Key triggers experienced in disturbing the back bone of supply chains , locally , includes the very disjointed and disruptive government policies . Basically , when the macros fail , only careful and creative choices or cherry picking of where one can play profitably will assure survival . The chains are now on survival mode . The back bone is no longer holding very well . and have some level of control and certainty . However , the shifting grounds have created a new and critical backbone - the macro factors .
SUPPLY CHAIN
Supply Chain : Revisiting The Backbone
By Michael Nzule
We have been away for some time . However , we now are back , to commune as usual on matters supply chain . We have covered grounds before , on restlessness in managing supply chains . We have reviewed key drivers for managing supply chains . We have looked at supply chain visibility . We looked at disruptors before , and earlier this year we did explore the possible challenges for the year 2023 . And the year is almost over .
In this engagement , we are looking at the vitals again , going back to the basics . The choice of the review of the supply chain backbone is intentional . It is actually very deliberate . When the backbone is disturbed , the centre cannot hold . It not only causes immense restlessness , it is very painful , and excruciatingly so . Simply put , touching the core or causing injury to it , should be avoided at all costs . It is great to avoid the triggers of the pain , and if possible eliminate them .
Key triggers experienced in disturbing the back bone of supply chains , locally , includes the very disjointed and disruptive government policies , especially in Kenya , where we are writing this from . We have seen great uncertainty from the tax regimes , foreign exchange challenges leading to extreme rationing of US Dollars ( low reserves to serve the supply chains ), rising costs of executing supply chains which are largely import driven . Rising costs of doing business , declining disposable incomes for households ( who are the final consumers ), declining destination competitiveness for the country continuously make the supply chain performance challenged .
Basically , when the macros fail , only careful and creative choices or cherry picking of where one can play profitably will assure survival . The chains are now on survival mode . The back bone is no longer holding very well .
Let us for once not forget what has been traditionally taken as the supply chain backbone - we can talk about people , processes , technology systems ( and now AI ) and execution . These are fantastic , assuming that supply chain managers can effectively and on purpose work on them
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Key triggers experienced in disturbing the back bone of supply chains , locally , includes the very disjointed and disruptive government policies . Basically , when the macros fail , only careful and creative choices or cherry picking of where one can play profitably will assure survival . The chains are now on survival mode . The back bone is no longer holding very well . and have some level of control and certainty . However , the shifting grounds have created a new and critical backbone - the macro factors .
It is a nightmare managing foreign exchange exposure . Foreign exchange losses cut across costs of critical imported inputs like raw materials and much required capital expenditure . Painfully so , this includes repairs and maintenance expenditure for spares and scheduled equipment service that supports overall equipment effectiveness measures . The mismatch between a strong currency used for sourcing imported inputs compared to an extremely weak local currency , in which sales collections are made leads to decline in value creation and preservation . Local manufacturers have found it hard to meet international supplier obligations . Scaling down operations is not even an option , closures are becoming more of a reality and the norm .
Taxes . Taxes … as certain as death , are now an even much more sharper pain , and the pain is right at the core of the spinal cord . Being in a situation where the tax regime is not certain , and the only direction of change is on the increase is not great . It feels like grinding of bones . Worse still , liquidity levels are declining , and cash reserves continue to deteriorate . This makes proven logistics planning models like for materials planning , demand forecasting , almost irrelevant .
Fundamentally , let this serve as a reminder that a severely broken backbone , breaks the camel ’ s back . It is so , when the only viable options left are to execute relocation strategies , to favourable tax regime zones . International trade is highly anchored on stability of tax regimes and ease of
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