Surviving Disruptions – an opportunity for supply chains to thrive with people and technology – LogiSYM July 2020
“Managing supply chain and logistics has never been more significant and challenging since the outbreak of COVID-19 that created a new norm with high uncertainty and enforced an inevitable shift”
Logistics and supply chain management is a rapidly evolving field. Digital technology continues to be the key mechanism for change and value creation. Increasing supply chain vulnerability along with uncertainty and disruption, are exposing business ecosystems and accelerating the need for digital transformation.
However, technology is a means to an end and not the end itself.
Dr Shereen Nassar, the Global Director of Logistics Studies and Director of the M.Sc. Logistics and Supply Chain Management programmes at Heriot-Watt University Dubai discusses how successful selection and implementation of a digital supply chain strategy can be predicted. She will also illustrate the necessity for change management and redefining the roles and the skills of supply chain talents as a key driver for success.
Exposing supply chain vulnerabilities and fast-moving trends
Supply chain trends and practices today, are mainly driven by cost optimisation and lean strategy. This has proved to be a major source of risk. Poor business continuity planning, lack of risk management programs and single source suppliers, have magnified the impact of such risks.
As an offspring of globalisation, supply chains are focused on optimisation – cost reduction, just-in-time deliveries and tight inventory-to-sales ratios. A pandemic-induced blow finally laid bare the vulnerabilities of the supply chain industry largely premised on lean production principles.
Disruptions in deliveries from exporting sources, have created a knock-on effect on the financials of suppliers, who now face delayed payments and cash flow pressures. Operators in the supply chain industry face the mammoth task of tailoring their business continuity plans to factor in risk assessments, scenario forecasts and recovery strategies for the unforeseeable future.
A significant paradigm shift in procurement and inventory control is an emerging area of focus. Just-in-time delivery models and lean supply chain principles, are now under scrutiny and brought many long-standing crevices to light. These have contributed to major supply chain bottlenecks and shortages with the outbreak of the pandemic.
Calls for more effective transportation capacity planning, inventory management, multi-sourcing and diversified supplier base strategies are crucial to mitigate business continuity in case of a crisis.
The short-term strategy to build resilience, is to focus on three major elements, essential to keep freight moving.
- Business continuity: prepare plans and create a response centre enabled to execute such plans in harmony.
- Safety: deploy stringent measures for frontline workers, essential as delivering top-notch customer service.
- Work-from-Home: ensure that their staff are well-equipped with all the necessary resources required to fulfill a seamless workflow.
The long-term strategy is about a digital infrastructure as the key pillar, whilst ensuring business agility and flexibility are improved. Achieving a supply chain ecosystem that is robust, requires a business continuity strategy that involves digital technology at the centre of the strategy for the future.
- Diversify manufacturing base: need to avoid single production base and create multi-location, multi-supplier and building multi-production bases with a diversification strategy.
- Build-In supplier network redundancies: Single-source dependency is high risk. Creating tactical redundancies throughout their supply chain is fundamental. Expanding supplier network to withstand operating continuity despite a disruption, adds to stronger resilience strategy. Whilst such redundancies will reflect cost hikes, it will create more robust supply lines and re-balance supply constraints.
- Maintain adequate levels of inventory: buffer stocks of critical finished goods, parts and raw materials in alternate storage and distribution sites will meet consumer demand and keep production lines running during the course of high-impact/low-probability events.
- Boost agility in logistics: multimodal solutions to combat increased freight costs and limited capacity. A shining example is the supply chain ecosystem in the UAE – significant investments in multimodal facilities and infrastructure over several decades has delivered a strong resilience in time of need. The country has not seen shortages of essential commodities on the scale experienced by other countries.
Technology for Digital Supply Chains
- Digitalisation is no longer optional
Increasing the scope and scale of uncertainty, and disruptions in business ecosystems, has revealed the vulnerabilities of supply chains, pinpointing the need for more agility and flexibility to build resilience. This is a powerful catalyst for revisiting current supply chain practices and strategies, and to reassess the need for digital infrastructures as the key pillar to support supply chains in the new norm.
Industry 4.0 technology based platform is crucial for Supply chains. Deployment of the basics, like data analystics, cyber systems, cloud computing and internet of things (IoT), are the 1st steps. This will lead us to the next level of robotics, artificial intelligence, machine learning, virtual and augmented reality, cognitive computing and blockchain, transformational for supply chains.
Supply chain professionals will be able to close the gaps of demand and supply, improve synchronisation across supply chain partners, have greater insights, boost efficiency and enhance resiliency, especially in uncertain times. Although technology is the key driver for improving performance at all levels in the supply chain, technology does not always guarantee successful implementation, that can be conditioned by change in the work practices and behaviour.
- Digital technology – a remedy for all supply chain problems?
Technology solutions alone will not solve all supply chain problems. Ignoring the people factor in the supply chain might inadvertently end up in failure. The speed of change and advances in technology are impacting people. The problems are manifested as lack of trust among stakeholders, poor visibility, unreliable commitments, opportunistic behaviour, misaligned incentives, lack of internal integration, slow decision making and a continuous cycle of directionless changes.
Standalone digital solutions cannot solve such issues, regardless of how smart and advanced the algorithms used in the solutions are. The shutdown of highly automated production plants and supply chains due to pandemic disruptions, along with redundancies of thousands in economies with highest rates of robotics density, has effectively demonstrated that no level of automation can thwart an economic downturn if human capital is destabilised.
This highlights the critical role of people and associated practices that by no means underestimates the immense value of supply chain technology. On the contrary, supply chains need to speed up the wider adoption of digital technology to enhance performance and value creation.
According to the Boston Consulting Group, automating manual processes can yield cost savings up to 40%. The advent of new technologies like data analytic tool, robots in warehouses, AI to track fulfilment and inventory, use of drones and driverless delivery vehicles and more are prime examples of how the supply chain landscape is changing.
Digitalised supply chains should make organisations more agile, flexible, meticulous, precise, and efficient. It can enable manufacturers in controlling the impact of future disruptions in several ways. But this raises another concern about the readiness and the preparedness of supply chain people for a digital transformation.
- Digital technology redefines supply chain talent
We need to understand how digital transformation is reshaping the roles and skills-sets of supply chain people. McKinsey’s global survey (2017) conducted with nearly 900 C-level executives and the MHI (2020) survey results from over 1,000 manufacturing and supply chain professionals, show talent skill gaps and workforce shortages will continue to rank highest amongst the challenges facing companies in achieving their strategic digitalisation targets.
The Deloitte report and Manufacturing Institute (2018) illustrates the skills gap could result in 2.2 million job going unfilled.
To overcome such challenges, legacy supply chain leadership requires changing the traditional leadership model.
Businesses need to build new technical skills that cover data analytics, and cognitive technologies.
They need to have an end-to-end understanding of supply chain management and the skills to create a real value to their businesses.
It is evident that many companies still lack these skills that constrain successful digital transformation even when new digital and analytics talents are added.
Despite the extensive knowledge and experience in functional areas such as inventory management and supply and demand planning, there are still a few end-to-end experts who are able to develop a digital project.
Specific training and development plans must be defined and deployed to support current workforce and new talent to effectively use the new technologies for solving supply chain problems which create business value. Only businesses who are equipped with powerful technical skills along with robust end-to-end perspective will be able to gain a competitive advantage.
Redefining talent and skills to survive and thrive supply chains
Technology alone cannot drive supply chain resilience or success. Attracting and retaining skilled labour to drive all elements of the supply chain will be the next big challenge.
- Talent for digital supply chains
There are 4 key interdependent talent roles identified for digitalisation of supply chains. These are driven by Technology, Data, End-to-end insight and Creativity.
The first, is related to technical skills needed to design, configure, use, and maintain new technologies e.g. 3-D printing, AI, and robotics. Tech talents must understand and decide if a technology solution is required and is a suitable option. It is important to identify how best to deploy and manage it. Tech talent should enable rapid integration of new partners into a supply chain and reconfigure the parameters to combine new demand data.
The second, is concerned with analytical skills that drive scenario planning and data-led modelling to enable supply chain to inform business decisions. Analytical talent requires conceptual analysis skills,with systematic and logical skills to identify problems that could be solved by using new technologies.
Analytical talents are open minded and critical thinkers. Supply chain professionals should develop the skills needed to manage conflicting views from both automated and people aspects, integrating new data sources and supply chains, updating machine learning algorithms to align with business strategy, and acting on the output from simulation modelling.
The third, is orchestration abilities to develop end-to-end insights that drives internal and external collaboration. This opens opportunities for improvements from a holistic perspective of the supply chain ecosystem. Breaking down silos in the supply chain and having end-to-end visibility requires skills to maintain deep understanding across internal and external operations and stakeholders including their interdependencies that inform business decisions.
The fourth, is about innovation that drives new business opportunities and brings a commercial lens through understanding the big picture. Innovators will work with the customer facing organisations, engineers and R&D, to find creative ideas and form service portfolio for target customer segments.
This approach develops agile and effective networks that configure unique supply chains, increasing profitability and delivering a differentiated customer centric service. Innovators should work closely with the technologist and analysts to develop scenarios,with the orchestrators to apply changes to the supply chain.
- Developing talent for the future
Supply chain talent needs to be equipped with skills that enable them to succeed in their roles – like agility, critical thinking, problem-solving, communication, time-management, teamwork, and networking.
The proper skills enable professionals to handle complex decision-making, stakeholder management and business ethics. Although many of these soft skills are intrinsic to an employee’s natural ability, the organisation and its workplace culture play an equally key role in soft skills development.
Leaders must be coaches, mentors, support virtual job shadowing and job rotations to help employees gain vital social and business skills. Moreover, as remote working continues to be the norm, employees are faced with social isolation, lack of direct supervision, and distractions at home.
Leaders have the responsibility to improve employee engagement and productivity, using effective means. They are also responsible in steering the teams to implement new strategies, to properly empower them and boost morale during challenging times.
- Sustaining & Engaging Empowerment
People should be involved in crisis response programme since they are the key force responsible for restabilising an organistion during and post-crisis. To this end, they should be empowered to take critical decisions and adopt response measures as needed. This serves as a valuable opportunity for organisations to build experience and knowledge into their supply chains, delivering agile, resilient and robust charcteristics for future disruptions. Motivation is essential for making people part of the solution which leads to true engagement, hence retention.
New technologies and people are at the forefront of supply chain digital strategies and are fundamental for the successful transitions and implementation. Change management, people development and retention programmes must be in place to ensure sustainability of these strategies. Supply chains’ human capital equipped with technical and analytical skills along with innovative end-to-end insights, will more effectively achieve their digital strategies’ goals.
As innovative companies integrate advanced technology, tools and solutions in their supply chains of the future, we will witness a surge in automation and robotics to handle routine and repetitive tasks.
The supply chain ecosystem is evolving fast and whilst time will bring more clarity on current and future practices and trends we continue to navigate and be part of a changing landscape.