These Three Non-Executive Directors Want To Accelerate The Supply Chain Transition

Let's start close to home. Have you noticed any supply chain issues in your personal life recently?
Van Pernis: ‘I notice that I am postponing some things. I would actually like to replace and replenish my solar panels, but I don't start because I already know that there are extremely long delivery times. The same goes for replacing my central heating boiler with a heat pump. I also see construction projects in my neighborhood being massively delayed due to lack of materials. So yes, you are confronted with sticky supply-chains issues in your private environment.’

In your role as a member of the Supervisory Board you doubtless have to deal with this as well. To what extent is that more or less than a few years ago?
Van Pernis: 'I think we've been having discussions in the Supervisory Board about supply chains and how to optimize them for about ten years now anyway. Although of course it differs per company. Aalberts, for example, is a different company than ASMI, with different supply chain challenges. Aalberts has traditionally tried to produce locally as much as possible. They keep the lines as short as possible, which is now proving a big advantage. It is completely different at ASMI. Their supply chain is of necessity located all over the world, with all the challenges that entails.'
De Jong: ‘Ten or twenty years ago, discussions about the supply chain focused mainly on costs. It was about how to reduce costs, how to improve margins and how to be as competitive as possible in the supply chain. Now it is mainly about security of delivery and flexibility, but also about matters such as CO2 reduction – how do we make the supply chain carbon neutral?
Jeanine van der Vlist: ‘Also, in the field of the supply chain, there is a clear shift from profit to purpose. Companies are not separate from society. A company like BDR Thermea (Remeha) is in the middle of the energy transition. There it's almost all about purpose. At the same time, we should not forget that we need to find balance between purpose and profit. The latter remains very important. It is ultimately about profitability, about continuity.'

Is there enough vision in the field of purpose in connection with the supply chain?
Van Pernis: 'I notice an increasing awareness that a clear purpose will ultimately lead to profitability. Or the other way round: turnover will decrease if no clear choices are made. What I see at the same time, and that worries me, is that management increasingly seems to be about ticking off lists. As a result of all kinds of legislation and regulations, we are faced with numerous checklists, things we all have to comply with. This keeps us very busy. But ultimately it's not about the lists, it's about the culture. That is what I try to convey as Director. I always attempt to see how the cultural elements reflect in the strategy, and more specifically, in the supply chain.
Van der Vlist: ‘The advantage of a checklist and clear targets is that issues get expedited. That is the main function of those kind of obligations. Whether it's diversity quotas or targets related to energy transition; as soon as they are imposed, things accelerate. I'm not against that.
De Jong: 'You can steer from targets or checklists. But if management only puts check marks behind imposed targets, it will fail. My concern is that we are too busy taking small steps. Most companies are taking these little steps. But it's not enough. We will have to take bigger strides and address systemic issues. We still consider the supply chain excessively as competitive tool, a means of getting an edge over others. I think that is too narrow a view. We need to get smarter about it. We have to be more collaborative and work not only with our own suppliers, but also with competitors and other partners.
Van der Vlist: ‘We cannot sit back and relax regarding our supply chain. It might have been possible in the past, but the world has changed. Companies will have to re-consider their supply chain policies. Two or three years ago, there was a kind of abundance. We could source anything from anywhere. This has changed. We cannot continue sourcing everything from China without a second thought. It is not implausible that something can happen which would bring this whole system to a halt. The crises of recent times proved to be a stick to motivate us to do things differently. That's the good news.

Is the supply chain sufficiently on the agenda of the Supervisory Board?
Van der Vlist: 'The supply chain as such is almost never on the agenda as a separate item. But the supply chain as part of the strategy is. Relevant supply chain questions are regularly raised in the Supervisory Board. Where can we source? Can we manage with fewer suppliers? Should we look at other suppliers? What can we do about supply issues? How should we go about product innovation? All of that is discussed. The supply chain discussion is also often an accelerator for innovation.'

That sounds good. Yet in my daily practice I also see chains that have little or no movement, that are as solid as a house. Is my picture then too gloomy?
De Jong: 'In all honesty, I see that too. It is difficult to mobilize everyone in the same direction. And many things are indeed fixed: you have to deal with existing machines, with existing contracts, with your employees – this does not make for a very flexible situation. If you were allowed to start all over again with a blank sheet of paper, you would probably do many things differently. But in practice, you never have that blank sheet of paper. On top of that, a future-proof supply chain is often not immediately cheaper. We can certainly set up a supply chain that is completely carbon neutral and which offers security of supply, but if it turns out to be ten percent more expensive, then the question is how do you avoid being priced out of the market?
Van Pernis: ‘There are so many aspects to the supply chain. When we talk about raw materials, there are often only a limited number of sources. Look at the electric car. The raw materials for the batteries are mined under the most appalling conditions in countries we don't really want to do business with. But everyone wants an electric car; the energy transition demands it. So we continue merrily.'

What is needed to better enable or accelerate the transition?
Van Pernis: 'That mainly requires data – to identify where improvement is possible. The first problem is that this data is not always available, at least not for the entire chain. Secondly, we need to plan more in terms of scenarios. If something happens tomorrow in a certain country, you will need to know where your second source is, where you have an escape. We need to do that more than what we do now. And a third point: in a global economy, we have to strive for a more balanced trade. That balance is currently skewed in many cases. That is undesirable. Germany is now trying to create more of a balance in the trade with China. I think that is smart. It has the capacity to create mutual dependence. And that allows you to exert some pressure, occasionally, when things go wrong in the chain.'
Van der Vlist: ‘What I especially hope is that we bid farewell to complete dependence on one country or a single product. I hope we've learned that we shouldn't want that. Buying all your gas from Russia has not turned out to be a wise decision. We learnt that lesson. And beyond that, I think solutions will need to come from innovation.'

Is the lack of speed also related to lack of mandate among Executives? I regularly speak to CEO’s and supply chain professionals who say they are quite willing to change, but that the company seems to be holding it back for all sorts of reasons
Van der Vlist: ‘This sounds a little too victimized to me. I think there is enough push to adjust strategy. Directors facing supply chain challenges will feel the need to do something about it. I have little compassion with CEOs who do not have this drive or who do not pick up the gauntlet. I immediately have a problem with someone like that.'

Are companies concerned enough with the long term? I see in the transport world, for example, that companies are not really involved with the physical internet, where logistics networks are connected in a smart and digital way. The EU wants to have that largely in place by 2050. That means as a company you should no longer make futile investments that go beyond that time frame. Is there sufficient realization of this?
Van der Vlist: ‘As far as I'm concerned, these are two different things. You cannot in the short or medium term stop doing your business in the way you are already doing it. Nor can we be 100 percent sure where we will be in 30 years. You will always have to balance between the short or medium term and the future. Maybe cars will be running on hydrogen in 30 years. We certainly have to look at that. But in the meantime, we should certainly also continue to develop electric cars. It goes hand in hand.
Van Pernis: 'Things like physical internet should be part of your R&D strategy. Research and development should always have a long-term vision. Innovation should be about the future. It won't be ready tomorrow. And of course you will have to have the flexibility to adapt in between.'
De Jong: ‘Complexity within large organizations is a big problem in this regard. The number of people in organizations who has the capacity to grasp the entire chain and think integrally, has gone down alarmingly. We made organizations ever bigger and more complex. All decisions must be made across multiple axes. That ultimately comes at the expense of agility and speed of decision-making. This is, especially for complex matters like the supply chain of the future, a disadvantage.'

A question that comes to mind, without wanting to be condescending: do you have enough knowledge to talk about the supply chain in the Supervisory Board?
Van Pernis: 'A Supervisory Board should make sure it has as much as possible knowledge on board. Individual Supervisory Directors need to sufficiently inform themselves. My experience is that these days they do. Supervisory Board Members are generally well informed. The days when documents were first opened in the meeting are truly over. There are of course always people with specialization in finance or supply chains. It is the role of the chairman to make sure the Supervisory Board has access to all the relevant knowledge. I'm involved in training new, young Supervisory Directors, and ESG and supply chains are the topics of the moment. Everyone doing Supervisory Board training now is growing up with it. These topics are really ‘hot’.'

Are you optimistic about the steps still to be taken by companies and chains?
De Jong: ‘Frankly, I am not that optimistic. I am positive about the steps we are taking, but when I think about the steps needed to change the system, I worry. We will soon have 10 billion of us on this planet. How are we going to deal with that? The planet will surely survive, but I seriously question the impact on our welfare. We are moving too slowly. I'm glad we accelerated from 1 kilometer per hour to 10 kilometers per hour, but I wonder if 100 kilometers per hour is enough for us.'
Van Pernis: 'Nonetheless a great deal is already happening. This is also a result of the growing need. With every escalation you see acceleration. The war in Ukraine caused us to use considerably less energy. Every now and then ‘necessity’ is needed. Societies respond to necessity. I find that reassuring.

Interview by Johan Kerver, member of the management team of evofenedex, responsible for digitization and supply chain. This article was published in Management Scope 01 2023.