Companies, Features

Supply chain: the last bastion of macro positive business transformation

Formula 1 racing car

What can supply chain learn from Formula 1 racing? Peter Jones, Founder and Managing Director at Prological, writes that he takes inspiration from the Formula 1 Mercedes team and applies its principles to drive positive change in supply chain operations. 

Cast your mind back to the 2015 British Grand Prix when Formula 1 reigning champion Lewis Hamilton had just rolled into Silverstone, England for the race. 

A couple of years back, with four wins, three seconds and a third in the first eight races, media and fans alike were hotly tipping Hamilton and the Mercedes team to comfortably take home their third World Championship title. 

As the crowd anticipated the start of the race, former British Grand Prix champion Johnny Herbert turned to Mercedes team principal Toto Wolff and asked: “Lewis has led the timesheets in all three practice sessions, fastest in qualifying, and is sitting on pole position. Toto, you’ve got to be feeling pretty comfortable about the win today?” 

To which Wolff responded: “No not at all, we can never take anything for granted.”  

While Hamilton did go on to win the race, it wasn’t an easy win – with a slow start challenging Hamilton throughout the British Grand Prix.   

In the press conference following the race, Wolff was quizzed about Hamilton’s poor start. Wolff responded with precision and an admirably in-depth knowledge of Hamilton’s performance. “We had a delay in the clutch taking up 1/10th of a second or so. We need to look into that and fix it,” he said.  

Hamilton won the race by 54,887 tenths of a second. 

Wolff’s commitment to finding and fixing the 1/10th of a second Hamilton had lost greatly inspired me at the time.  
His dedication to knowing every single detail of Hamilton’s race begs the question: Do you know your supply chain to the same level that Wolff knows Hamilton’s car and race? 

Supply chain is commonly an area of the business that is second or third on the general ledger. It’s capital intensive and is one of only two or three key areas of your business that interacts with your customers.  

Your profit or loss can swing on your supply chain costs, or on your supply chain execution. While procurement may be able to cut supply chain costs once, turning your supply chain into a distinctive competency will ensure it becomes an investment that keeps on giving, year after year after year.  

In order to do this, you need to know your supply chain like Wolff knows Hamilton’s car and race.  

You need: 

  • detailed understanding;
  • access to accurate data and measurements that can be turned into information;
  • to be innovative;
  • to exercise empathy for your suppliers; and
  • to take total ownership of the issues in your business – more so when outsourced.

It’s also important to think ahead and recognise that the supply chain of tomorrow will look different to the supply chain of yesterday. Your supply chain needs to be both different and better than your competitors. This is exactly how Mercedes has dominated Formula 1 since 2014.

Unfortunately, this isn’t easy. Many business decisions are driven by CEOs, MDs, CFOs and COOs who may not understand the complexities within their supply chains.

I’ve heard numerous senior execs say: “Just find it in the shed!” or “Just put it on the truck, how hard can it be?” or “Why is that lost? Can’t those people do anything?” 

To truly create positive business transformation through supply chain, a more detailed and empathetic view of the complexities of supply chain operations is required among leadership teams and at board level.

If Foreign Exchange arrangements were suboptimal by a few percentage points, I’m sure a business would not let this slide, yet many businesses in Australia are running supply chain operations that are 20-30 per cent short of optimum.

If left unaddressed, 1/10th of a second soon becomes minutes, and even hours in lost time and revenue. Having an aligned and optimised supply chain will make your business the Mercedes F1 team of your sector. Just like in F1, success is not easy. It requires commitment, time and resources. However, getting it right will repay in many multiples.

When you truly know your supply chain, with all its intricacies and complexities, you can make improvements to beat the competition and succeed far beyond your expectations.

Peter Jones is the Founder & Managing Director of Prological Consulting.

For more information on Prological, click here.

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