Wyndham Plumptre - Identifying macro risks and their impacts in supply chains
Wyndham Plumptre is the founder and CEO of the digital transformation consultancy Future Arc who have partnered with some of the world's leading organizations and businesses.
In this episode, we discuss how macro events affect supply chains globally. We begin by explaining the different tiers of supply chains and the difference between micro and macro risks. After that, we highlight some of the biggest current macro risks, i.e. the Covid pandemic and the war in Ukraine, before moving on to the impact of digitalization and concluding with a look into the future.
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“You just got this melting pot at the moment of really, really, really challenging events that are occurring, all intrinsically interlinked. And I think it's really one of the things, and we'll probably get onto this in a little bit, it's really pulled into question, I think, for a lot of people, the general security of a global supply chain and actually what do people need to do to create greater security from a supply perspective at a local level.”
Welcome to the Agile Digital Transformation podcast where we explore different aspects of digital transformation and digital experience with your host Tim Butara, content and community manager at Agiledrop.
Tim Butara: Hello everyone, thanks for tuning in. I'm joined today by Wyndham Plumptre, founder and CEO of the digital transformation consultancy Future Arc. They partner with some of the world's most renowned organizations, so we're definitely in for a great discussion with Wyndham. And this time we'll be talking about how supply chains are impacted by macro risks, macro events, with one of the most obvious recent examples being the COVID-19 pandemic. So Wyndham, welcome to the show. It's really great having you as our guest today. Anything you like to add before we jump to the questions?
Wyndham Plumptre: Just to say a big thank you for having us there. Is it worth me just talking about kind of Futur Arc and what we do a little bit further and kind of where we come from?
Tim Butara: Yeah, sure, go ahead.
Wyndham Plumptre: Future Arc, we've been around probably about five years or so. We're a hybrid innovation consultancy and venture studio. So in short, we advise and build technology for big organizations. We work with government, third sector, private sector as well. And then we also invest in our own platforms and products. And we've got quite a deep spike in sort of supply chains and digital supply chains. It's not what we do, but it's kind of a big set of our capabilities and we've actually built our own digital supply chain tool as well, called Cimple.
Tim Butara: Awesome. I'm sure that we'll have more opportunities to talk more specifics about these. Yeah, but yeah, obviously, the supply chains are one of the kind of very important topics ever since the beginning of 2022. But for those listeners who maybe don't have an in-depth understanding of the different tiers of supply chains and all the nitty gritty, can you start off by maybe describing or breaking down these different supply chain tiers?
Wyndham Plumptre: Yeah, no, of course. Supply chains are called supply chains because they're linked in multiple chains to get a good or a service from A to B across the globe. And each of those links in a chain is a specific tier. So when we talk about tiering and supply chains, what we're really talking about is, and where most people frankly focus a lot of their attention is, their tier one suppliers. So those that they have a primary contract route or a primary relationship with. So I need services from the look after group by going contract with the Look After Group, they’re my tier one supplier.
However, in order to provide those services, they will then potentially subcontract with a number of different organizations to pull a good or a service together. Their ability to do that and where they then contract is what is my tier two, but their tier one. And they're very simply you just go down and down the chain and you can get down to kind of tier four, tier five. In particular, where you're talking about electronic goods where you've got raw materials that are going into things like transistors which are then being manufactured, which are then going on to a PCB board which are a specific piece of technology that then is going into an actual TV frame. So you've got potentially four or five links in that chain.
Tim Butara: So it's something like how direct something is or how fleshed out the product is, something like that?
Wyndham Plumptre: Yeah, frankly it tends to be contracting route. So do I have a contract with a supplier directly? If so, they're my tier one supplier. If they don't have a contract with someone else to provide a component of what I need, then that is a tier two supply for me, but a tier one for them and so on and so forth.
Tim Butara: Okay, I think that this is another thing that we’ll probably get into in a little bit more detail as we kind of discuss the specific impacts and the specific things happening with supply chains right now. But first we need to define the other part of the episode title or topic. So that's macro risks. What exactly are macro risks and how can businesses kind of incorporate them into their planning and strategizing?
Wyndham Plumptre: You asking that question actually makes me think I really should have gone away and researched the definition of what a macro risk is. So I'm going to give you my opinion rather than anything else. So if I'm wrong, I apologize. Micro risks for me are things that are kind of lower risk to an organization. But in particular when I think about supply chains, I think about localized risk. So where is there a risk that can affect the supply chain at a local level which may impact a specific supplier or specific groups of suppliers.
So for instance, going back to my transistor getting manufactured, if there is flooding in a specific region within Southeast Asia and therefore that affected the water quality, for instance, that goes into the machinery, it creates this kind of microrisk at a local level. Macro risks are things that affect supply chains whole scale, end to end. And we seem to be living in a world where macro risks are apparent all the time. But a really basic example of this is a global financial crash. That's a macro risk that affects supply chains end to end.
Tim Butara: Yeah, and as you just said, we seem to be kind of going from one huge macro event to another. Obviously the Covid pandemic was one of the key macro risks of the past, let's say ten years, not only because of what it entailed, but all the other macro events and macro risks that kind of issued from it. So what are these other recent examples that we could mention here of macro events and why are they so significant in the context of our discussion?
Wyndham Plumptre: Let me unpack, there's multiple questions in this, so let me unpack that little bit and also with a bit of a kind of a story. So I was recently churning out with our COO and we were going through some updates we need to do for our ISO audits. And the slightly terrifying thing was doing a PEP analysis and realizing that we had kind of a medium or high risk against every single part of the political, economic, social, technological risk.
So the macro risks to businesses at the moment are vast. The very obvious ones, as you said, is more recently what's happened with Covid. Actually what I found fascinating about Covid is, it created, yes, just a giant macro risk, but a macro risk that then moved across the world in different ways at different times and then also created micro risks at a local level as well. How people dealt with it also then created further micro risks.
So, for instance, we were relatively well sheltered here in the UK because of the furlough scheme and everything else which secured a lot of businesses and kept a lot of people in jobs, in lots of other parts of the world that didn't happen. And the kind of decrease in jobs created wider mico risks in their economies, which then impacted supply chains in different ways.
So COVID is just a fascinating thing that lots of people were predicting would happen at some point and how that would disrupt supply chain, then eventually it did, which was terrifying at the time and a lot to be learned from. I think the other obvious one that you're seeing at the moment is the war in Ukraine and the impact that that's having in particular on the provision of goods and in particular the kind of provision of goods and fuel. So the things that people run their lives on and the impact of that is then creating, that is then creating another macro risk which is then inflation.
So you just got this melting pot at the moment of really, really, really challenging events that are occurring, all intrinsically interlinked. And I think it's really one of the things, and we’ll probably get onto this in a little bit. It's really pulled into question, I think, for a lot of people, the general security of a global supply chain and actually what do people need to do to create greater security from a supply perspective at a local level.
And certainly something that I'm really fascinated to see pan out, you're seeing the UK at the moment try and push as much as they can towards hydrogen fuel and greener energy on the basis that actually trying to get energy and electricity out of the North Sea is probably not the best thing that we should be doing for the world. But also actually the security of supply and fuel coming from Europe is also becoming harder and harder and harder.
Tim Butara: But there's so many layers to everything, right? Because if we wanted like a successful transition to renewable energies, that would mean having to alleviate the supply chain issues for shipping raw materials necessary for producing all of this. And it's just like, as you also pointed out, and as we already talked about how different risks play off each other and also how macro risks transform into micro risks, it's all just kind of very complex.
Wyndham Plumptre: And that's even before you get to talking about politics as well, and the political overlay and how the political landscape, like what's happening in the US literally right now, it can flip one way or another to how the US supply chain and the US economy kind of functions and its view of how it then restricts supply or demand across the globe, whether it's from a currency perspective or whether it's from actually things that they source. So it is not a boring time to be in supply chain. Trying to have the right answer though, is incredibly complicated.
Tim Butara: Yeah, it's not a boring time to be anywhere on Earth, basically.
Wyndham Plumptre: I like it to be a little bit less stressful, but yeah, I agree.
Tim Butara: It's always this balance, right? Either it's stressful but exciting or it's kind of peaceful but boring. So there's always a trade off. Obviously you would want only the best aspects of all the extremes, but that's just wishful thinking.
Wyndham Plumptre: Correct.
Tim Butara: One other thing I wanted to ask, Wyndham, we talked initially about different tiers of supply chains and I was wondering if what's happening now, if the impact is the same across all of the different supply chain tiers, or if there are some major discrepancies, like with regards to maybe, I don't know, tier one as opposed to tier five, six and onwards.
Wyndham Plumptre: It's a really good question. And actually the challenge in answering that question with a, no, it's totally varied across all of them, is down to actually where suppliers sit within a tiered supply chain. So more often than not, you'll have a supplier, in particular, let's say if it's a global supplier, a global supplier will have access to direct customers. So there'll be a tier one, there will be subcontracting, deliver components of a service or a goods. So they'll be tier two. They’ll then be manufacturing other things that are at a tier three level that feed into a tier two into another tier.
So a single organization that's providing something in multiple different points within a supply chain all at the same time. And so it's very, very difficult to actually have a very binary question as to yeah, actually okay, so, in tier one we’re seeing these impacts and in tier two we’re seeing these impacts and tier three we’re seeing these impacts. Mainly because supply is dead across all of the tiers.
So it's very, very difficult, actually. You end up really focusing on the classification of an issue or a risk within a supply chain and then trying to– and this is in particular, again, leading us nicely kind of through our discussion. This is where some of the real innovation and change at the moment is happening with technology, is actually people are realizing they can't just sit there and look at their tier one suppliers and go, you're going to shelter me from all of these risks and you're going to sort all of this out.
And I think fundamentally the reason why that hasn’t really changed, except in – and I don't mean high security, but except in industries where there is a greater, basically there's not a breadth of suppliers that provide the good or the service that is required by that organization.
I think the thing that has happened is that what COVID did and with the level of force majeure that went on where people just pointed at a very specific cause in every single contract and went, this is the world changing event. All of my terms of service have to be changed in accordance with that. I think what that created is a real freak out across basically every procurement and supply chain professional going, okay, so I can no longer rely on my tier one sheltering me from the risk in multiple parts of the supply chain. Because if a tier four goes, I can't do this because of force majeure, the tier three will do the same, the tier two will do the same, and the tier one will do the same.
So actually, I think procurement and supply chain professionals have always wanted to try and manage risk and value across multiple tiers within the supply chain. But it's been a real value add rather than a necessity because ultimately you can contractually back the risk on to a tier one supplier. However, now because you can't always do that and that's become very apparent, probably for the first time, I reckon, since maybe the 80s people are scrubbing that to really understand all of the risk at every single level within their supply chain.
Tim Butara: So, as you said, it's definitely not a uniform thing. And definitely, what I was just about to get to, definitely digitalization is playing an important role here, technology innovation. So can we talk a little bit more about this? How companies are using tech innovation and digital transformation to kind of address these risks and these issues with the supply chains.
Wyndham Plumptre: It's a really interesting question because I think procurement and supply chain have been talking about the digitalization – I also hate that word because it's just a complicated word to say – the supply chains for decades. I certainly since I started my career, actually what's been really interesting and what was certainly in particular when we started building Cimple, what we really thought is that technological innovation in supply chains are just going to go through the roof on the back of Covid and it's really complicated technology to build.
And I think the thing that you're starting to potentially see, and I was at a procurement tech event recently, is that there's a lot of people talking about how, on the back of the financial crash, basically marketing and advertising type technology on the back of social media changes just went through the roof. The level of innovation that was seen was giant. And between 2012 and 2015, you saw some incredible growth in some incredible companies.
Lots of people are talking about now how we're kind of, hitting supply chains are the topic fundamentally at the moment. They're everywhere. And the concern with them, it goes from everything from a consumer level about how much I went and bought a tuna and cucumber sandwich for lunch yesterday and it cost me £4.85. And I'm like that's bonkers. So I think it's affecting everyone. The level of innovation I think you're going to see between 2022 and 2025 in supply chain technology is just going to be vast. Maybe we can go into a little bit of specifics of why it's complicated and everything else.
Tim Butara: Yes, I'm definitely interested in why. And I'm also interested if you have any expectations or any experience already of what kind of breakthrough innovations we're most likely to see. If you have any examples of maybe a client of yours that you’ve helped develop a solution for or something like that, it would be interesting to get to know more.
Wyndham Plumptre: Yeah, I think the challenge a lot with kind of supply chain technology is, supply chain in its purest sense is a workflow. And therefore a lot of the previous enterprise technology has been built around either digitally enabling workflow, i.e. the procurement process and ordering and purchasing and everything else. So going through steps A, B, C, D, E and providing technology that digitally enables that in its truest sense.
And then you get that the same across the supply chains where people like, OK, so what we need to do is we need to digitally enable the tier one interaction into the tier two, into the tier three, and for instance, provide technology that automate customs payments, for instance, and everything else.
So what you've really seen certainly since the late 1990s is after the first of over 20, 30 years of procurement technology has been actually just about digitally enabling workflow, helping people to do A to B to C far more effective. I think what you're seeing now, which is the real change and some organizations really stumbling into this in quite a hard way, and is for instance, I was looking at some stuff from Palantir recently, which is kind of doing a lot of this, which is actually supply chains are going to be all about data. You're going to end up with just a very intrinsic amount of data that you can harvest and consolidate.
And to get value out of that data, you're going to need a load of different visualization at the top. And that can be all sorts of different software products doing very different things. And in between you'll see that level of automation and intelligence that have helped to create really truly intelligent, not only understanding of your supply chain, but also how you act in things according to everything else.
So I think the thing that's fundamentally changing at the moment is people actually now are starting to get that and develop that and actually see some real use cases and how that works. So that kind of data visualization and automation in between, I think is going to be the backbone for any of the procurement technology. And rather than– and you'll see people who do the stack and you'll see people who do layers and you'll see people who do components at each level, I think it's a really– yeah, it's a really exciting place to be.
Tim Butara: You know what's really interesting to me about your answer here, for most up until now, for every key resource, you needed supply chains, you know, to kind of effectively distribute them everywhere they’re needed. But data is unique in that it's both a crucial resource for any business, any kind of endeavor in the digital realm nowadays, and you don't really need supply chains to kind of distribute data to the places where it's needed.
So it’s in this unique position where it's actually able to kind of transform the supply chain industry or the field without having a negative impact on it. Because obviously if there was a physical endeavor that was this huge as the kind of data transformation, it would be impossible without super streamlined supply chains. So it would be kind of paradoxical.
Wyndham Plumptre: Yeah. And frankly, one of the biggest threats that we kind of haven't really talked about – climate, but everyone's talking about climate and supply chains at the moment, in particular because of the level of scope three emissions. So for those that aren't all over climate at the moment, you have different scopes of emissions. Scope three is all about supply chains and the provision of goods and services across the globe. And the emissions of those create.
I genuinely believe that move to the kind of data visualization and intelligence on the front end is the only real way that we're going to actually optimize how scope three emissions occur through a supply chain. And this is some of the stuff that we've been doing and we've got kind of a research project. I'm not sure whether I'm allowed to actually say anything about it yet because it hasn't come out.
But we're really looking, with Cimple actually, how can we help drive just a different type of decision making from a buyer perspective and automate that by going, actually, do you want to deliver a price based outcome or do you want to deliver an environmental based outcome?
Because with the intelligence and the data we have about the supply chain, we can actually go, you can reduce, we can intrinsically map, you can reduce CO2 in your supply chain by this much, by giving it to this local supply. There will be an impact to that, there will be an increased cost or whatever it may be. But that's where I think technology from a supply chain perspective will be going certainly in the future once people start worrying about risk, which is what everyone is talking about.
Tim Butara: One final thing that I wanted to touch upon, because you mentioned previously that in this context, things have mostly been kind of run following the waterfall method. And I'm wondering if, like, all the changes that we're seeing and all the new technologies and all the disruptions are making Agile Methodologies more prominent also in this context? Or what's the situation here?
Wyndham Plumptre: Yes, but there's a balance. I love Agile, it's great, but it's great at delivering things really quickly. You need a milestone at the end of it delivered to otherwise you just intrinsically keep on going. The hybrid between waterfall and Agile from a delivery perspective I think is really critical.
The thing that is exciting is that if you create that level of data enablement that people can build on top of and there's some really fascinating stuff going on in government around the deployment of the open contract data standard which creates interoperability between systems which you can then build systems on top of. I think it gives a really exciting opportunity to how you can transform supply chains, how you can create greater local value, how you can derisk your supply chains, how you can reduce carbon in your supply chain. But I think we're really only at the start of that.
Tim Butara: So there's definitely a lot more exciting things to come and we'll just have to live through them to kind of see what's in store for us.
Wyndham Plumptre: Correct.
Tim Butara: Well, Wyndham, this has been a great discussion. Thank you so much for joining us today. I definitely learned a lot of new things and kind of clarified a lot of the things that I wasn't super certain about. Just before we wrap up our discussion, if listeners would like to reach out to you, maybe learn more about you, learn more about Future Arc, where would you point them to?
Wyndham Plumptre: Yeah, just we can connect my email and notes and we'll put in the notes of the recording and we can put them there. Otherwise you can kind of head to our website.
Tim Butara: Awesome. Yeah, we'll include all of those in the show notes and yeah, Wyndham, thanks again and have a great day.
Wyndham Plumptre: Wonderful. Thank you so much. Good morning everyone.
Tim Butara: Well, to our listeners. That's all for this episode. Have a great day everyone and stay safe.
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