Reimagine Supply Chain of the Future – agile, resilient, and balanced – LogiSYM July 2020
Let me start with a quote from a great leader!!
“When the world changes around you, and when it changes against you, what used to be a tailwind is now a headwind — you need to lean into that and figure out what to do because complaining isn’t a strategy.”
— Jeff Bezos, CEO, Amazon
Reimagine Supply Chain of the future:
There are many facets to imagining Supply Chain of Future. What are the learnings from Covid disaster that leaders will incorporate into future supply chains? Which emerging technologies will have the most impact? In order to imagine how the Supply Chain of the future will look like we need to consider and articulate what are the underlying philosophies, beliefs, and paradigms shifts will come into picture. In doing so we must let go conventional beliefs and think beyond the immediate hurdles, challenges, that leave people stuck and unable to think beyond the current reality of their jobs, their companies.
Let us study major highlights of Supply Chains of the future
1. Automated & synchronised: Future supply chains will be e2e automated, connected & synchronised. Most of the current repetitive processes like (forecasting, reports, purchase orders & Invoicing) will be automated using various technologies. Advanced technologies like IoT, Machine learning will allow for intelligent, what if actionable scenario to act upon
2. Control tower technology: Control Towers will be prevalent as Supply Chain leaders are able to see, & manage how their entire Supply Chain is functioning from one digital command centre. They will access their control tower, on any secured handheld machine regardless of their location.
3. Supply Chain as a service (ScaaS): Future supply chains, will outsource as many activities as possible to third party and only orchestrate the movement of materials and information between all nodes of their Supply Chain digitally. This will enable companies to be highly flexible and asset light leveraging the very best capabilities of subject matter experts all around the world.
4. Circular supply chain would be the order: Future supply chain leaders will embrace a circular economy in which a used product is returned, recycled, and then reused in some way. Current Initiatives such as Coca Cola’s “World Without Waste” and Unilever’s “Sustainable Living Plans” are first steps toward a circular economy
5. Agility & resiliency would be a standard norm: Agility would continue to be a “given” norm. Agile supply chains are collaborative in that they focus on delivering value to their customers as well as their supply partners. They built risk assessment in their DNA to make their value chain as resilient as possible at the same time keeping an ability to adapt and change to market dynamics and customer demand volatility.
6. Risk assessment will be focused agenda in Board Room: Risk assessment would be a primary agenda in most bord rooms where high-level guidance would be provided on expected outcomes. Supply Chains of the future will have enhanced and automated risk management methodologies and protocols which will be executed upstream in the value chain processes.
Case Study Agility: ZARA
Zara has become Europe’s most profitable apparel brands by building agility end to end in their supply chains. At one end of the product pipeline, Zara has created an agile design process. As soon as designers spot possible trends, they create sketches and order fabrics. As the fabric suppliers require the longest lead times, ZARA approves designs & initiates manufacturing after it gets feedback from its stores. This allows Zara to make products that meet consumer tastes and reduces the number of items they must sell at a discount.
Case Study Resilience: CISCO
When Hurricane Katrina hit the Gulf Coast of the United States in 2005, Cisco executives created a business continuity-planning dashboard to mitigate risks. The company could not maintain supply chain performance levels to cope-up with the sudden surge in orders for 1.0 Bil $ of new equipment to replace telecommunications infrastructure damaged by the storm. Despite their best efforts, Cisco could not locate their products or determine financial impact of these sales orders.
Just six years later, when the Japanese earthquake and tsunami of 2011 struck, Cisco was well prepared. Although that disaster forced economic losses of at least $217 billion, Cisco suffered almost no revenue loss from it. During the intermittent 6 years, Cisco had developed a platform to collect, update and utilize critical supply chain node information, learning from Katarina disaster. This platform enabled the company to illuminate potential vulnerabilities. When disaster struck in the Pacific, Cisco was able to use that platform to assess instantly the status and scope of the disruption’s impact.
Case Study Risk management: The All England Club
The All England club which runs prestigious Wimbledon Lawn Tennis Tournament, was paying 2 mil $ per year as Insurance for a Pandemic policy consistently for last 17 years. This year (2020) when they cancelled the Tournament, they stand to get 144 mil $ from Insurance company.
How to balance supply chain with agility, resiliency, and risk assessment?
Supply-chain resilience requires a risk-aware culture to establish and maintain strong defensive layers against unknown risks, as well as respond more quickly in the event of a severe crisis or operational threat. To create flexible and balanced supply chain organisation, it is necessary to integrate strategy, processes, metrics, and technology enterprise wide and across customers, suppliers, and service providers. Let us look at few major steps supply chain leaders need to take in order to bring balance to their supply chains
Use advanced technologies as deeply as possible (few covered below)
- Adopt autonomous planning: Supports machine-derived analysis and decision making in replenishment planning
- Use machine learning (MC): Supports improving demand signals quality which are reviewed in S&O and IBP process, making them error free to a larger extent
- Adopt autonomous Logistics planning: Autonomous logistics planning will help making data based intelligent analysis related to cross docking, drop ship, lanes routing which can be used proactively to build capacities, routing optimization.
- Smart use of Blockchain: Use of blockchain allows organisation to become more compliant, transparent and create traction in new types of services, such as mobile freight brokerage systems, smart contracts to replace service agreements.
- Use of AI and IoT: AI / IoT will enhance risk mitigation by analysing large sets of data, continuously identifying evolving patterns, and predicting disruptive events along with potential resolutions.
- Digital supply chain twins: A digital twin is a virtual representation of a product or workflow across its lifecycle. Digital twins are used throughout the product lifecycle to simulate, predict, and optimize the product and production system before investing in physical prototypes and assets.
Implement Risk assessment upstream in Value Chain: Proactively engage with supply chain ecosystem partners, like suppliers and logistics service providers to conduct a risk assessment regularly. Partner across the ecosystem to get consistent visibility through third-party data feeds. Rethink the definition of “critical risk” with a focus on business purpose and social responsibility. Develop methodologies to measure risk for each supply chain node, warehouse, factory, supplier, geography, or transportation node.
Diversify supplier base: Supply chain should not be overly dependent on long lead-time or on a small pool of specific suppliers or sourcing regions. Don’t rely on a single supplier at the category level; while it may be a cheaper strategy, the risk is enormous. To improve your capability to manage demand shifts and customer expectations it is mandatory to have dual sourcing
Build inventory hedge to cover for volatility and risk (from Just in time to Just in Case): Understand demand and supply side shocks, volatility and develop Inventory hedging strategies. Embed these strategies for commodities/ products where demand is volatile or geographies which have a history of natural disasters
Increase visibility & transparency in supply chain: Companies will need end-to-end transparency of their supply chain, which may include suppliers, contract manufacturers, and suppliers’ suppliers. Supply chain leaders will need to know the flow of material and the geography of each location on a wider scale
Optimize global manufacturing capacities: Carry out a structured view of Mfg capacities by each plant, self as well as outsourced. Identify sourcing plant/s which can back-up each other in times of disruptions. Create a culture of flexibility in manufacturing/ sourcing strategy.
Standing still is no longer an option. CEOs, CFOs, and the board need to understand the drivers of change that affect the companies. They need to stress test their assumptions using various scenarios to understand the interdependency of events and assess the likely impact in an objective way. They need to make sure their organizations are structured to allow a quick and agile response and be ready to communicate with their wider ecosystem of stakeholders when it is required.
Resilience needs to be permanently architected into the supply network topology so that collaborative networks can react as a team when disruptions occur, especially those that impact human life. Businesses must focus on building up the muscles of a strong supply chain by using strategies that give them more options, while employing technology to provide extra insight and guidance.
The overarching objective is to reshape for the future by building greater responsibility, agility, responsiveness, and resilience right across the supply chain. In this, it is important to recognize that supply chains are critical, not just to business, but they are the essential lifelines to human societies. Therefore, it is so important than ever before, to step up and build purpose and responsibility, as well as resilience, into supply chains.
Let me end this article with a lovely quote from a visionary leader!!
“All we are doing is looking at the timeline, from the moment customer gives us an order to the point when we collect the cash. And we are reducing that time by removing the non-value- added waste.”
Taiichi Ohno, father of the Toyota Production System
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Sanjay runs his own advisory consulting practice working with start-ups & small medium enterprise organizations. Prior, he has led diverse and world class supply chain verticals for MNC like VeriFone Inc, Huntsman Inc, ThermoFisher Scientific, JohnsonDiversey, DELL Global, Apple, Exxon-Mobil, MOTUL, Rhone-Poulence & UniLever Brothers.
He holds a Bachelors of Commerce from Mumbai University and a Post Graduate in Materials Management from premier Indian Biz School. He also holds a CPIM certification from APICS, USA. He has completed formal Executive Leadership management courses at INSEAD, Singapore