4 Supply Chain Insights from A Nordic Cruise

From Raw Materials to Order Fulfillment, These Words Resonate

My wife and I have just returned from an incredible Nordic cruise, covering Iceland, Norway, Sweden, and Denmark. You would think I could take a break from discovering insights about supply chains. Think again.

One onboard lecture explored the “Happiest Countries in the World,” frequently spotlighting Denmark, Finland, Iceland, Norway and Sweden. What caught my attention were the reasons behind their happiness: four Scandinavian words that have no robust English equivalents.

It intrigued me how these words could apply to both Nordic culture and supply chain dynamics, from procuring raw materials to product sourcing to the final mile. I have five decades in the supply chain industry, just two months in the Nordic countries. I feel most comfortable sharing supply chain insights related to these four words: Lagom, Jante, Hygge and Sisu.

LAGOM: The Answer to Just-in-Time vs. Just-in-Case

This Swedish word embodies balance – not too much, not too little, just the right amount. Lagom suggests exercising common sense in determining the correct quantity.

This word answers the questions we have struggled with for the last three years: How much inventory should we have? In other words: The fight between the Toyota Production System (JIT) vs. the traditional approach (JIC).

Before COVID-19, cost considerations made Just-in-Time (JIT) seem superior to Just-in-Case (JIC). Everyone knows too much inventory skyrockets your costs and sends your finance team into a panic. Therefore, stockpiling inventory just in case you need it is a recipe for financial disaster.

Despite inventory considerations, the pandemic exposed JIT’s inadequacy. Going forward, supply chains are going to have to strike that balance between JIT and JIC.

Different products in different situations create different perspectives on just the right amount. When disruptions are low, resilience is high. Therefore, inventory management should establish the amount of safety stock by looking at the margins. Higher margin products require a higher level of safety stock. Lower margin products require less safety stock.

Conversely, greater magnitudes of disruption create low resilience. Those situations require inventory levels higher than the Lagom amount established from a margin analysis.

But independent of product margins and situational disruption, the right answer is always Lagom.

JANTE: Your End-to-End Supply Chain Answer

In Danish and Norwegian, Jante emphasizes the collective over the individual. It discourages self-focus and underscores the significance of the entire end-to-end supply chain for competitive advantage.

You must think beyond enterprise-level applications and strategies for end-to-end supply chain success. That is the old, individual, company vs. company view of competitive advantage.

Your supply chain does not start one link upstream. Your supply chain does not even start a few links away. Your supply chain starts from the moment raw material enters – which can happen well beyond even your Tier 4 suppliers.

Likewise, your supply chain does not end one link downstream. Your supply chain does not even end a few links away. Your supply chain ends when your product or service reaches your final customer. Depending upon where you are on your end-to-end supply chain, that can happen dozens or hundreds of steps away.

Competition is not my company vs. yours, but rather my end-to-end supply chain versus yours – Jante.

 

HYGGE: Your Digital Supply Network

A term from both Denmark and Norway, Hygge suggests that our greatest well-being comes from a sense of togetherness. Building on the concept of Jante (collective thinking), the benefits of a great end-to-end chain come from togetherness.

That requires a digital supply network. Even within a single enterprise, getting multiple departments and locations to cooperate for the common good has been historically difficult. Siloed behavior is the rule, not the exception. Digital supply networks allow for a spirit of teamwork and cooperation.

Information technology that connects all enterprises with a single version of truth enables this cooperation. All enterprises, whether 15 steps downstream or 73 steps upstream, know where parts, products and raw materials are. All players know next steps and exceptions that must escalate from autonomous decision-making to humans. Those are supply chains with true end-to-end visibility – a true Digital Supply Network.

A fully enabled Digital Supply Network will:

• handle high degrees of complexity,
• eliminate latency with real-time information,
• autonomously resolve many problems with artificial intelligence and machine learning,
• optimize the entire chain, not just specific links,
• and harvest the benefits of internal and external synergies even while facing VUCA.

It’s about togetherness – Hygge.

 

SISU: The Mindset to Handle Supply Chain Disruption

Sisu is a Finish word about perseverance, tenacity of purpose, overcoming adversity and resilience. Sisu recognizes that life is hard, and the ones who thrive are the ones with Sisu.

The theme of supply chain for the last three years has been that the new normal is disruption. Supply chains that prepare for disruptions and have the optionality to respond to VUCA (volatility, uncertainty, complexity, ambiguity) will be resilient. These supply chains will excel. Success in these challenging times requires a mindset of Sisu.

Cruising to Supply Chain Insights

So, I went on a cruise to relax and have fun with my wife. Still, I couldn’t resist sharing these supply chain insights from the Nordic region.

The principles of Lagon, Jante, Hygge, and Sisu have the potential to pave the way for the happiest and most successful supply chains in the world.

Sånn er det (Norwegian for “So it is”).