Decoding Global Supply Chains: Insights from the Front Lines

Prepare to ascend the heights of supply chain mastery as we unpack the secrets behind Schneider Electric's triumph in clinching the number one spot on the Gartner Global Supply Chain Top 25 for 2024. Discover the innovative strides of their STRIVE program, which is setting a new standard for achieving a net-zero carbon footprint. In an industry that thrives on resilience and innovation, we'll explore the composite score system employed by Gartner to rank these elite companies, blending peer evaluations with a keen eye on financial stability and ESG factors. I'll also share insights on why fostering talent and integrating advanced systems, including the game-changing power of artificial intelligence, are non-negotiable for leaders in the supply chain arena.

As we navigate the geopolitical chessboard affecting global trade and technology, I'll take you through a scenario that's keeping industry giants on edge: the potential global impact of Chinese aggression towards Taiwan, particularly on the semiconductor industry. Hear from Dutch-based ASML and TSM on their cyber-fortified strategy to remotely disable crucial manufacturing machines, a move showcasing the importance of cybersecurity in protecting our most advanced technologies. We'll shift gears to examine Tesla's audacious pivot toward robo-taxis and dissect the competitive hurdles European automakers face against Chinese production prowess. Lastly, we'll touch upon Boeing's fiscal turbulence and forecast the semiconductor market's trajectory, providing you with a panoramic view of the evolving industrial landscape.

#SupplyChainInnovation

#SustainabilityLeadership

#DigitalTransformation

#SchneiderElectric

#GartnerTop25

#NetZeroCarbon

#ESGStrategy

#CyberSecureFuture

#SemiconductorTrends

#RoboTaxiRevolution

#MarketInsights

#SupplyChainResilience

#GlobalTradeDynamics

#StrategicAdvantage

#SupplyChainExcellence

You can follow Chain Reaction on LinkedIn, Twitter and Facebook

Transcript

Tony Hines: 0:06

Hello, tony Hines. Here You're listening to the Chain Reaction Podcast, all about supply chain advantage. Well, very interesting show coming your way in just a few moments. It's all about supply chain advantage this week as we focus on the top 25 supply chain companies named by Gartner. This is an annual event and, well, I'm sure you'll find it quite interesting. And then there's all the rest of the news that's happened this week that we'll tuck into the program, everything that impacts global supply chains this week. Chain reaction.

Tony Hines: 0:41

Well, one of the big news items in supply chain world this week is the Gartner Global Supply Chain Top 25 for 2024. This is a list of the top 25 companies that they publish annually, and this is the 20th anniversary of this list and it makes interesting reading. So let's just take a look at the Gartner list. At number 1, we have Schneider Electric. Number 2, cisco Number 3, colgate-palmolive Number 4, microsoft Number 5, johnson Johnson Number 6, diageo Number 7, nvidia Number 8, coca-cola Number 9, walmart no-transcript. Schneider Electric got the award as the top number one supply chain by Gartner for its three-year STRIVE program, and that's led to a more regional, resilient and supplier-centric supply chain. With recognition received from the World Economic Forum, schneider Electric is a leader in digital transformation of energy management and automation, and it's been named the best global supply chain organisation by Gartner. Its STRIVE programme was designed to have 70 net-zero carbon plants and distribution centres by 2025, to progressively pursue further energy and carbon efficiencies across all of its 300 manufacturing and warehousing facilities.

Tony Hines: 2:51

The interesting thing when you look at the Gartner list of supply chain top 25 companies for 2024 is the composite scores that they actually get. For example, snyder Electric get 5.96 and that's the top score by a mile. Cisco get 5.04, and then, when you go down, microsoft at number four get 4.3, and you move right down to the bottom of that list where JDcom appear at number 25 and they get 2.71. Now this composite score is composed of a peer score that represents 25%, the Gartner Expert score another 25%, a ROPA score of 5%, a ROPA change score that's the year-on-year score 10%, a revenue growth score another 10%, inventory turns score 5%, and an ESG score 20%. So they make up this composite score that all these companies are judged by. So they're the criteria. Ropa, I think, is return on physical assets.

Tony Hines: 3:57

Now, when we look at the things that are looked, ating and engaging talent is one of the factors, and chief supply chain officers know that redefining the skills, roles, relationships and structures in the organisation are critical to driving high performance and engagement. That's according to Gartner, and they talk about recommending the company as a great place to work. The top 25 leaders are more consistently funding people-centric strategies to drive higher engagement from the workforce and they use AI to redesign and automate processes to reduce the work friction. So the claim is they're investing in knowledge management as well as the systems, so it's about people and systems. They also look at artificial intelligence-driven advances. So supply chain organizations are actively assessing how they can use generative AI and they're exploring the potential of that, and, of course, that depends on attracting the right talent and making sure that that talent are fully engaged. There's another phrase they talk about, which is the anti-fragile supply chain, and across industries, leading supply chain organizations have faced a volatile, uncertain, complex and ambiguous environment VUCA. It's something I've mentioned in my Supply Chain Strategies book Supply Chain Strategies book and CSCOs and their teams have to embrace uncertainty and make sure that they have anti-fragile strategies in place.

Tony Hines: 5:32

The anti-fragile state helps understand complex global supply chains and focuses on improvements that can be made to overcome disruption and uncertainty. On improvements that can be made to overcome disruption and uncertainty. The top 25 companies ranked by Gartner have 50% of that score, based on business performance and community opinion. Business performance and the form of public, financial and environmental social governance. Esg data provide a view of how companies have performed in the past three years, while the community opinion gives a peer and Gartner expert view of the company's potential and reflects leadership in the supply chain community. The companies themselves are selected from a combination of Fortune Global 500 companies and Forbes Global 2000 companies. They say that this keeps the list at a manageable level and the annual revenue threshold of US$15 billion has been applied and companies without physical supply chains are excluded, so it only includes companies with physical supply chains. So if a company, for argument's sake, had a 15 billion plus turnover but it was all in digital products, digital supply chains, then that would be excluded.

Tony Hines: 6:55

The key issues facing the industry will be discussed on June 10th to the 12th in Barcelona. Couldn't be a better place to be, could there? So it could be a worthwhile trip going to the Gart in Barcelona. Couldn't be a better place to be, could there? So it could be worthwhile trip going to the Gartner Supply Chain Symposium in Barcelona. So, all in all, it's a very interesting scoring mechanism and it's very interesting who makes the Gartner top 25. It's focused, of course, on sizable companies, as you can see. Well, I think congratulations are in order to all the class of 2024 that made the Gartner Global Supply Chain Top 25.

Tony Hines: 7:31

And when we look through the companies, we can see that Amazon got the award for increasing speed to client through the use of Cobots. Apple for maintaining top-line growth and margin via regionalization efforts. Procter Gamble supplier-to-shelf initiative that's driven savings to offset inflationary pressure. That's a program called Supply 3. Unilever shaping your own future program focuses on skills over roles. Jdcom number 25 on the list, using technology to drive innovation in customer service and emissions reduction. Bmw, working on ecosystems, resilience and sustainability and using AI for predictive maintenance. Pfizer for investing in their refugee leadership scheme. Dell for the creative use of technology to engage and enable disabled employees. I think that's a very interesting program. Nike, a focus on partner development across a large and diverse contract manufacturing base and looking at a focus on the upward mobility of women. Diageo, scoring a perfect 10 in the ESG. Walmart for a deepened supplier engagement through the Luminate platform. Nvidia, the supply chain and suppliers that have supported all the growth in the digital age. Astrazeneca, addressing the bottlenecks to gain fast patent achievement. So, all in all, a good show for the class of 24.

Tony Hines: 8:59

I think the standout thing for me in the awards that Gartner make for the top 25 is the rigor they apply, and I think also not just the rigor when we look at the analysis, but the focus, of course, when we look what we can learn from those top 25 companies, and I think some of the takeaways for me are the focus on people, the focus on applied technology and the focus on ESG, environment, social governance. Those three things taken together provide a central focus for the supply chains of the future. I suppose, to summarise the Gartner Supply Chain Top 25, it's to celebrate those companies that have made contributions towards best practice, and the key reasons why they make it onto the prestigious list are probably these. Well, first of all, let's summarise the performance metrics and composite score. Companies are evaluated based on financial and corporate social responsibility metrics, as well as community opinion, and the scores are aggregated and weighted into this composite score that we talked about. You know, the 5.76 or the 2.71. That final score is a composite score and the ranking is just determined on the basis of the highest score first and the lowest score Making the top 25 is the 25th score.

Tony Hines: 10:22

Another key thing about the list is embracing new opportunities. Top supply chain organisations actively pursue growth opportunities. Even in the face of disruption, they position themselves as partners for growth, while also mastering supply chain risks. They're adaptable and resilient and that's what differentiates them with their capabilities. The third thing sustainability and ESG. That has to be a focus. Sustainability remains a priority for these companies. 19 companies on the list achieved perfect ESG, environmental, social and governance scores Perfect. Schneider Electric, the top-ranked company, reduced its key supplier's carbon footprint by 10% in less than two years through an ecosystem approach.

Tony Hines: 11:08

Supply chain masters the masters category recognised sustained supply chain performance. To qualify, companies have to have top five composite scores. For at least seven out of the ten years, amazon, apple, procter, gamble and Unilever are among the masters this year. Schneider Electric is also a master and they're the number one in 2024. They've consistently demonstrated long-term leadership in supply chain excellence and they've had remarkable recognition.

Tony Hines: 11:39

And the fifth and final thing is the future implications. The focus on growth and risk management suggests that supply chains are evolving to be stronger and more profitable. Companies are navigating volatile economic environments while protecting growth rates. So prioritising sustainability and agility is critical for competitive advantage, and that's what we're all about, isn't it? Having that supply chain advantage. So to summarise, I suppose overall it's a commitment to excellence, adaptability and forward-thinking strategies in the face of disruption. And there's the future.

Tony Hines: 12:27

Now let's turn to some of the things that have been happening this week that will affect supply chains in the future, and the first thing on my mind is elections. We have an election due at the end of the year, in November, in the United States, and that's for the President. And the President, of course, can influence all kinds of things, not just in the United States but elsewhere in the world through the policies that the United States pursues in international trade. And so where is the China-US trade war headed? Well, we'll be finding out fairly soon. And also this week, prime Minister Sunak in the United Kingdom surprised everybody when he came out on Wednesday after Prime Minister's questions and said he was going to call a general election on the 4th of July, of course, american Independence Day. Well, wonders never cease. But let's return to this question of trade wars, because that's going to influence all of us who work and comment about what's happening in supply chains.

Tony Hines: 13:40

Well, there was an interesting piece this week in the Independent newspaper which talks about the US, china and the EU in relation to these trade wars that have been happening for some time now. It emerged this week that if China were to invade Taiwan, it would cause some problems in the microchips and microchip supplies. Taiwan manufactures the lion's share of microchips and apparently Taiwan would be able to disable remotely the machines that made the chips, which would stop China from accessing and manufacturing them. The Dutch-based ASML, the only producer of the machines that make the most advanced semiconductors and its largest customer, taiwan Semiconductor Manufacturing TSM, had confirmed to the Dutch government that this could actually be done, and the significance of this is that the US ban on exporting the higher specification chips to China, which they use for military purposes, will not sell machines to China. And then assurance was given to the Biden administration that this technology cannot simply be seized by force. So that's clever, isn't it, if you can stop your technology through remote access if somebody tries to steal it. Now, that's what I call cyber security.

Tony Hines: 15:06

Now Tesla this week has missed out its goal of delivering 20 million vehicles a year by 2030 in its latest impact report, which was published on Thursday. It's pulling back on its previous goal here, and it suggests to many that it's also tempering those auto ambitions to focus attention on robo-taxis, so perhaps it sees the future in these robo-taxis. You might remember that Elon Musk, the CEO of Tesla, said in 2020 that they aspire to sell 20 million vehicles by the end of the current decade, and that would be twice as many as those sold by Toyota, the world's largest automaker. But that's no longer the case. The company has dropped plans to produce the all-new model that was expected to cost $25,000, while pushing autonomous driving technology as the main growth driver. It plans to host a launch event for its robo-taxi on August 8th. So we'll get to know more as we approach August 8th. This change in strategy was first reported by Reuters in April. Tesla's plans to use its current production lines for new, affordable vehicles, a move that would result in smaller cost reductions than expected and modest volume growth. Affordable cars were the aim, but robo-taxis seem to have taken that place now. The company still says it will introduce more affordable models in the future, but it doesn't necessarily mean that those will be cars costing $25,000.

Tony Hines: 16:41

The slowing demand for electric vehicles and tough competition have hit Tesla hard. Its sales grew by 38% in 2023, and that's below the long-term growth target of 50%, and Tesla has recently laid off 10% of its staff, including the disbanding of the supercharger team, which I reported on the Chain Reaction podcast in the last few weeks. The other interesting thing is Tesla no longer compares the diversity of its workers to other companies in the impact report and it no longer makes the claim that the majority of its employees are from underrepresented groups. In the first quarter of 2024, demand for vehicles was weak. Boeing's chief financial officer said that deliveries won't increase in the second quarter. Shares have fallen 6% on the news of negative 2024 cash flows. The deal with Spirito Aero in quarter two is still possible, says the CFO. Boeing is burning rather than generating cash in 2024, and deliveries won't increase. And that's all down to these problems that Boeing has experienced over the past few months.

Tony Hines: 18:05

The CFO, brian West, told the Wolf Research Global Transportation and Industrials Conference that he expects Boeing's full-year free cash flow to be negative compared with March's outlook for a positive cash generation in the low single-digit billions. The remarks did surprise some investors and they sent the shares tumbling by 6% on the news. Production problems at the troubled aircraft manufacturer and delayed deliveries to China have worsened the outlook. The planemaker said it's working with Chinese customers on the timing of deliveries as the Civil Aviation Administration of China completes the review of batteries contained within the 25-hour cockpit voice recorder. Commercial jet deliveries won't improve in the second quarter. Boeing stock has fallen 30% in the year to date. And it's all those problems the 737 MAX has experienced with the blowout of the door panel at the start of the year. They're also searching for a new CEO because the current CEO, dave Calhoun, is set to step down by the year end. The Federal Aviation Authority has imposed a May 30th deadline for Boeing to produce the 90-day report that would address systemic quality control issues. The

Tony Hines: 19:21

FAA thinks it's a long road to recovery to address the safety issues. Now. European car makers are facing much more competition from China than car makers in the United States, and the Eurocar giants won't have much time to restructure their business operations and product lines to compete with these Chinese automakers. Stiffer tariffs might do little to protect the status quo, according to industry executives. The authorities in Brussels have said they could levy new tariffs on Chinese electric vehicles if the results of an investigation into Chinese government subsidies are substantiated. Ursula von der Leyen, European Commission president, said on Tuesday that Europe would take a tailored approach to the investigation and to any potential duties that will be imposed. But the truth of the matter is China can produce cars at lower cost, and so the competitive forces at play presently favour Chinese cars. But there's only so much protection you can provide to an industry of this size, and many think tariffs are not the answer. The problem here is time. It's time to get things sorted out in the Euro car makers operations and compete on a level playing field with China.

Tony Hines: 20:51

So, it might gain some respite if the tariffs level the field for a short period, but they can't go on forever. Cutting labour costs in Europe is never going to be easy and getting the costs to compete with those of Chinese car makers is difficult. So unless they can innovate and be more productive to compete with China, the future looks bleak for Euro car makers at this point. World Semiconductor Trade Statistics forecasts growth of 13.1% for the global semiconductor market in 2024. Tsmc, the Taiwan Semiconductor Manufacturing Company, has said that second quarter sales could rise as much as 30% as they ride the upturn in demand. Ai, of course, is driving the demand for all these semiconductors. TSMC, of course, manufactures semiconductors too for Apple. So maybe, as some markets fall off and fall away and AI is driven by growth, that will replace the switch. Nvidia forecast on Wednesday its quarterly revenues to be above estimates and they've announced a stock split. So all going well at NVIDIA at the moment and that's where all the demand is in companies like NVIDIA. Nvidia's forecast its annual growth of 10% in the global semiconductor industry, excluding memory chips. Senior Vice President Cliff Hou said that this is a golden age of opportunity with AI. With AI, Argentina has big plans to cash in on its untapped copper riches in the Andean North. Its ambition is to be a top 10 global producer and it's attracting investor interest from Glencore, Lundin Mining and First Quantum Minerals.

Tony Hines: 23:08

Xiaomi said it plans to sell 120,000 electric vehicles as its quarter one. Figures were boosted by its strong phone sales. China's Xiaomi, which many of you will only know as a phone company, said it aims to deliver 120,000 EVs this year from its initial goal of 100,000, and it will implement double-shift production to meet this rising demand for its EVs. China's Lenovo Group reported a 9% rise in its fourth-quarter revenue to $13.8 billion on Thursday. It's the world's largest maker of personal computers and demand is picking up after the COVID-19 pandemic, so it hopes to ride the crest of the wave.

Tony Hines: 23:46

Mondelez has been fined 366 million US dollars by the European Union for cross-border trade curbs. Oreo Macom Mondelez International was fined 33337.5 million that's $366 million by the EU antitrust regulators on Thursday for impeding cross-border trade of chocolate, biscuits and coffee products between EU companies. The European Commission continues to crack down on companies, imposing territorial supply constraints on distributors and retailers. They're concerned about the anti-competitive arrangements that are taking place to try and hold prices and profits, and it's a clear breach of EU antitrust laws. Contrition by the company reduced the fine by 15% after it acknowledged its wrongdoing.

Tony Hines: 24:51

Us Treasury Secretary Janet Yellen said on Thursday that she wants to make market-driven countries a wall of opposition to China and its state-driven industrial policies. This will be discussed at a G7 finance meeting this week On Friday and Saturday. It's expected to dominate talks. Many industrial democracies are concerned about China's over-investment in EVs, solar products, semiconductors, steel and other strategic industries, and including the investment in countries such as Mexico, india and South Africa. Without changes to Chinese policy, including a shift from increasing production to boosting the domestic demand, market-driven economies will face a flood of cheap goods and it will threaten their manufacturing capacity, and we've seen some of that in this particular episode that we've already discussed about the European car makers. So it'll be interesting to see how those talks go.

Tony Hines: 25:56

Don't forget to subscribe to the Chain Reaction Podcast and be the first to know when new episodes appear. You'll be sent a notification and you can download and listen right away. Well, that's a roundup of everything happening in global supply chains this week. Hope you've enjoyed the program and I hope you've learned something you didn't know before you listened, and I look forward to seeing you in the next edition of the Chain Reaction Podcast. Until then, I'm Tony Hines. I'm signing off. Bye for now. Thank you.