Transforming Supply Chains During the Pandemic and Beyond

Stephen DeAngelis

November 24, 2020

The pandemic has forced many companies to rethink their supply chain strategies. However, Shanton Wilcox (@ShantonW), U.S. manufacturing lead at PA Consulting, cautions, “Too many companies jump from appetite for change to action without fully evaluating the many ‘whys’ in between. Fully redesigning the supply chain starts with envisioning what it needs to become. The disruptive change that’s typically involved affects all kinds of people and involves complex connections and processes across the organization. To embark on this change without a clear destination or ‘north star’ risks confusion, inefficiency, and resistance — resulting in higher costs and worse, not better, outcomes.”[1] If your supply chain needs to transform, be prepared to make some wrenching decisions. Jim Tompkins (@jimtompkins), Chairman at Tompkins International, explains:

 

I think people are underestimating the magnitude of what is happening today. Transformation was a great process to move a company forward five years ago. But are you telling me that for us to deal with digitalization, digital commerce and the pandemic all we need to do is change the way we do business? This is what I have read in many articles and blogs, but just changing what you have done in the past is woefully inadequate. As we try to put 2020 behind us, we need to grasp that it is a whole new game. You will not be successful going forward if what you do is transform your business, supply chain or logistics processes. Simply changing these processes is totally inadequate. You must throw out how things have been done in the past and reinvent your business, supply chain and logistics processes.”[2]

 

I believe there is a big difference between the verbs “change” and “transform”; although it’s difficult to define one without using the other. That’s probably why Tompkins is stressing reinvention. My preferred definition of transformation is: “A thorough or dramatic change in form or appearance.” Transformation is not, as people are fond of saying, “rearranging chairs on the deck of the Titanic.” Digitizing a few processes is not the same as becoming a digital enterprise. Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, explains, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”[3]

 

Paths to supply chain transformation

 

If you are going to transform, not merely change, your supply chain operations, Wilcox suggests three potential archetypes you might consider.

 

The incremental archetype. Wilcox writes, “The usual starting point is to develop a performance-led vision. … The performance-led archetype focuses on driving cost reductions and quality improvements and increasing capacity for growth. It’s an inward-looking view, meant to optimize the organization’s current operations to realize performance goals. Individual supply chain functions apply targeted solutions that resolve particular problems to overcome inefficiencies.” Like Tompkins, Wilcox argues this path doesn’t lead to true transformation. When taking this path, Wilcox notes, “Cross-functional initiatives and capabilities aren’t yet aligned. With discrete, focused solutions, it’s relatively easy to demonstrate value, build momentum, and start familiarizing people with what change really involves.” At the very least, companies taking this path need to adopt a concurrent planning scheme. Concurrent Planning refers to planning by multiple departments simultaneously with consistent objectives. The ultimate goal is having an enterprise wide planning objective filter down into each department to keep the enterprise in alignment. Cognitive computing systems — such as the Enterra Cognitive Core™, a system that can Sense, Think, Act, and Learn® — can help enterprises achieve better planning results and improve corporate alignment.

 

The connected archetype. According to Wilcox, “The next archetype is connectivity-led. Here, the organization’s focus starts to turn outward, to better understand how connecting digital capabilities across supply chain partners can do more for customers and even develop new revenue streams from products and services that are digitally aligned.” For years, supply chain analyst Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, has advocated outside-in planning. By that she means planning must take into account all of the demand data being generated outside of corporate boundaries. Leveraging both internal and external data fosters increased planning alignment throughout the supply chain. Wilcox agrees. He writes, “Demand-sensing capabilities improve forecast accuracy and cut inventory. Operations are synchronized to ensure the products customers want are available on demand.”

 

The agile archetype. “The third archetype,” Wilcox writes, “is agility-led.” He is not alone in his belief that supply chains must become more agile. Disruptions caused by the pandemic drove this lesson home. On this path, Wilcox writes, “The organization flexes easily in response to customers’ evolving demands. … A growing number of large organizations … believe this is where their future lies. To succeed, they must aim to become ‘super disruptors’ and commit to weaving AI and other digital technologies deep into their fabric.” This is what Wang means by achieving “a total paradigm shift in the culture and operations.” Polly Mitchell-Guthrie (@PollyMGuthrie), Vice President of Industry Outreach and Thought Leadership at Kinaxis, adds, “When demand and supply are fairly stable, forecasting algorithms approach a useful accuracy, and your planners can operate closer to cruise control, relying on automation to flag only the exceptions worthy of attention. But when we live in times like these, exceptions may be the entire day. Our supply chains have always needed agility to respond quickly, but especially once they sense disruption. The most accurate prediction we can make for the future is that times of disruption are the new normal. Which means agility needs to be the new normal.”[4] Mitchell-Guthrie suggests three pillars that make supply chains more agile. They are:

 

  • Visibility. “Visibility means being able to view the entirety of your supply chain, so you can plan across all the network and not just in functional silos. It means sensing problems immediately, with alerts that monitor your data, flag exceptions, and show the impact.”
  • Concurrency. “Concurrency means being able to make and manage synchronized plans across time horizons, business processes and organizational boundaries at the same time. With concurrent planning, a change in one part is reflected real-time across the entire supply chain – supply is not surprised by a change in demand, because it is visible instantly across the connected network without latency.”
  • Collaboration. “Collaboration is about bringing the right stakeholders together, in real-time, to evaluate alternative scenarios against your most important corporate metrics. When you can run scenarios across a connected supply chain instantly, you can create hundreds or even thousands ready for various what-if questions. With the best scenario in hand, your team can collectively move forward in a common environment, without triggering a prolonged chain of emails.”

 

Clearly, the subject matter experts cited above believe the agile path is the one leading to the best outcomes over the long run. All of the paths can benefit from cognitive computing capabilities, but the greatest benefit is achieved when they are fully integrated into an agile supply chain.

 

Concluding thoughts

 

Mitchell-Guthrie observes, “The rug has been pulled out from beneath us. Doing things the same way we’ve always done them will no longer serve us, so we can’t simply put it back in its place. In fact, the definition of pulling the rug out from underneath someone is that doing so causes their plans to fail, because they have little recourse or time to respond adequately. It’s a fitting metaphor for the world’s supply chains, which have always had to figure out how to respond rapidly in the face of rug-tugging disruptions, although none at the scope of the current one.” Although transforming supply chains may be an imperative during the pandemic and beyond, Wilcox is correct that you need to know where you are going before you begin your journey. As the late, great, hall-of-fame baseball player Yogi Berra once stated, “If you don’t know where you are going, you’ll end up someplace else.”

 

Footnotes
[1] Shanton Wilcox, “Three Paths to a Redesigned Supply Chain,” Supply Chain Management Review, 19 August 2020.
[2] Jim Tompkins, “Transformation is Inadequate: Why Reinvention is the Only Option for Business Success,” Tompkins Blog, 15 September 2020.
[3] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[4] Polly Mitchell-Guthrie, “Why Supply Chain Agility Needs to be the Next Normal,” Logistics Viewpoints, 2 June 2020.