This week: supply-chain worries and why sustainability is reaching a tipping point. Plus, McKinsey’s new social responsibility report highlights some projects our folks are working on to make a difference in our communities and for our planet. |
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Car parts from Mexico. Rare earths from China. How should companies manage supply-chain risk in a global environment that is, let’s say, unsettled? |
Over the past decade, industries including consumer goods, electronics, and automotive were hit by unforeseen supply-chain vulnerabilities and disruptions, leading to recalls costing hundreds of millions of dollars. And multiple government organizations and private businesses have struggled with cybersecurity breaches, losing critical intellectual property from failures in the supplier ecosystem. |
Top this off with the current geopolitical environment, and you’ve got a whole lot of agita for companies. What’s the most productive way to handle this uncertainty? |
First, organizations should think about risk by breaking it down into knowns and unknowns. Actions in the known column are straightforward, from identifying and documenting risks to instituting monitoring and regular reviews. |
But unknown risks are, by their nature, neither predictable nor quantifiable. In our experience, mitigating unknown risks is best achieved by creating strong defenses while building a risk-aware culture. That includes empowering management and employees to pass on bad news without fear of retribution. |
Doing that, of course, is easier with great training, and, in the digital age, even minimal investment in recruiting and developing supply-chain management can pay off. Among top-quartile supply-chain performers, strategic investment in supply chain correlates with strong financial results, with a typical $10 billion company seeing a $70 million improvement in earnings before tax and a potential $85 million cost reduction. |
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OFF THE CHARTS |
To do well, it pays to buy well |
In an ever-more-complex world, there’s a strong correlation between procurement health and corporate performance. Here’s how to tell if you’re good—or bad—at procurement. |
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PODCAST |
Freeing the grid from gridlock |
Ridesharing, robo-taxis, and bike-sharing schemes are just part of the seamless mobility envisioned for urban areas over the next few decades. Reducing congestion and pollution in the world’s cities—by 2030, the projected home of 60 percent of the global population—is within reach, but only if governments and companies work together. In this podcast, McKinsey experts discuss how to make that happen. |
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MORE ON MCKINSEY.COM |
Sustainability at a tipping point | A stable climate is a prerequisite to a healthy economy. That’s the message that 200 leaders in energy, the circular economy, sustainable investing, and agriculture gave at McKinsey’s Global Sustainability Summit in May. |
Chemicals: Fertile ground for dynamic pricing | Chemicals companies can benefit from rapid, customer-tailored pricing adjustments made possible by digital technologies and advanced analytics. |
Offshore-drilling outlook to 2035 | This year’s market started with some of the lowest activity in 20 years, with rig demand about 3 to 4 percent below 2017 levels. We anticipate that the market will be slow to recover. |
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WHAT WE’RE READING |
Creating change that matters |
“The need for business, government, and social-sector organizations to work together to tackle the world’s most pressing societal challenges has never been clearer. Protecting our planet, enabling meaningful work in our communities, and creating inclusive societies that honor our diversity are fundamental.” |
That’s how Kevin Sneader, McKinsey’s global managing partner, sums up McKinsey’s commitment to social responsibility in a new report that highlights what we do globally, beyond client work, to increase economic opportunity, advance gender equality, and create a more sustainable environment. |
A few examples: |
Inspired by research on the education-to-employment gap, we founded Generation—an independent nonprofit tackling youth unemployment. At the end of 2018, Generation was operating in 98 cities across nine countries. Of 25,000 graduates, 81 percent were placed in jobs within 90 days of program completion, with 66 percent still employed after one year. |
To realize Nobel laureate Malala Yousafzai’s vision of a world in which all girls have access to 12 years of safe, high-quality education, McKinsey has helped the Malala Fund craft its strategy and operational plan. |
McKinsey.org is working to create economically sustainable recycling programs in communities in Bali and Buenos Aires. The goal is to create recycling models that are economically beneficial as well as environmentally and socially responsible. |
Through pro bono service, board membership, and volunteering, our people are also helping to improve education for Syrian refugees, training community-health workers, and improving learning in Indian schools. Check out the full report here. |
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BACKTALK |
Have feedback or other ideas? We’d love to hear from you. |
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