The late, great baseball player Yogi Berra is often given credit for saying, “It’s tough to make predictions, especially about the future.” He was, of course, correct. Because predicting the future is difficult, organizations shouldn’t think future-proofing their supply chains is going to be easy. Nevertheless, the attempt has to be made. Alan Holland (@AlanHollandCork), founder and CEO of Keelvar, observes, “To withstand the known and unknown challenges of present and future supply chains, companies need to embrace modern procedures and technologies to help ensure business continuity — whatever the circumstances.”[1] It’s clear from his statement that he believes “future supply chains” need to be substantially different than today’s supply chains. In Part One of this article, I discussed why transformation is essential in order to future-proof supply chains. The best way to start future-proofing your supply chain, suggests Nigel Duckworth (@duckworth_nigel), Content Director at One Network, is to improve visibility. He explains, “Amidst [current] turmoil, most companies continue to struggle with network visibility across their ecosystem of suppliers, plants, warehouses, distribution centers, logistics providers, and customers and are actively looking for a change. KPMG notes in a recent report, that only 6 percent of companies said they had full visibility over their supply chains.”[2] Below are some other suggested ways experts say that supply chains can be future-proofed.
Suggestions for Future-Proofing Your Supply Chain
Evan Quasney, Global Vice President for Supply Chain Solutions at Anaplan, agrees with Duckworth that improved supply chain visibility is a good place to start. He explains, “Greater visibility across the entire supply chain can help leaders think farther into the future when it comes to critical operational decisions, like predicting demand and associated capacity, aligning those decisions with the resources needed to meet that demand and to shape it with advanced commercial strategies to optimize the organization’s cashflow.”[3] Cognitive computing solutions, like the Enterra Global Insights and Decision Superiority System™ and the Enterra Revenue Growth Intelligence System™, can help companies work their way through the complexities of a modern supply chain, help them improve their processes, and make better decisions. Gartner analysts insist supply chains can no longer afford to be reactive to changes in the business environment. In order to future-proof supply chains, they insist companies must be proactive. They also believe supply chain transformation can be facilitated by taking “three main actions to improve today’s most pressing issues: disruption, climate change and employee fatigue.”[4] Later in this article, I will briefly discuss Gartner’s recommended actions.
In the initial installment of this article, I noted that supply chains have managed to transform over the course of history; however, transformation has often been slow and painful and change is always motivated by profit (i.e., how can things be done more efficiently so profit margins can increase). Gartner analysts insist future-proofing supply chains is the best way to ensure a company remains profitable. Business executives seem to agree. A Bain & Company survey found, “Flexibility and resilience are the top supply chain goals ranked by executives … displacing cost reduction as the top priority.”[5] The first action to achieve flexibility and resiliency recommended by Gartner is for companies to pivot to sustainable profit. They explain, “Sustainable profit means focusing on the longevity of profit and making changes that allow an organization to continue conducting business successfully into the future.” They note, sustainable profit consists of three main parts, which are:
Resilient profit: “Supply chains must cope with the rising rate of disruption the world experiences, such as global chokepoints, shortages of materials and workers and emerging risks.”
Durable profit: “Supply chains must adapt to new realities to deliver profit in the long-term.”
Holistic profit: “Supply chains must account for externalities that are a result of their activities and might affect other parties, such as their impact on air and soil quality.”
Dana Stiffler (@BeanBoston), a Vice President analyst at Gartner, observes, “There are many examples of companies that have adopted a broader definition of profit to guide their organizations who now outperform their peers. Stakeholder groups such as investors, customers, suppliers and employees have all responded well to the new focus on truly sustainable profit.”
The second action recommended by Gartner is to make purpose personal. They explain, “Today’s professionals want to do meaningful work. They want to help their organizations do the right thing. However, they don’t want to be left exhausted on the way.” Stiffler notes, “There’s a clear business pay-off connected to shared purpose. Gartner research sees a 26% increase in workforce health when work is personally relevant to an employee and 50% improvement in employee engagement when a company takes action on social issues.” Like so many other economic sectors, the supply chain is currently suffering a worker shortage. Finding a way to attract and keep new employees is important and many younger individuals are attracted to businesses that demonstrate a commitment to a larger cause.
The final Gartner recommendation is to build value-aligned ecosystems. They elaborate: “A value-aligned ecosystem is a network of equal partners where all participants trade their capabilities through equitable value-exchange. They differ from today’s popular supplier ecosystems in that there’s no dominant entity. Gartner predicts that ecosystems will become the prime competitive entity in the future. A Gartner survey between March and May 2021 among 400 companies in 18 industries found that today’s main drivers of ecosystem partnerships are efficiency and service. However, in three years the main drivers will be innovation and purpose.”
Beyond Gartner’s meta-recommendations, Philip Moscoso (@philipmoscoso) Associate Dean for Executive Education at IESE Business School, offers a few more specific suggestions. He suggests the first thing companies should do to future-proof their supply chains is segment them. He explains, “The first step to take when moving from a one-size-fits-all to a differentiated supply chain management approach is conducting a thorough analysis of customer needs. As it’s rare for all customer segments and product categories to be equally important to a company, different needs should be translated into separate supply chains that align strategies with value propositions.”[6] Below are a few more of his recommendations:
• Boost Resilience. Moscoso asserts, “To avoid similar repercussions during the next shockwave, businesses must stop interpreting ‘lean’ business models as saving money at all costs. Resilience has replaced ‘single-source, just in time’ as the guiding principle of supply chain management.” He also suggests automating warehouses and bringing supply closer to demand.
• Implement Smarter Operations. “The benefits of digitalization for supply chain management became abundantly clear during the Covid-19 crisis,” Moscoso writes, “particularly when it came to digital visibility permitting real-time quantification of the pandemic’s effects. … The utilization of AI … further streamlines supply chain management. Even managers who were initially doubtful of AI’s ability to work through such an unprecedented disruption as the pandemic quickly came to trust in it.”
Concluding Thoughts
Moscoso believes future-proof supply chains will emerge after what he calls “the Great Undoing.” He explains, “The lean, cost-focused model of sourcing nearly everything from Asia has been deeply ingrained into many companies’ strategic DNA. Departing from it will not be easy, won’t happen overnight and, in the early stages, will likely entail costly redundancies. Yet it must be done. … Making a few tweaks to existing supply chains is definitely not sufficient. Foundational redesigns are required via segmentation, the relocation of certain operations and a major investment in new technologies.” According to Danny Shields, Vice President of Industry Relations at Avetta, those new technologies include: Cloud Computing and AI; Robotic Process Automation; and the Internet of Things.[7] He concludes, “The growing pace of technological innovation propels digital supply chain management solutions. Thankfully, embarking on the technical journey will become more accessible and cost-effective as more technologies emerge. Organizations that rapidly adopt these emerging solutions while incrementally replacing legacy systems will better navigate this decade with greater insight and efficiency.” You may not be able to look into a crystal ball to help you predict the future, but you can take steps to prepare for an uncertain future.
Footnotes
[1] Alan Holland, “A Future-Ready Supply Chain: Hurdles and Rewards,” SupplyChainBrain, 13 October 2021.
[2] Nigel Duckworth, “Inside Next Generation Supply Chains,” The Network Effect, 8 November 2021.
[3] Evan Quasney, “Port Congestion Crisis Proves Supply Chain Operations Need to Change,” Supply & Demand Chain Executive, 20 October 2021.
[4] Gartner, “These Three Actions Are Critical to Future Supply Chains, Gartner Says,” SupplyChainBrain, 25 October 2021.
[5] Lisa Terry, “Enabling a Future-Proof Supply Chain,” Consumer Goods Technology, 31 August 2021.
[6] Philip Moscoso, “How To Future-Proof Supply Chains,” Forbes, 27 July 2021.
[7] Danny Shields, “The Four Technologies Shaping Next-Gen Supply Chains,” SupplyChainBrain, 5 September 2021.
