Is Your Supply Chain Future-Ready for the New Normal?
Love it or hate it, when you see the term “New Normal”, you can safely assume it’s describing a pandemic-driven change. The McKinsey report “How COVID-19 is changing consumer behaviour – now and forever”, bluntly illustrates how this change occurred more quickly and seismically than anyone predicted – so fast that it’s apparent the capacity to adapt had always been there.
So how do these changes bleed into the facets of the supply chain?
What Is the Post-Pandemic “New Normal” Supply Chain?
While the “New Normal” in supply chain implies a fundamental shift to the core of the industry, the pandemic-driven changes to behaviours are neither “new” nor are they so developed as to be called “normal”. A more accurate summation would be to view COVID-19 as having accelerated the pre-existing vulnerabilities in the global supply chain and stirring to life the lethargic industry-wide shifts already underway. However, “New Normal” is an effective shorthand, and it’s the term we’ll use here.
Three significant industry shifts were i) the need to develop supply chain resilience, ii) address changing customer demand and expectations, and iii) do this through digitalisation and recognising the importance of technology. These three aspects are linked, and successfully grasping the New Normal requires a holistic commitment to address each.
Supply Chain Resilience
Resilient supply chains were able to cope and recover from sudden shocks and disruptions during the pandemic. This was achieved by diversifying the supply base to create more agile responses to such shocks and improving end-to-end visibility to manage risks and disruptions more effectively. By improving coordination and management of suppliers, which includes manufacturers, logistics providers and even customers across vast geographies, resilient supply chains minimised the ripples of shocks and disruptions.
Changing Customer Demand and Expectations
Consumer preference and therefore expectations of their experience, have drastically changed due to the pandemic. Having evolved at a speed that McKinsey describes as “decades in days”, it is expected that most if not all the boom experienced in eCommerce are here to stay. The wide adoption of digital sales channels also means greater demand for e-fulfilment and delivery options. Digital touchpoints of a buyer’s journey will continue to be opportunities for brands to differentiate through better, more tailored, and smoother customer experience. Expect to see improvements to customer engagements that are not limited to a seamless checkout process but all facets of a buyer’s journey, including product education, research and comparison, and easily navigable after-sales support.
Digitalisation and the Importance of Technology
Before the pandemic, the industry had been grappling with digital disruptors and the adoption of technology. Almost overnight, conversations within supply chain businesses about having both customer interactions and internal operations going digital went from “in the pipeline” to “we needed it, yesterday” as governments placed movement restrictions. Logistics service providers quickly utilised the technological platforms at their disposal to uphold business continuity, and those who had entered 2020 with more mature digitalisation of their internal processes found themselves, literally, back online quicker.
As the months continued and the supply chain and shipping industries weathered numerous storms, the maturation of process digitalisation and remote management continued at speed. In this way, businesses were forced and swiftly invested in making a fundamental change in mindset regarding the strategic importance of adopting and integrating digitalisation and technology. This change in attitude is expected to stay and accelerate, as efficiencies in service delivery and experience have proven to be a valuable differentiator.
How do you prepare your supply chain to be future-ready for this New Normal?
As we mentioned before, a holistic approach is needed to address the three significant aspects we expect to underpin the New Normal in supply chain. Here, we discuss broad brushstroke trends that we see as solid foundations upon which tailored and considered solutions can be built.
Re-engineer your supply chain to boost resilience
We shared before that resilient supply chains rely on diversification and lateral coordination. Understand and identify your supply chain vulnerabilities as a start so that you’re better placed to consider which parts need prioritisation. Map your entire supply chain, including distribution centres and transportation hubs, and identify the known risks within your supply chain – for example, suppliers, routes, trade regulations, and other similar considerations.
By diversifying your supply base, improving processes and internal controls, and other similar strategies, you can markedly mitigate risks – especially given continued uncertainty. More importantly, this is the time to review past decisions made on supply chain trade-offs and consider whether the balance of benefits has shifted. These include Inventory vs. Service; Local vs Global Sourcing; Multiple Depots vs. Single Distribution Centre.
Invest in eCommerce to improve the customer’s digital experience
Your supply chain operating model should focus on superior customer experience as a core tenet. eCommerce offers different or new customer touchpoints, and these touchpoints require the same level of attention as you would for their analogue counterparts. By introducing value-adding features on the electronic shop window – such as those that support education, research, decision-making, etc. – supply chains have enhanced the customer experience in meaningful ways.
However, while the front-end of eCommerce or the electronic shop window is the interface that the customer uses, what is important and critical to the delivery of a superior experience is effective product data management (PDM). Imagine that the features that enable eCommerce as an iceberg – the customer interface is just the small visible tip above the waterline. Successful PDM, and the efforts to digitise inventory with detailed data, images, videos, and accurate attributes are the unseen, yet much great elements beneath the surface.
Choosing the right technology and a logistics partner who can provide advanced technology as part of their solution
The future of supply chains is Digital and Autonomous. While, yes, the definitive timeframe of such a “future” is as elusive as a concrete definition of “New Normal”, the trend would appear to show that those who can, do better in the longer run. Automation at scale increases efficiency and ranks as a top critical factor for digitising business processes.
How do you begin?
It is important to identify a global IT system architecture and solutions of choice that covers all the major business processes. Create a comprehensive view of the current system/s landscape and a roadmap for the planned systems, both owned and outsourced. With this approach, you can select and prioritise what and how to implement the IT solutions that you need to enable the business process.
Reduce the risk and resources needed by taking a modular approach that allows you to pilot and test solutions on a specific business process. This approach hinges on robust data integrations across all relevant supply chain systems and a comprehensive data warehouse which provides a single source of truth for accurate and timely data-based decision making.
Let’s look at an example of a modular approach for digitalising an important business process: purchase order (PO) management from the point of issue to suppliers, to the delivery to the warehouse, and through to its input into inventory for sales and/or production. A global provider like TVS SCS can implement an order management solution by integrating PO data from other systems such as an enterprise resource planning (ERP) platform, to provide real-time visibility of the PO down to order item level. The solution is delivered through a global network that operates on standardised processes and enabled by an advanced order management system.
The advantages of working with a supply chain solutions provider when digitalising your business is your ability to leverage on their experience and best practices from the provider while enjoying the economy of scale for setting up and maintaining the system solutions moving forward.
The Challenges Along the Way
Let’s acknowledge the big elephant in the room: investment. Although it is an enabler for many parts of the business, advanced supply chain technology doesn’t come cheap; it still competes with other avenues that drive scalable growth. These avenues are precisely some of the strategies we have mentioned: smart manufacturing, supply chain diversification, and more. Businesses must focus on ROI when making decisions on which direction to take. Therefore, we recommend that tech-centric investments should be fit for purpose and fit for budget. Rather than a single big system upfront, consider investing in modular technology to keep things manageable and scalable – digitalise and integrate one part of your supply chain at a time.
The other uncomfortable debate: is Supply Chain Integration a Reality or an Illusion? Like Rome, the work to integrate data systems into an end-to-end platform does not happen overnight. It also relies on openness and collaboration between suppliers and customers, different function within the organisation and top-down leadership. Internal digitalisation requires a change in functional silos to work together, with lateral transparency to best map out operational processes, vulnerabilities, gaps, and more.
These challenges are not quickly addressed and are a key reason the industry hasn’t quite reached or embraced the zenith of what a New Normal may be.
When seeing the macro megatrends, it is undeniable that supply chains must prepare for whatever digital “New Normal” may be. Yet if the pandemic has taught us anything, it’s that the unexpected can come at any time, and the world won’t wait for the weary or wary to adapt at their own pace. The most exciting prospect: if the world can adapt to “decades in days”, imagine what we can do in an actual decade?