Article: Sourcing and Inbound Logisitcs (attached) Review the preselected Supply Chain Management Concept Articles to analyze and show how the concepts discussed in the article are

NAVIGATING A DISRUPTIVE DECADE Year 3–Strategic Sourcing and Inbound Logistics

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Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

Copyright 2021, Auburn University Center for Supply Chain Innovation All rights of any nature reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, without written permission from the copyright owners.

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

A Brief Note of Introduction In 2018 when we began the Logistics 2030 project, little did we know that the following three years would be the most transformative period for supply chains. Market volatility caused by the pandemic, the subsequent economic downturn, and severe weather events have converged to cause enormous stress on all areas of the supply chain. One of our focus group participants said it best “Now everyone wants to go back to “normal” – how things used to be. But most of us don’t realize how the normal has changed – the future has changed.”

The year 2030 is getting closer. Over the next nine years, supply chain professionals will continue to encounter many challenges and rapid change. It is important to assess the strategies, requirements, and tools that will shape supply chains and drive success over the next decade.

Our team of experts from Auburn University's Center for Supply Chain Innovation, the Council of Supply Chain Management Professionals (CSCMP), the National Shippers Strategic Transportation Council (NASSTRAC), and AGiLE Business Media (publisher of DC Velocity & CSCMP’s Supply Chain Quarterly), has undertaken a multi-year study of these future issues. We have previously explored transportation and warehousing.

This year’s selected topic is Strategic Sourcing and Inbound Logistics. We collected expert insights on future sourcing issues via a survey, focus groups, and individual interviews. The resulting information is contained in this report

We would like to thank all the sourcing/procurement and logistics professionals who participated in this study and hope you will find the information contained within this report useful to your transportation/supply chain networks.

Gail Rutkowski Mark Baxa Executive Director President and CEO

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

TABLE OF CONTENTS

ABOUT THE STUDY …………………………………………………… 1

ORGANIZATIONAL PRIORITIES …………………………………… 3

STRATEGIC SOURCING: CRITICAL CAPABILITIES …………… 5

Future Challenges: Business Continuity and Supply-Demand Mismatch …. 6

Strategies and Tactics: Risk Management …………………………………… 9

Technology Outlook: Efficiency, Speed, and Accuracy ……………………. 14

Talent Management: Art and Science of Relational Management ……… 17

INBOUND LOGISTICS: CRITICAL CAPABILITIES ……………. 20

Future Challenges: Capacity, Service, and Power-play …………………….. 22

Strategies and Tactics: Collaboration and Planning ……………………….. 25

Technology Outlook: Power of Analytics …………………………………… 29

Talent Management: Multi-skill Logistics Manager ………………………. 31

LOOKING TOWARDS 2030 ……………………………………… 34

THE L-2030 STUDY RESEARCH TEAM ………………………. 36

THE L-2030 STUDY PARTNERS ………………………………… 37

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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ABOUT THE STUDY

“We didn't have a great plan for handling any kind of major risks to our supply chain. It's just never hit us this hard. Now, everybody wants to go back to “normal” – how things used to be. But most of us don't realize how the normal has changed, the future has changed. “

In the wake of the global pandemic, strategic sourcing and inbound logistics have become increasingly vital in supply chain management. Operating complex supply chains amid multiple interweaving disruptions is becoming ever more challenging, requiring a holistic business understanding.

Given the current environment, it is easy to attribute almost any business challenge to the whirlwind of global shutdowns and re-starts forced by a global pandemic. However, the current situation masks many long-term trends that have been on the radar of business executives and thought leaders for their disruptive potential. The pandemic has turbocharged these trends to create a perfect storm that needs our attention.

In the third installment of the Logistics 2030 (L-2030) annual study, we present a long-term view of the supply side of global supply chains. This report takes an in-depth look at strategic challenges in sourcing and inbound logistics.

We highlight future initiatives through which organizations are building requisite capabilities to effectively respond to these challenges. These initiatives relate to finding reliable sources of supply, deploying capable transportation arrangements, and leveraging technology and talent development strategies that will be needed to ensure business success in the coming years.

Our analysis provides a comparative view of today’s capabilities and how these capabilities match up with the needs of the next decade. The findings of this report are based on the expert insights from multiple focus group sessions and survey responses from hundreds of sourcing experts and logistics professionals. We share these insights to broaden readers’ perspectives about future challenges and relevant strategies that can meet these challenges.

THE IMPERATIVE

Future supply chain dynamics are intricate and onerous. We need to account for these challenges now to be ready. The Logistics 2030 study highlights relevant issues and offers insights that can help organizations prepare for these future challenges.

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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Research Objectives: Strategic Sourcing and Inbound Logistics in 2030

Our third L-2030 series report targets sourcing and inbound logistics capabilities, essential to an organization’s ability to satisfy customers’ needs. We investigate the essential issues that warrant a company’s earnest consideration for future success:

Operational Tactics: What actions and strategies can help you meet future sourcing and inbound logistics needs?

Technology and Analytics: Which technology applications will have the most impact in sourcing and inbound logistics?

Talent Management: What managerial skills in sourcing and inbound logistics do you need to become the future leader?

In the pages ahead, we present future-focused analyses of these key questions, along with actionable takeaways. The report also highlights impending issues and investment decisions that sourcing and logistics professionals must address.

Study Methodology

The L-2030 research priorities were derived through analysis of industry trends and discussions with supply chain executives. To gain diverse insights, we sought input from CSCMP and NASSTRAC members, DC Velocity and CSCMP’s Supply Chain Quarterly subscribers, our sponsor’s network and CSCI partners.

The valued insights of industry practitioners were captured through a multi-method research approach, using:

Expert Panels: Six, hour-long, focus group sessions to uncover the most pressing sourcing and inbound logistics issues.

Online Survey: A 50-question survey captured respondents’ insights on current and future sourcing and logistics issues.

This research approach engaged supply chain professionals from a broad array of organizations and industries. Thus, we are able to present an accurate narrative on tactics, technology, and talent issues. The report includes direct quotes from experts who participated in the focus groups and a compilation of responses from the online survey.

KEY NUMBERS

6 focus groups 275+ survey respondents 50% of participants from large companies (revenue over $1 billion) Average of 23 years’ work experience in supply and logistics management roles

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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ORGANZATIONAL PRIORITIES

“The focus around our procurement organization is no longer to drive value through lowering costs. The value is to keep the business running through uninterrupted supply.”

Finding ways to fix problems and getting out of difficult situations have always been the forte of supply chain management professionals. Their response to the current challenges on the supply side of their businesses is no different. Our report not only highlights the challenges, but also provides an in-depth understanding of different strategies that are being devised to respond to these challenges. We start the report by looking at the long-term organizational priorities that guide these strategies.

In strategic sourcing, organizations are focused on a number of key priorities. On top of the list for 2030 is finding ways to curtail rising procurement costs. The cost pressures are rooted in supply side issues, as well as the changing global regulatory landscape that is adding to the uncertainty. Another organizational priority identified in our report is developing future leaders that understand both the science and the art of supply risk management.

On the inbound logistics side, the top of the priority list is building end-to-end visibility to detect and respond to logistics challenges. Other items on the priority list include: shipment tracking, e-Processes, and service performance. It is interesting to note that 2030 organizational priorities are significantly different from today in terms of their strategic focus (see info- graphic on the next page). These differences highlight the critical need for organizations to pivot and adapt their capabilities to the changing business landscape.

We expand below on these organizational priorities by presenting our analysis in two main sections of this report: (i) strategic sourcing, and (ii) inbound logistics. Each section provides a detailed discussion of issues and challenges, and strategies related to business processes, technology, and talent management issues. We wrap up the report with specific action items that will guide you in developing a plan to deliver on the aforementioned priorities.

IT’S A NEW WORLD

“Things I've never seen in my career are now the "normal". Times of predictable lead times and reliable supply sources are gone. We need a new game plan!”

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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STRATEGIC SOURCING – CRITICAL CAPABILITIES

“Nothing costs the business more than the inability to serve its customers. You can't save your way to profitability. If you don't have supply, you can’t make things and you don’t deliver. That means you don’t have a business.”

The global pandemic and the resulting myriad disruptions has laid bare long-term vulnerabilities of supply management in modern times. This situation underscores the critical role played by sourcing and procurement in sustaining vital supplies for businesses, public institutions, and consumers.

Historically, sourcing and procurement has been seen as an organizational function tasked with managing purchasing costs. The future outlook of sourcing and purchasing looks quite different. Eighty-one percent of our survey respondents identify developing new sources of supply and ensuring business continuity as the primary sourcing and procurement capabilities that will be most useful in the future.

This outlook accounts for the near consensus among our study participants (93%) who describe the key attribute of their suppliers as being strategic partners. For that reason, 86% of the respondents state that they are focused on developing incentive schemes and shared processes to promote collaboration with their strategic supply partners.

The other key capability highlighted in our report is sourcing flexibility. Many supply chain experts in our focus groups share concerns about looming trade wars, perpetual supply shortages and global disruptions. These concerns have led to calls for developing flexibility through alternate sourcing strategies, such as using multiple sources of supply for key product categories (93%), investing in sophisticated analytics to reduce supply- demand mismatches (92%), and renewing their focus on domestic sourcing and near-shoring (81%).

To align themselves to these sourcing and procurement trends, organizations need a better understanding of the challenges headed their way. In this section, we present a detailed analysis of relevant sourcing and procurement issues and identify strategies to help prepare for future challenges.

CHALLENGES ABOUND

“A six week supply lead time is now 24 weeks. And that’s just one of the many challenges in sourcing.”

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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Future Challenges: Business continuity, supply- demand mismatch, and supplier performance

Threats to Business Continuity

One of the top sourcing challenges identified in our report is the threat to business continuity. This concern, shared by 81% of our survey respondents, directs attention to the built-in vulnerabilities of the prevailing sourcing strategies.

“We are starting to realize that where we had three different suppliers for a category, they are all somewhere tied in to the same source. So, as we expand our collective supply chains to serve increasing demand, we will approach the limits of supply. We need to start thinking about better alternatives.”

Today’s hyper global market competition has forced many organizations to find ways to shorten the supply cycle. A go-to strategy in this regard has been to deploy supplier qualification protocols built around single sourcing. This strategy has been successful in reducing product variation, speeding up awarding contracts and lower administrative costs. However, its downside, i.e., the elevated supply risk, has many sourcing experts concerned.

Multiple discussions among our focus group respondents point to the critical need for strategic supply planning that generates solutions to these concerns. “We have to get smarter about understanding trade flows around the world. Not just think about single manufacturing source, but develop strategy that looks across all sourcing options.” This outlook is also shared by a majority (67%) of our survey respondents who see poor sourcing flexibility as the big supply challenge in the years leading up to 2030.

Deteriorating Supply-Demand Mismatch

At a strategic level, the concern about business continuity connects to another macro trend related to a growing supply- demand mismatch. With rising demand and constrained supply, the first causality is usually the cost of goods (94% of survey respondents agree) that eventually leads to higher

BUILT-IN VULNERABILITIES

“Supply chains have always been exposed to “what ifs”. What if our supplier shuts down for two weeks? What if there's a global pandemic? Now we're seeing these “what ifs” happen and we’re dead in the water.”

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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consumer prices. Neither outcome alleviates concerns arising from a limited supply capacity (70% of survey respondents share this perspective). “We have this challenge of demand and supply mismatch that will continue to create a perpetual bullwhip effect.” Interestingly, it is this trend that is making organizations look at options to explore and develop additional sources of supply, including near-shoring.

Taking account of the shifting landscape in terms of tariffs, supply shortages and other risks, more than 80% of our survey respondents believe that there will be an increase in domestic sourcing in the years leading up to 2030.

“Maybe the model ahead is one where there's an affordable level of contingency planning around local sources that results in security of supply and an affirmation of supply.” This outlook is supported by a large majority (72%) of survey respondents who see a major increase in North American sourcing activity over the next decade.

Supplier Performance Management

The other key sourcing challenge highlighted in our study is supplier performance management. The key connection of this challenge with the strategic issues mentioned above is that ineffective supplier performance exacerbates risks in quality, cost and timeliness of supply. For this reason, 74% of survey respondents stated that supplier performance management will be a major challenge facing organizations in the future.

The elements of supplier management that will be become critical in coming years include: suppliers’ production capacity, real time visibility of supply and logistics processes, and ethical/sustainability practices. To effectively manage the supplier base, organizations are developing programs to incentivize supplier communication and incorporate better process visibility. Sixty-one percent and 72% of survey respondents, respectively, indicate corporate investments in these areas.

The other key area of supplier performance management to focus is the expectation of ethical practices around labor, intellectual property, and sustainability initiatives.

SURVIVAL MODE

“If I could get one thing, it would be a good risk management process where we identify contingencies for supply. That will help me get out of all these situations requiring perpetual crisis management.”

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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“As supply professionals, we must talk about the 3E’s: economics, environment, and ethics in supply chains. We must assess our suppliers on these 3Es.”

There is growing investor and consumer pressure to enforce trade regulations and promote ethical sourcing. Buyers must ensure that global supply partners are not abusing local labor in the quest for lower production costs or deploying business practices that harm the environment. “You don’t want to wake up and find out there's a huge uproar that your supplier’s packaging comes from an endangered rain forest that you didn’t know about.” The challenge for sourcing organizations is determining how to accomplish these goals when supply is constrained, and lead times are too long for supply chains to function properly.

There is an equal level of social pressure around reducing your carbon footprint and conserving the environment. These contemporary sourcing challenges are expected to be at the forefront in coming years. Sourcing professionals, in partnership with their suppliers, must adopt sustainable sourcing innovations.

Strategies and Tactics: Risk Management through Supplier Partnerships

“Our focus is no longer on driving value through lower costs. The value is to keep operations running. 100% of my team's time is spent making sure that we can get the materials to keep our billions of dollars of assets running.”

This year’s L-2030 report has identified business continuity, supply-demand mismatch, and supplier performance as the biggest challenges in the coming years. Based on these challenges, a large majority (65%) of our study participants believe that organizations need to make long-term adjustments to their procurement and sourcing strategies.

To help with such long-term planning, we asked sourcing professionals who participated in our focus groups and survey about the best way forward. The following discussion presents these strategies and tactics.

FINDING THE MIDDLE GROUND

“We are trying to strike that balance between satisfying the market demand and finding ways to conserve the environment. But we must balance the other side of these things like higher cost of goods.”

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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Seat at the Table

As organizations become increasingly concerned about business continuity challenges, the attention of corporate leadership has honed in on the critical role of strategic sourcing and efficient procurement processes. Many organizations are treating the sourcing and procurement function as an organizational priority, as indicated by 93% of our survey respondents.

To fully leverage their collective supply chain capabilities, organizations are integrating sourcing and procurement processes into a broader corporate strategy, increasing its use from 73% to 92% among our survey respondents’ organizations.

The new organizational priority is reflected in the higher level of engagement by sourcing professionals in new product development and portfolio decisions. “What we see is having a sourcing expert at the table in these ideation sessions. To say … look, we can find this ingredient pretty sustainably pretty easily in all parts of the world. Let's create a new product where we can use this material, instead of having to reinvent the wheel. Let's start with something we know we can source effectively.”

Another change in the business outlook is how organizations are beginning to view sourcing and procurement function in a different way. “Now when we talk about strategic sourcing, we're really talking about a new definition.”

The new outlook goes beyond viewing procurement professionals as a group who beats down suppliers to the lowest price. It's more about people who foster collaboration and build relationships with supply partners that will yield solutions to shared problems. “Let's not just always be pushing for cheaper and cheaper. Let’s add value using our relationship with suppliers who know more and can offer alternatives we can use.”

Risk Management in Uncertain Times

The sourcing experts in our focus group and survey respondents are clear that the coming times call for a shift away from the low-cost, just-in-time practices of the last decade. Risk management in uncertain times requires corporate investments

NEW VALUE

“People have started seeing us as the one who understands a particular commodity vertical, one who fosters strategic relationships with suppliers. It’s great when they come to you for help with developing new products.”

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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in better supply visibility (97% survey respondents agree) and automated information flows through e-Processes (84% agree). Both enable faster response when supply is affected due to shortages and disruptions.

“Smart sourcing is now becoming about the use of analytical tools that help people understand their supply chains from an overall sourcing model. And then use risk analysis tools to make decisions around trigger points where alternative sourcing strategies need to be deployed.”

Our survey also identifies other risk management strategies that will be applicable in coming years. These include: dynamic adjustment of inventory levels (87%), diversified supply sources (84%), and more domestic sourcing (63%). It is interesting to note the identification of domestic sourcing as one of the risk management strategies in our survey results. The use of this approach makes sense for mission-critical supplies where a local, more reliable source can be leveraged to offset the impact of supply disruptions.

“With so many things that can go wrong, we need a different risk management plan about having a local alternative to outsource temporarily. There's so much uncertainty out there with supply and logistics, we need a backup plan, a plan B and plan C and sometimes even Plan D at this point.”

Finding the Right Supply Partner

Organizations are increasingly relying on their suppliers to be a source of innovation to address future challenges. “Our sourcing relationships with our suppliers are absolutely changing and they're becoming deeper and intertwined. That's critical for the future.”

This high level of reliance requires organizations to form buyer-supplier teams that work on developing new products, build supply plans from prototype to production, and devise innovative approaches for process improvements. These opportunities underscore the importance of fostering close supply partnerships as a critical sourcing strategy for the future.

ACTION PLAN

“Job number one now is a top-down risk analysis and capability assessment for each one of our vital components that go into manufacturing the final product, and understanding our alternative supply options for each one of those components.”

Jeffrey Kirkpatrick / Dallas Baptist University Order # 82146 / Order Date: 1/5/2023 Copyright

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A key element of this collaborative strategy is identifying best supply partners for your organization. We asked our sourcing and procurement experts to identify the necessary attributes of a supply partner. Their responses included: flexible manufacturing capability, location and proximity to ease logistics flow, and service quality. These attributes reinforce the outlook discussed above regarding business continuity and supplier performance. Notably low in the ranking of partner attributes was purchase cost.

“A good supplier relationship management program helps you segment your supply base and identify those that really are transactional. You don't need to invest nearly as many resources or time in developing close relationships with them.”

Joint Ownership of Success

To ensure a successful buyer-supplier partnership, each side must make a commitment to shared success. This implies that when requiring suppliers to meet certain performance goals, buyers must ensure they are facilitating their suppliers’ workflows and providing necessary support. “We will work with our suppliers to solve their supply and quality problems. We do this because our suppliers also bring a lot to the table for us!”

Building good supplier partnerships require both buyer and supplier organizations to articulate and gain buy-in to the value of joint ownership of mutual business success. It’s only then that partnerships can deliver desired outcomes.

Our study indicates multiple approaches used by organizations to implement this strategy, such as: embedding a rep from the buyer organization in suppliers’

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