Recession is the type of word that sends a shiver down the spine. Sometimes it seems that there are plenty of people only too willing to talk us into one despite the fact that all the indicators show that the economy is still growing – albeit more slowly than last year. Nevertheless, organisations will need to be as prudent as possible in the coming months when it comes to all aspects of operations.
Neil Ashworth, director of the Tesco.com supply chain, says: “Those organisations that are fundamentally lean in operation are better disposed to weather the storm – without the disruption that a major cutting session can create, but they are also in a better position to emerge stronger when the economy strengthens.”
The slowdown has triggered a sharp increase in demand for supply chain development and logistics talent. Barrie Dowsett, managing director of The BJD Group, which specialises in the recruitment of senior logistics and supply chain managers, reckons outsourcing is going to be high on the boardroom agenda.
Companies may choose to outsource so they can focus on their core business. “Those that do will need to re-engineer how to handle aspects of the business, that previously had been thought of as technical, so that third party logistics providers can inherit them,” says Dowsett.
This means 3PLs will be expected to adapt to new demands and increased targets, and they in turn, will expect more from their employees. Dowsett reckons this will change the required skills sets of logistics managers. “People will need to be able to take on real bottom-line responsibility.
“Supply chains are going to get more and more complex, and organisations whose supply chains aren’t efficient enough, are going to be caught out. People who can see through those complexities are going to be in high demand.
“Companies will focus on where and how they can get things sourced and supplied in the most economic way,” says Dowsett. “For this they will need people who are skilled in strategic, particularly global, sourcing.”
Business development people will also be in high demand. Colin Osborne, head of training and development at Kuehne + Nagel, reckons that as the market gets tougher, more attention will be paid to improving negotiation skills.
“Third party logistics providers could do very well indeed,” says Dowsett, “as long as they can demonstrate the complexities of supply chains.”
He reckons 3PLs that will manage it well will be the ones that do more than just receive and store the raw materials, and handle the more typical aspects of warehousing and distribution. If they can take on the production and packaging side of things too, they will fare even better. “This will take 3PL contracts further into the customer’s supply chain,” he says.
Matt Humphries, practice head of logistics and supply chain at recruitment company Ellis Fairbank, says: “A trend is emerging that is seeing companies completely overhaul everything from sourcing the raw materials to the distribution to shops and customer home.”
Supply chain and logistics make up a big part of a company’s expenditure after people costs. “Companies need to ensure that every penny is accounted for and whether there is any way to reduce costs without compromising quality of both goods and services,” says Humphries.
Dr Mick Jackson, acting chief executive of Skills for Logistics, says: “Rising costs are putting a premium on decent management.” He reckons there’s a lot of room for improvement in this area. “Historically, it has been a very ‘command and control’ structure, which has put limits on the creativity found in other professions.”
Managers are going to need to develop skills such as: better use of information; better analysis of problems; better on-ground decision making; and above all, better people management. “If companies are looking to get more out of the same workforce, people management is going to be an important skill,” he says.
Demand for skilled logistics and supply chain professionals has always been strong, but the downturn is going to increase it even more. Avi Mann, operations director at recruitment consultancy MVP, says that last year was buoyant, but this year middle management vacancies have increased by 20 per cent.
What Mann describes as the “nice-to-have” roles, such as project management within the supply chain and distribution centres, are not going to be as common as they have been previously.
Barrie Dowsett says: “The best supply chain and logistics people will have golden handcuffs.” Companies will want to retain their best people, and the way to do that is to provide bonuses and other incentives to stay within the company.
Katie Herdman, human resources manager at Kuehne + Nagel, says: “When we are faced with an economic slow-down people feel less secure and tend to stay where they are. Companies may down-size, but very seldom will let their best people go. This leads to less movement of labour and it becomes harder to recruit good people even though more people are on the market.”
Demand will no doubt outstrip supply, and companies may end up vying for the same people. Dowsett says: “During periods of uncertainty shortlist numbers get smaller and job offer rejections grow.” He reckons people do not always think through the consequences of moving jobs. Suddenly they are faced with relocation – they will have to sell their house, and uproot their family. Even road congestion will play a factor, as it will result in higher commuting costs. “There’s a risk factor in moving, which isn’t popular,” he says.
Interim managers could offer a short-term solution, as they are more flexible. “Companies will do this either because it is a good solution, or because it is the only one,” says Dowsett. But emphasis would be on short-term, because they are a pricey alternative.
Mick Jackson says: “In any downturn period, the knee-jerk reaction for a company is to cut training. But this is short-sighted.” If there is less training on offer, it is natural for the employee to then start thinking about what else is out there.
“If you think training is expensive, just look at recruitment,” he says. It involves hidden costs which a lot of companies are not aware of until later on. There are ways of training which can save money, because a company will improve its retention if it provides good training.
“If you can reduce churn you can reduce the need for recruitment. It’s a prevailing myth that you train someone up only to find they move on somewhere else. The statistics prove the opposite is true,” says Jackson.
Global service providers such as Kuehne + Nagel, which has well-established professional development strategies, will be able to take the fallout from the downturn on the chin. Colin Osborne says the company’s focus will be on developing its existing talent.
One of its schemes, which it calls “succession planning”, is to monitor the up-and-coming employees in the company, and assess whether they are ready for a more senior role. Then they will train them in what they need to progress to the next level. Osborne reckons its in-house development and assessment centre helps it skirt the skills shortage issue. It helps them pinpoint which skills an employee lacks or needs to develop, then fills in the gaps with individual training.
And Katie Herdman says the skill requirements for the company’s logistics employees will not change. “In our experience, our customers require end-to-end solutions, which means understanding all aspects of the supply chain. At Kuehne + Nagel, in-house development is provided specifically for this reason.
“We believe that our tailor-made traineeship and apprenticeship schemes will help us grow the talent required to face the challenge ahead. We strive for an educated, trained, multi-skilled work-force and the results attained with our development programmes have shown us the benefits, already,” says Herdman.
Dr Mick Jackson reckons over the next few years there will be a flattening out of management. This means people who are now at operative level, which is the equivalent of a level 2 National Vocational Qualification or five GCSEs, will take on more of the responsibility that a junior manager currently has.
“Today, operatives are level 2 qualified, but there will be more level 3 operatives around. They will move from being a ‘doing’ employee to a ‘thinking’ one,” he says. This is likely to spread to other management levels, including the more senior roles.
In the long-run, the increased responsibility employees will have to adopt to deal with the challenges ahead, could be just what the industry needs to help raise skills levels. More and more companies are investing in graduate programmes, and the number of opportunities to study logistics at degree level is better than it has ever been.