Supply chain snarls and disruptions have captured headlines for months. Evan Quasney, Global Vice President for Supply Chain Solutions at Anaplan, insists these challenges prove supply chain operations need to change. He notes, “Global supply chains have been reeling over the past 18 months, battered by a tangled web of pandemic restrictions and re-openings, drastic changes in consumer spending behaviors, labor shortages and a whirlwind of related events.”[1] He acknowledges that “shocks to the supply chain aren’t uncommon”; however, he writes, “The pace and type of disruption witnessed today is unparalleled and has laid bare many of the risks associated with our traditional way of supply chain operations.” Robert J. Bowman, Managing Editor of SupplyChainBrain, agrees with Quasney’s assessment. He writes, “Global supply chains were clearly in trouble before COVID-19 arrived on the scene, but when it did, the weakness of our time-honored strategies for procurement, production and delivery became shockingly evident. To paraphrase an old maxim, then, necessity breeds innovation.”[2] He insists supply chain innovation today is not a choice, but an imperative.
The Supply Chain Transformation Imperative
Like Quasney and Bowman, Nigel Duckworth (@duckworth_nigel), Content Director at One Network, insists supply chains have finally reached a point of no return and must transform. He explains, “Supply chains are flinching and often stumbling, under a barrage of assaults. From the COVID-19 pandemic, tariffs and trade wars to globalization and reshoring, market shifts and domestic and international regulation, companies are challenged more than ever in managing their supply chains effectively.”[3] To be fair, 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. Today’s supply chain challenges are hitting the bottom line so hard, change is bound to follow. According to Duckworth, the best place to begin supply chain transformation is with improved supply chain visibility. He explains, “Amidst this 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.”
Marina Mayer (@MarinaMayer), Editor-in-Chief of Supply & Demand Chain Executive, reports that visibility isn’t the only area in which companies are lagging. She reports a survey conducted by the Association for Corporate Growth (ACG), found, “Only 18% of companies have adopted technology solutions to solve supply chain challenges since the Coronavirus disease (COVID-19) pandemic began.”[4] Tom Bohn (@TheTomBohn), president and CEO of ACG, told Mayer, “Despite ongoing supply chain challenges exacerbated by COVID-19, our survey of middle market company leaders indicates that many businesses remain unprepared for the future. The middle market represents the largest segment of our workforce, and if done properly, adopting new technologies and hiring talent to implement these solutions has the potential to result in increased productivity going forward.” Although the experts cited above have primarily focused on the need to implement technology solutions, companies need to take a more holistic approach, that involves people, processes, and technology, if they are going to future-proof their supply chains.
As Quasney observes, “With supply chain impacting anywhere from 65-80% of a company’s P&L statement, it’s clear that this just-in-time thinking aimed at driving down costs may be too exposed and at risk for the disruption witnessed today.” As a result, Quasney asserts, “Supply chain leaders should focus to build resiliency against future shocks so that their supply chain becomes a center of competitive advantage. This requires a focus on the cross-connected implications of operational decisions on financial outcomes; a new appreciation for real time data analysis and scenario modeling capabilities; and contextual collaboration both internally within departments, as well as real time with suppliers and customers, to make and act on the best decisions in the moment.”
Increasing Likelihood of Supply Chain Disruptions
Supply chain disruptions are not new. Historically, disruptions have been caused by events like, sabotage, weather, erupting volcanoes, accidents, and, of course, pandemic. Analysts have pointed out, however, that thanks to persistent challenges — like climate change and extended supply chains — disruptions are increasing. Alan Holland (@AlanHollandCork), founder and CEO of Keelvar, observes, “One of the largest pain points for manufacturers is today’s ongoing turbulence in the shipping industry. Port closures like the one at Ningbo-Zhoushan in China and backlogs from the Suez Canal blockage earlier in 2021 have limited transport capacity. … Transport isn’t the only thing impacted by recent crises. Extreme weather events and the ongoing pandemic are also causing shortages of direct and indirect materials.”[5]
The mathematician John Allen Paulos has stated, “Uncertainty is the only certainty there is.” That could be the motto of supply chain professionals. Danny Shields, Vice President of Industry Relations at Avetta, predicts, “Supply chains will become more complex and internationally dispersed.”[6] If he’s correct, that means uncertainty will only increase in the years ahead. Journalist Lisa Terry notes that, even before the pandemic, consumer goods manufacturers were reeling from uncertainty. She writes, “A shifting geopolitical climate, accelerating digital transformation, more frequent and intensive weather events — all of these forces and more were prompting consumer goods manufacturers to strengthen their supply chain capabilities even before the pandemic dramatically shifted consumer behaviors and strained sources of supply.”[7] As a result of the unsettled nature of supply chains, Terry reports that a Bain & Company survey found, “Flexibility and resilience are the top supply chain goals ranked by executives … displacing cost reduction as the top priority.” She adds, “Achieving that flexibility and resilience is proving a tall order, thanks to the current state of many CG supply chains.”
Concluding Thoughts
Gartner analysts conclude, “The struggle to supply goods to a world fractured by COVID-19 has overstretched resources and burned-out employees. It’s time for chief supply chain officers to innovate their networks and commit to a sustainable and purpose-driven supply chain that is part of the solution, not the problem.”[8] Unfortunately, that’s easier said than done. Holland notes, “Many leaders have struggled to ensure continuity of supplies through the disruptions [caused by the pandemic], confirming findings from global professional services firm Accenture Plc that only 4% of today’s supply chains are ‘future-ready’.” In the concluding installment of this article, I will discuss some of the suggestions experts have made about how organizations can future-proof their supply chains.
Footnotes
[1] Evan Quasney, “Port Congestion Crisis Proves Supply Chain Operations Need to Change,” Supply & Demand Chain Executive, 20 October 2021.
[2] Robert J. Bowman, “Supply Chain Innovation Today: Not a Choice, But an Imperative,” SupplyChainBrain, 8 November 2021.
[3] Nigel Duckworth, “Inside Next Generation Supply Chains,” The Network Effect, 8 November 2021.
[4] Marina Mayer, “Only 18% of Companies have Adopted Technology to Solve Supply Chain Problems,” Supply & Demand Chain Executive, 10 September 2021.
[5] Alan Holland, “A Future-Ready Supply Chain: Hurdles and Rewards,” SupplyChainBrain, 13 October 2021.
[6] Danny Shields, “The Four Technologies Shaping Next-Gen Supply Chains,” SupplyChainBrain, 5 September 2021.
[7] Lisa Terry, “Enabling a Future-Proof Supply Chain,” Consumer Goods Technology, 31 August 2021.
[8] Gartner, “These Three Actions Are Critical to Future Supply Chains, Gartner Says,” SupplyChainBrain, 25 October 2021.
