Canada Bigger inventories, blockchain and domestic suppliers: how companies are re-jigging supply chains

14:56  29 november  2021
14:56  29 november  2021 Source:   globalnews.ca

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As companies reckon with the supply chain havoc wreaked by the COVID-19 pandemic and natural disasters, almost everyone agrees: the way products and parts move across the world needs a serious rethink.

The past eighteen months, for example, appear to have curbed corporate enthusiasm for the just-in-time model of operating with lean inventories and requesting supplies only when needed.

"Old practices like just-in-time inventory that were really central to driving down working capital costs ... are maybe no longer the best way to go," says Vincent Dixon, a partner and supply chain expert at consultancy KPMG in Toronto.

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For businesses, stocking up on material, parts or goods acts like insurance against supply chain disruptions, Dixon says. "You know it's expensive, but when you need it, you're lucky to have it."

One way to deal with supply chain curveballs like the COVID-19 pandemic is to build "safety stocks" that ensure a store or factory has enough supplies even in the event of significant delays, he adds.

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But beefing up inventories is hardly the only way in which companies are reevaluating the way they run their supply networks. The post-pandemic future of supply chains, it turns out, may involve both high- and low-tech solutions.

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One Canadian tech company, for example, credits the blockchain for helping a key client keep the shelves stocked despite the global trade logjam. At the same time, one century-old Toronto business says it's rediscovering the importance of domestic and U.S. suppliers.

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In the widespread panic that seized retailers big and small in the run-up to the 2021 holiday shopping season, one company has been sounding remarkably relaxed: Walmart Canada.

As companies -- from toymaker Hasbro to tech behemoth Apple -- have warned of lost orders or delayed deliveries, Walmart Canada made it sound like it would be holiday shopping business-as-usual in its stores.

Although the retail giant did not respond to a comment request for this story, it previously told Global News via email: “By buying earlier and accounting for extra lead time to move goods, we will be well-positioned for the season.”

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Toronto tech company DLT Labs says the blockchain helped Walmart Canada solve a key supply chain headache at exactly the right time.

Blockchain in supply chain management theoretically means "the ability to communicate in real-time with a large network of all your suppliers all the way down through your supply base. So everybody has information that they need when they need it," Dixon says.

The blockchain, best known as the technology that underpins cryptocurrency, has long generated buzz among supply chain experts. A blockchain is a decentralized ledger that allows multiple parties to record transactions in a transparent, traceable, and tamper-proof way. This new system of record-keeping, goes the thinking, could make it much faster and easier to track and monitor products, settle payments to suppliers and improve coordination, among many other things, in a complex supply chain.

Walmart Canada adopted a blockchain platform supplied by DLT Labs to settle invoices and payments, the company has said in press releases.

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"The essential service of moving a massive quantity of goods, many of which are perishable, across borders, time zones and different climates, is an enormous operational challenge. The information, particularly costs and charges, have historically been extremely difficult to calculate," the company noted in a September 2020 release. "Despite good intentions, there are often vastly different understandings and duelling calculations, over the amounts due under invoices."

For example, every freight load used to require "tracking over 200 data points from diverse and often conflicting sources and systems, simply to prepare, or check, an invoice," the company noted. Adopting the blockchain-based platform allowed Walmart Canada to collect and share real-time, verifiable and standardized data across all its carriers in a single platform, driving a 97 per cent reduction in disputes with carriers, it said.

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And with remarkably lucky timing, DLT Labs happened to install the new system just days before the onset of the pandemic in Canada in mid-March of 2020, according to chief technology officer Neeraj Srivastava.

DLT Labs CEO Loudon Owen says Walmart Canada is just one example of how blockchain can drastically reduce supply chain attrition and costs. In Southeast Asia, he says, DLT Labs is helping manage airline fuel costs and tax charges. In Japan, it's helping to ensure that cocoa supplies from Africa are free of child labour.

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Still, the blockchain may not be a supply chain panacea for every company – at least, not yet. The costs of managing a blockchain-based platform can be "fairly high," says KPMG's Dixon.

And blockchain, like any data-based system, is subject to the so-called "garbage in, garbage out" problem. To be useful it needs accurate, good quality data inputs.

"Many companies across the globe are using or are considering blockchain for tracking assets," reads a blog post by Avivah Litan, an analyst at research company Gartner. "But how does anyone know what is being tracked on the blockchain is real to begin with?"

Just because information recorded on the blockchain is very hard to tamper with, doesn't mean it's accurate.

"With blockchain, it’s garbage in, garbage forever," Litan concluded.

At Progress Luv2Pak, a high-end packaging company in North Toronto, surviving the supply chain meltdown meant going back to sourcing from Canadian and U.S. suppliers.

The company, which supplies brands and retail stores like Indigo, the LCBO and Abercrombie & Fitch with premium packaging, got out of the manufacturing business in the mid-2000s, turning instead to suppliers in East Asia, says president Ben Hertzman.

But increasingly long delivery delays and soaring costs forced the company to reconsider its model during the pandemic.

Before the pandemic, Luv2Pak could count on its supplies entering the United States or Canada in around 45 days, Hertzman says. These days, that has turned into at least three months, he adds.

"Layered on to that, it's costing much, much more to bring in containers than it used to," he notes.

A container travelling from Asia to North America that might have cost between $3,000 and $5,000 pre-pandemic is now going for $25,000, according to Hertzman.

"Sometimes the cost of the freight is even more expensive than the value of the goods that are inside of it," he says.

That's why, in recent months, the company has rejigged its supply chain to count on Canada- and U.S.-based manufacturers instead.

"We found some fantastic supply lines in Canada that have met our customers' needs when nothing else would work," Hertzman says.

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