Supply Chain Resilience through Strong Relationships with Dr. Edward Sweeney

Patrick Daly:

Hello, this is Patrick Daly and welcome to Interlinks. Interlinks is a program about supply chains, connections, international business, and globalization, and the effects these developments have had on our life, our work, and our travel over recent times. In today’s program, we will be talking to Dr. Edward Sweeney, a professor of supply chain management based in the Centre for Logistics and Sustainability at Heriot-Watt University in Edinburgh, Scotland. Ed is one of our own man of the County of Wexford.

Patrick Daly:

So on the show, we’ve been talking a lot about the importance of international supply chains since long before the COVID pandemic, and now it seems that supply chains and so-called supply chain crisis are a huge interest to everyone, including politicians, the mass media, and the average person in the street concerned about supply shortages and rising prices. So this is the second time that Ed has joined us on the show, and I’ve asked him back precisely because of the new high profile international supply chains, and to try to let him help us to understand what exactly is going on, and what the future might hold. So welcome, Ed, and thank you very much for being here with us again today.

Dr. Ed Sweeney:

Thank you, Patrick. It’s good to be back. It’s we’ve been through a hell of a lot since we last spoke on this program, haven’t we?

Patrick Daly:

We have indeed. We have. Yeah, we’ve just been chatting offline. It’s been an experience to say the least.

Dr. Ed Sweeney:

Yeah.

Patrick Daly:

So to kick off, Ed, today, maybe help us on understand something fundamental. So as I was saying there, kind of outside of certain professional spheres, most people had no real idea what the supply chain was, and now we have politicians, and we have journalists, and even radio presenters all talking about supply chains. So what are supply chains? How do they relate to this other word, logistics, and why are both so crucial to our modern economy today?

Dr. Ed Sweeney:

Well, look, it’s that there are two sides to this I think, Patrick. First of all, everyone has become an expert suddenly in supply chain management and logistics, and, of course, you are being modest, because you are actually an expert in this subject, but many people in the political realm and in the media have become experts overnight in this, and that’s interesting. And on a more positive note, and I think this has been something we’ve seen over a number of years, it’s not just a COVID related issue. It’s not just an issue related to the current sort of supply chain challenges that we see in Ireland, and in the UK, and elsewhere. I think we can trace a lot of this media interest and political interest in supply chains probably back to the Brexit debate.

Dr. Ed Sweeney:

So probably back to sort of 2015, 2016, because if we go back and think about that debate here in the UK, much of it really was about trade flows, much of it was about the friction that Brexit would introduce in terms of trade flows, and, of course, we’ve seen particularly on the island of Ireland we’ve seen some of the repercussions from that, but just going back to your fundamental question, look, I think what we have to remember is that every product, and I mean every product, will reach its final user through a chain of companies. So the phrase sense in which we use the phrase supply chain is it’s a chain of companies, and a chain of companies will typically comprise manufacturers, and retailers, and distribution organizations, and so on, but it’s a complex chain of companies.

Dr. Ed Sweeney:

And we often talk about this as a chain to acknowledge the fact that the chain is only as strong as its weakest link. So a weak link anywhere in the supply chain will have a negative impact overall, and that might sound like an obvious thing to say, but actually, it’s very profound from the perspective of developing strategy and implementing strategy in individual businesses, because what it means is my business, irrespective of how strong I am, and irrespective of how good I am in relation to the activity that happens within my four walls. I mean, I can never really achieve my true competitive potential unless I’ve got the right partners to work with upstream and downstream in the supply chain of which I’m part, so the right suppliers, the right distribution links into my final customers, and so on. And that’s quite a sobering thought, because really what it means is that your success depends on things which happen within the four wall of perhaps hundreds of other organizations. So that has implications for the way in which we think about our strategic capability.

Dr. Ed Sweeney:

It has massive implications, I think in particular in terms of this whole business of relationships, and I know that’s something that you have a particular interest in and a particular expertise in, because I think, ultimately, if I’m an organization, it’s unlikely I can control what happens, and I probably wouldn’t want to in terms of what happens in other organizations, but the one thing I can influence very strongly is the kind of relationship that exists between my organization and those organizations with which I interact. So I think contemporary supply chain management thinking is about relationships. It recognizes that to be successful, and to sort of eliminate waste, and to do things more cost effectively, and in a way which meets customer requirements in a consistent way, we’ve got to kind of shift away from the fragmentation, which was often a characteristic of traditionally managed supply chains, towards an approach which is characterized much more by integration.

Dr. Ed Sweeney:

And that sounds nice in theory, but it’s not just a theoretical concept, because we know through anecdotal evidence and through research, which has been undertaken into this over a long period of time, that a lot of the waste, a lot of the non-value adding activity in supply chains happens as a direct result of fragmented structures. So often what we have is different parts of the supply chain being measured and therefore managed in isolation from each other, and because we do that we end up with fragmentation. That directly creates waste, and really the central tenant to me of contemporary supply chain management thinking is a about shifting towards integration, and we can only really do that by having a very sharp focus on the way in which we create and manage relationships between different organizations up and down the supply chain.

Patrick Daly:

It’s interesting you mention about the weakest link. So in the early days of COVID in China, since then, late 2019, almost two years ago now, and almost right through to quite recently, apart from kind of a few scares about toilet rolls and so on, the supply chain pretty much stood up and performed, but now and recently we’re seeing in many parts of the world almost simultaneously we begin to see problems with the availability of all sorts of things that go into cars, or toys, or fuel, even food stuff. So what’s going on now, and why now precisely?

Dr. Ed Sweeney:

That’s a very good question. And it’s interesting because it’s a question which has been asked of me by media commentators quite a bit, as you can imagine over the last few weeks. Now, it’s interesting. I spoke to a journalist from the Financial Times I think it was, and his sort of starting point was, and this is really looking at the UK context, because, of course, we’ve seen a lot in recent days and weeks about the fuel shortage in particular, and the narrative around is that this is all caused by the shortage of HGV drivers, right? So we here in the UK, we have the Road Haulage Association, [Breckens 00:08:36], we’re short of about a 100,000 drivers. There are all kinds of reasons for that, some are Brexit related, because a lot of European, Eastern European drivers in particular return to their home countries post Brexit.

Dr. Ed Sweeney:

COVID has had an impact, because for example, we’ve a big backlog of testing for HGV drivers. We simply weren’t able to do the testing we needed to do because of social distancing rules. So there were all kinds of reasons, but the point I was trying to make to this journalist was you’ve got to look at every product and its supply chain to really figure out what the reasons are for the shortages. It’s not as simple as saying, “HGV driver shortage is the problem, and if we somehow solve that problem, every everything will be fine.” I mean, for example, we work very closely with the automotive industry here in the UK. We have a very well documented global shortage of chips. That has slowed down production of automobiles. That in turn happens for a whole variety of reasons.

Dr. Ed Sweeney:

So those of us like you and I, Patrick, who have of this interesting in kind of systems thinking have to really go back and keep asking why, the sort of five whys type logic, and if we do that for different products, we begin to see a whole bunch of different types of factors emerging. I mean, another one I came across just in the last couple of weeks is a serious supply shortage in relation to coffee. So Starbucks, for example, I think it was documented a couple of weeks back we’re really struggling with the supply of coffee beans, and some of that we can track back to a particularly difficult winter in Brazil, and we can trace that back we think to sort of climate change factors. So I think what we have to do is we have to look at sort of every supply chain and its dynamics as an individual entity.

Dr. Ed Sweeney:

And what we find when we do that is we have different reasons for the supply challenges with different products and in different geographies. Now, having said that, there is at least one common theme, which we can see across most of them, and that is after the lockdown we’ve seen this sort of gradual unlocking, and it’s happened at different speeds in different parts of the world, and it’s created a lot of predictability in terms of demand for product. So if I’m a supply chain director, the thing which drives everything I do is the expected level of demand for my product range in the different markets in which those products are sold. And that has just been a scenario which is characterized by a massive amount of unpredictability.

Dr. Ed Sweeney:

So we’re trying to forecast what will demand for product X be in Southeast Asia? What will demand for product Y be in the Middle East and Africa? What will demand for product Z in North America? And it’s very, very difficult to do that because of the different speeds at which different parts of the world are bouncing back. So on the sort of demand side, we’ve got this unpredictability, and I think there’s a sense in the supply profession that we’re going through this sort of very volatile period, and it will kind of resolve itself to an extent as time marches on. Now, I mean, there are other very specific problems on the demand side, and they tend to be quite product specific, but in terms of as you very well know in terms of global freight transportation, we’ve had particular problems in relation to…

Dr. Ed Sweeney:

I said to one journalist last week, in relation to shortage of containers, but it’s not shortage of containers, of course, we’ve got plenty of containers, but many of them are just in the wrong place at the wrong time, and that’s caused some bottlenecks. That turn has pushed up freight chipping costs, and that has affected most businesses really where the supply chain is global. And, of course, we know that supply chains have become much more international, in some cases, genuinely global in really over the last 20 years or more as a result of this process, which is often referred to as globalization.

Speaker 1:

93.9 Dublin South FM.

Patrick Daly:

Now, there are problems everywhere. We know there are problems in China. There are problems in the US, in European Union, here in Ireland, but things seem to be particularly acute in the UK where you live and work now. So what conditions aspecific to the UK do you think are conspiring to make the supply chain challenges there so much more acute than some of the other places?

Dr. Ed Sweeney:

That’s a really excellent question, and the first thing I would like to say by way of a response is that the premise underpinning your question I think is right. That’s certainly the anecdotal evidence I have, and the more concrete evidence that’s beginning to trickle through would suggest that the premise of your question is absolutely right. I think there probably are a few different things. The easy answer to this is Brexit. We can blame Brexit for all kinds of things which have happened over the last number of years, but I think there are Brexit factors at play here, because the reality is Brexit has created friction in trade terms in relation to the UK’s trade with its nearest neighbors, including ourselves, of course, in Ireland, and we see a lot in the media at the moment about the Northern Ireland protocol and so on, but there are other kind of Brexit related factors beyond sort of trade friction.

Dr. Ed Sweeney:

We talked previously about the shortage of HGV drivers. We had a serious dependence on the Eastern European HGV drivers in the UK more than in other countries. Another interesting factor if we just stay on the HGV driver shortage for a moment is, and people often forget this, I mean, the UK has quite a rapidly aging population now. So if you look at the average population age in the UK compared to Ireland, for example, we see quite a big gap. If you look at the HGV driver profession, again, the Road Haulage Association estimates that the average age of drivers is about mid fifties. So we see a lot of drivers kind of coming towards the end of their working lives, and that’s a situation which is more acute in the UK than in some other countries with a different profile.

Dr. Ed Sweeney:

I think also the fact that the UK is an island economy, is a trading economy. I think in some ways it has become… I’m just trying to be careful in how I word this. It’s become a little bit the victim of its own success in that. I think we had become pretty good in many sectors over the last decade or so in terms of putting a lot of our kind of supply chain lean thinking principles, and just in time type principles into practice, and we needed to do that because of the sort of cost pressures on the industries which dominate, and simply because of hyper competition in a lot of the global markets that UK companies compete in, and not just British owned companies, of course, but internationally owned companies with a strong presence in the UK, for example, in the car industry.

Dr. Ed Sweeney:

So I think it’s interesting, because you will remember pre pandemic we would often talk about kind of just in case type approaches as opposed to just in time, and that phrase, “Just in case,” was often used in quite a pejorative sense. Look at that company. It’s not performing very well. It’s got lots of just in case inventory. Now, and I think many of the UK companies had really gotten the lean just in time model down to a fine art form really, and needed to because of the island economy and all the pressures that come with that. So I think many of the companies in the UK were probably badly positioned when resilience and the need for just in case inventory became obvious, and so it’s a bit like it’s something we’ve talked about for a long time, that if you go down this lean sort of track almost to too great an extent it’s kind of the danger is we throw the baby out with the bathwater [crosstalk 00:17:50].

Patrick Daly:

Yeah. I guess if you apply it across the board as a one size fits all rather than strategically to certain things and not necessarily to other things, depending on what they are, you run that risk don’t you of hitting the [crosstalk 00:18:05] quickly?

Dr. Ed Sweeney:

Yeah. Look, I mean, a good example really is around the supply chains feeding into sort of the supermarket, the growth grocery business. I mean, when we go back to March of last year when we all went into lockdown suddenly, you remember we saw the panic buying that happened here in the UK? There was one particular weekend when we reckoned that UK citizens, UK residents collectively were carrying something like a billion pounds worth of stock of food in fridges and cupboards up and down the country. I mean, a billion pounds worth. So we as consumers became the biggest stock holding point in the whole supply chain.

Dr. Ed Sweeney:

Now, that put massive stress on the supply chain, but I think as you alluded to earlier on, apart from the odd issue we had with toilet rolls, or dried foods, and things, the supply chains bounce back very, very quickly, and I think proved that they were quite resilient in their own way, and certainly that they were quite agile to use the phraseology. They could quickly respond to kind of very, very sharp changes in the demand patterns in the marketplace, and I think those of us who work in the supply chain profession we’re quite proud of the way in which we responded to that particular challenge.

Patrick Daly:

Now, I know predicting the future is fraught at the best of times, Ed, but I’m going to ask you none the less. So assuming there’s no major setbacks from the public health front worldwide in relation to COVID, how do you see supply chains responding say tactically over the next 12 to 18 months, or maybe more strategically in the longer term to deal with what’s upon us now? Where are we going do you think?

Dr. Ed Sweeney:

I think I may have said this to you last time we spoke. I mean, my sense is that we have learned a huge amount during the sort of pandemic, and it’s interesting that some elements of sort of good practice, particularly in terms of collaborative working between companies, even sometimes collaborative working between companies that were competitors, that became much more commonplace a year or so ago when we began to sort of grapple with some of these challenges, and to me, one of the really encouraging things is that some of those kind of elements of good working practice, particularly in terms of collaborative working between organizations, they seem to have bedded in quite well.

Dr. Ed Sweeney:

I think you and I had a discussion in the past where we sort of agreed that at the end of the pandemic, but do these things ever really end? But I had a strong sense I think that we would have a relatively narrow window of opportunity to bed in some of these learnings from the pandemic period. Now, having said all of that, I think this whole thing has gone on much, much longer than any of us had envisaged. If we turn the clock back 18 months, I don’t think any of us. I mean, when we had the first lockdown, I was quite depressed thinking about “Oh, bugger, we’re going to have six weeks of this.” You know?

Patrick Daly:

Yeah, yeah.

Dr. Ed Sweeney:

And here we are kind of 18 months later. So I think we’ve adjusted quite well. I think all across supply chains there are elements of what will become recognized as good practice, which are bedding down in supply chains, and I think a lot tactically at least in terms how we go forward, I think that’s going to be really important. The second thing is I think this is a bit more long term, and there’s a massive opportunity for us here, and it really goes back to the first question you asked me. Look, our profession is front and center of political debate and of media discourse, and I think that represents a massive opportunity. Just one example of this is in recruitment into university specialist degree courses and postgraduate programs in the field of logistics and supply chain management.

Dr. Ed Sweeney:

We’ve had a bumper year, so we’re recruiting more and more good quality new talent into our profession, and any of us who worked the profession for a long time recognize that was a major, major issue for us, and professional bodies in the field. Universities and other key stakeholders have been working really hard to try to address this, and I think sometimes the almost notoriety that comes from some of the things which have happened, we can turn it into an opportunity, and we can begin to really address the challenge of skills, and knowledge, and competency development, because for a long time I’ve been strongly of the view if we really want to move forward to the next stage of our development, we need to… All of that depends on having the right talent, and it’s about redeveloping existing talent and upskilling existing staff right across the supply chain, but more than ever, it’s about bringing new, fresh talent into profession in general and into the logistics industry in particular.

Dr. Ed Sweeney:

And I think we have an opportunity to do that, because the next few years will be very challenging in terms of technology continues to develop at a rapid pace, just staying on top of that potential and that capability is important. We have a massive job of working in front of us in terms of the sustainability, the environmental sustainability agenda. We know that supply chains do damage to the natural environment, particularly in freight transportation and logistics. We still remain very heavily dependent, for example, here in the UK on road transportation, which in turn remains stubbornly dependent on the burning of fossil fuels. So we’ve got to grapple with that.

Dr. Ed Sweeney:

Ahead of COP26, we’ve all got incredibly challenging targets that we need to be meeting, and in addition to that, we’ve got this sort of uncertainty in the international marketplace, but perhaps more importantly, an element of uncertainty and volatility in the international economic and political environment, which we need to grapple with when think about what’s been happening in China in recent years, what’s been happening in Russia in recent years, what’s been happening in some parts of south America, and so on. So I think we’re going to need a huge amount of kind of knowledge and skill as a supply chain profession to grapple with that myriad challenges, and the fact that we are now bringing a great new talent into our profession I think is really encouraging.

Patrick Daly:

Augurs well. So you recently edited the eighth edition of the book, Global Logistics: New Directions in Supply Chain Management, I think it’s a subtype title of this edition that was published earlier this year by Kogan Page and both in Great Britain and in United States. So what’s the premise of the book, to whom is it directed, and why did you decide to embark on the new edition in 2020, which I think was probably something like six years after the seventh edition, which came out in 2014, I think?

Dr. Ed Sweeney:

Yeah, I think it’s interesting because in that intervening six years a lot had happened. I would point to two areas in particular. I mean, one is, and we mentioned them already in passing, one is the kind of digitalization agenda has become much more developed during that period, and the kind of environmental sustainability piece also has become more important, but I also think that more fundamental in that is this sort of sense, and it’s interesting in the book, the very last chapter in the book quite deliberately is about the subject of so-called de-globalization, because we’ve begun to hear a lot about trade wars between China and when Trump was in the White House and all the rest of it. We see Brexit. I mean, isn’t that a bit of a kind of return to some kind of economic nationalism?

Dr. Ed Sweeney:

So there’s a sort of feeling around I think that somehow this trend that we had seen over 20, or 30, or 40 years, where we’d seen barriers to the movement of products, and people, and knowledge, and everything else across international borders. We’d seen those barriers reduce over a period of time, and I think there was a sense that we’d come to the end of the line with that in some quarters. Now, that was a theory I never really bought into, because I often say to people that when I began my supply chain career, and I left university 35 years ago this year, so I’m getting old now, but I mean, the supply chains within which I worked in the 1980s and even into the nineties were largely quite local in complexion, and in some cases perhaps regional in complexion, but to me, the biggest single change I’ve seen in my kind of supply chain career is that those supply chains have become much more international in complexion, and in some cases, genuinely global in terms of how they look and feel.

Dr. Ed Sweeney:

And that hasn’t happened by accident. As you very well know, it’s happened as a direct result of fundamental structural change, which has happened in the international economic, and business, and political environment. Now, I think those long term trends are not going to disappear. So I think international supply chains will be with us. I think I can’t see any reason why they won’t be. They will change. We always have changed. We hear a lot about reshoring, and near-shoring, and all the rest of it, but I think by and large, that sort of trend towards removing barriers to international trade, international [crosstalk 00:28:31].

Patrick Daly:

It’s more a change of form rather than an unraveling.

Dr. Ed Sweeney:

Yeah, it’s change of form rather than a complete change of direction. It’s not a kind of U-turn where suddenly we’re going to wake up and every product will be manufactured and distributed locally. I think that’s not going to happen. So in a sense I was keen to in the eighth edition of global logistics to acknowledge the fact that there is a reasonable debate happening on this, and to deliberately include a final chapter, which was in a sense an antidote to everything that preceded it, but to recognize that this process, which has resulted in the creation of these complex international supply chains, that’s a wake up call for all of us, because that kind of internationalization of business under supply chains I think just requires us as managers to adopt a different kind of strategic outlook.

Dr. Ed Sweeney:

We can’t just kind of do what we did 20 years ago when the world was different and hope that we get a good result. So it’s ensuring that strategic development processes and the implementation of kind of plans in business do take into account the way in which these international trade trends particularly have impacted on the supply chains for particular products, and indeed for particular services, because you look at it in our Irish context now, it’s internationally traded services play a huge role. It’s not just about products and product supply chains. We’re turning our attention a lot more now to service supply chains, and indeed supply chains which are a mixture of the physical and the service element, which is really interesting and challenging in its own right.

Patrick Daly:

I’m going to have to get you back on, because there were more questions I had here for you, but as we come to an end, I just wanted to ask you how can people find out more about your work, about your research, and the courses that are available? And if you’re looking for PhD students and so on, what kind of areas are of interest, and how should they contact you there at Heriot-Watt?

Dr. Ed Sweeney:

The best thing to do I think is to just consult the Heriot-Watt University website. So we’re at www.hw.ac.uk, and if you have a look there, and take a look in particular at the work being done in the Centre for Logistics and Sustainability, that’s the center in which I’m based, and its title probably gives the game away in a sense, because a lot of our work really is driven by the need to do things in a much more sustainable way, and it’s about environmental sustainability, yes, but also about social sustainability. And I guess the latter piece, the kind of people dimension of the supply chain is something we could devote a complete conversation to, but we have a particular interest I think, and a particular expertise in the role of sort of technology and the role of digitalization in achieving some of our supply chain sustainability goals.

Dr. Ed Sweeney:

So it’s kind of bringing together the technology deployment piece on the one hand and the sustainability, particularly but not exclusively the environmental sustainability piece on the other hand, so that in a way is what drives what we do, and as an engineer by background myself, that technology deployment as an enabler of better integrated supply chains, but more sustainable supply chains continues to be a key focus.

Patrick Daly:

Okay. Well, thanks again. It’s been a pleasure, an absolute pleasure as always, so wish you continued success personally and professionally with your new role in Heriot-Watt in Scotland.

Dr. Ed Sweeney:

Thank you, Patrick. Good to speak to you again.

Patrick Daly:

Thank you, and thanks also to our listeners for tuning in. Any comments or questions, just drop me a line on Pdaly@albalogistics.com. That’s P-D-A-L-Y@Alba, A-L-B-A, Logistics, all one word, .com. So keep well and stay safe until next time. (silence)