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Strategy and visibility vital to Australian supply chain

visibility

Nate Rosier, SVP Consulting at enVista, is a globe-trotting supply chain strategist with a global vision to match. He talks about global and Australian bottlenecks, and why better strategy and visibility are imperative down under. 

Nate Rosier, SVP Consulting at enVista, operates primarily out of the United States while consulting on supply chain strategy projects across the world, including Australia and the APAC region.

“I run our consulting practice, which consists of about 100 people,” Nate says. “We do supply chain strategies across the world. Some are in Australia, Singapore, Hong Kong, a few in the UK and India – and the rest in the US. We work projects everywhere.”

Nate notes that nowadays most supply chains are global – even those for basic goods like groceries – but that companies across the world are still hamstrung by old modes of thinking. 

“Supply chains still mostly operate on a basic linear process basis,” he says. “It’s still largely the practice to have just enough trucks, just enough containers, and just enough ships to handle a ‘steady state’. Such processes assume that tomorrow will be the same as today; whether there’s capacity to handle disruption is not built into supply chain thinking.”

The exceptions to this rule, Nate says, are the big-name companies – Walmart, Amazon, Nike, Apple – who truly do consider supply chain strategy as integral to their overall business strategy.

Most companies, though, are stuck in the past, Nate says. “And one of the worst things that companies do is to operate a just-in-time global inventory model,” he says. “It’s a horrible mistake.” 

Why is the just-in-time model ineffective?

“Before COVID, those of my clients who were operating on a just-in-time basis – I pulled them out of it because it costs more money to operate that model globally than it does to just pre-position inventory strategically,” Nate says. “The reason for this is the length of planning cycles. To get components from Asia to a factory to assemble things in the United States – the stretch of time involved is so long that forecast accuracy of actual future needs and demand is very low. With such low predictive ability, whatever you order in this manner is going to be wrong for the situation you actually find yourself in.” 

Inevitably, he says, this means that airfreight shipments will be used at the last minute to compensate for inaccurate earlier predictions. 

“The companies that effectively manage global supply chains strategically position what I call ‘shock absorbers’,” he says. “When you’re importing product, you have long lead times and therefore a lot of risk associated with it. What many companies will do is simply flow their product into distribution centres across different countries. What they should be doing instead is holding inventory closer to ports as a hedge, so that it can then be deployed flexibly and within a shorter timeframe to accommodate changing demand patterns in different locations. Unfortunately, everybody usually just wants to buy a bunch at once, do a big load, and sell it through. Well – the reality is – you don’t always know where it’s going to sell.”

The short shrift afforded to import supply chain strategy is compounded, in the Australian context, by two major limitations, Nate says. “Firstly, Australia has a far higher percentage of imports compared to other countries. Secondly, there isn’t much in the way of port development.” 

He says that the US has excellent port operations and a variety of competing options to get goods to the same place via different routes. 

“We have a lot of inland ports in the US – where there’s a drop off at the coast and it goes straight from ship to rail and is received at a port that’s inland,” Nate says. “So, if I’m trying to get something to Chicago, I can access via LA, or Oakland, or Prince Rupert up in Canada – and it’ll get there in about the same amount of time.”

The variety of backup options in the US provides a safeguard against specific port disruptions. Indeed Nate adds that the variety of port development owes a lot to a series of port strikes that occurred in the past decade, as well as to the naturally greater level of competition and economic activity in the US.

“Australia has a low-density population and a broad landmass, with populations clustered on the east and west,” he notes. “Sydney to Melbourne, or Sydney to Brisbane isn’t bad – but there’s a lot of infrastructure work that ought to be done elsewhere. Governments should plan for the rainy days – not just the sunny ones. An analogy might be the strategic oil reserve that we have in the United States – it’s a backup option if international supply is shut-off. Australia doesn’t have enough focus on infrastructure development around ports, which is a little surprising based on the volume of imports the country has.”

With most activity occurring via the Sydney port – because it’s the cheapest – much work could be done in terms of opening up constrained roads and building out better direct rail lines, he says. “There’s a lot of simple bottlenecks that could be addressed – and the same goes for Brisbane, Melbourne, and Perth. That would be a good government investment.”

But if such infrastructure must wait for government to catch up, what can companies do in their own right?

“The basic thing to keep in mind is that the longer your supply chain, the better visibility you need,” Nate says. “With port bottlenecks and disruptions the best way to combat this is with better visibility. Australian companies need to invest in better visibility systems and control towers. 

“Visibility is more valuable to a company in Australia than it is for a company in the US, China, or Brazil – because you have lower volumes going farther distances. That means better initial strategic pre-positioning and visibility are paramount. If you have goods coming in on a ship, and you have to change mode, you need to know where things are going to land and how best to re-arrange transportation if you’re trying to speed things up or slow things down. It’s about knowing where your inventory is in the supply chain. A lot of Australian clients I’ve worked with haven’t been focusing enough on that – and they need to. Visibility is key.”

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