The Pandemic has Bolstered Supply Chain Transformation Efforts

We’ve read a lot about how fragile supply chains proved to be when the COVID-19 pandemic started spreading. When you think about it, however, today’s global supply chains are a true marvel.

The Pandemic has Bolstered Supply Chain Transformation Efforts

Stephen DeAngelis

February 23, 2021

We’ve read a lot about how fragile supply chains proved to be when the COVID-19 pandemic started spreading. When you think about it, however, today’s global supply chains are a true marvel. Mark van Rijmenam (@VanRijmenam), founder of Datafloq writes, “In today’s complex world, it is short of a miracle how we have been able to create global supply chains that move products across the globe at breakneck speed.”[1] Miraculous or not, van Rijmenam understands there’s room for improvement. “The current pandemic,” he notes, “has also shown how vulnerable our global supply chains are.” This vulnerability has forced many companies to reevaluate their supply chain operations with the aim of making them more agile and resilient. Marisa Brown (@MB_APQC), senior principal research lead for supply chain at APQC, notes, “COVID-19 and the resulting economic downturn have challenged organizations to reevaluate their ideas about how to optimize the supply chain. Rather than focusing solely on cost and market share, organizations must now consider how to address risk and meet strategic goals while achieving efficiency.”[2] Many analysts believe complete supply chain transformation is required to meet current and future conditions.

Transformation won’t be easy

If your supply chain needs to transform, be prepared to make some wrenching decisions. Jim Tompkins (@jimtompkins), Chairman at Tompkins International, believes the word “transformation” fails to capture the urgency he feels about the need for supply chains to reinvent themselves. He 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.”[3]

Updating old processes to incorporate digital technology is what Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, calls “digitization at its worst.”[4] She 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.” I believe Tompkins and Wang are saying the same thing; they are looking for a total paradigm shift in how supply chains function. Van Rijmenam notes, “Those companies who had not updated their supply chain to the digital era before the start of this pandemic faced a lot more difficulties in adjusting to the new normal than those companies with a digitally optimized supply chain. Digital has become a prerequisite for supply chains.”

Data, digitization, and cognitive technologies

The digital supply chain will rely completely on digital data. As van Rijmenam notes, “[Transformation] can only happen if the supply chain effectively goes digital, becoming paperless in the process. Naturally, within a paperless supply chain, the cloud plays an important role, but in the coming years, we will also see other areas of technology such as the Internet of Things and 5G networks becoming increasingly important. Of course, within any such digital environments, the quality of your data is crucial. Without having high-quality data, it becomes very difficult to optimize your supply chain.” Van Rijmenam alludes to, but doesn’t specifically state, that optimization, and other benefits of a digital supply chain, rests on the ability to analyze data; and, the amount of data we’re talking about requires cognitive technologies with embedded analytics.

Doug Mefford, chief product development officer at Generix, argues the digital supply chain is necessary in order to deal with complexity. He writes, “The modern supply chain is an intricate animal that incorporates many different organizations, people, processes and technologies. Add the word ‘global’ to the equation, and those complexities become even more difficult to manage.”[5] Like van Rijmenam, he insists supply chain transformation requires cognitive technologies. He writes, “Fortunately, technology has advanced to the point where it can help organizations more effectively manage their global supply chains without the need for additional labor, physical space, or expertise. From predictive to prescriptive, from decision support to decision automation, artificial intelligence is transforming supply-chain activities in new ways.”

Mefford goes on to note, “Performing tasks in a manner similar to human brains, AI-enabled technology can sense and respond to specific features within its environment. It can learn to solve problems such as delivery delays and weather-related disruptions in unexpected ways, recognizing the nuances of speech and exhibiting some form of humanlike creativity.” Cognitive solutions, like the Enterra Supply Chain Intelligence System™, powered by the Enterra Cognitive Core™ — a system that can Sense, Think, Act, and Learn® — can generate the kind of actionable insights decision-makers need to function in a world characterized by volatility, uncertainty, complexity, and ambiguity. Gartner analysts note, “AI in supply chain makes up a toolbox of technology options that allow companies to understand complex content, engage in natural dialogue with people, enhance human performance and take over routine tasks. AI currently helps supply chain leaders solve long-standing challenges around data silos and governance. Its capabilities enable more visibility and integration across networks of stakeholders that were previously remote or disparate.”[6]

Concluding thoughts

At the end of the day, digital transformation efforts should help business leaders make better supply chain decisions as well as improve operations. Brown notes advanced analytics will help make supply chains “future-ready.” “In supply chain,” she explains, “analytics can provide valuable information needed for forecasting logistics and inventory optimization, as well as scenario planning. All of these capabilities enable organizations to increase the effectiveness of supply chain planning. In fact, supply chain managers that rely more on data are three times more likely to report significant improvements in decision making, compared with those who make decisions based on intuition.” Bain analysts, Michael C. Mankins and Lori Sherer (@lorisherer), agree with that assessment. They write, “The best way to understand any company’s operations is to view them as a series of decisions.”[7] Mankins and Sherer add, “We know from extensive research that decisions matter — a lot. Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision making and execution have the results to show for it.”

Footnotes
[1] Mark van Rijmenam, “The Supply Chain of Tomorrow Will Be Flexible, Efficient and Resilient,” Datafloq, 20 September 2020.
[2] Marisa Brown, “Planning for the Supply Chain of the Future,” Supply Chain Management Review, 1 September 2020.
[3] Jim Tompkins, “Transformation is Inadequate: Why Reinvention is the Only Option for Business Success,” Tompkins Blog, 15 September 2020.
[4] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[5] Doug Mefford, “How AI Is Transforming Global Supply Chains,” SupplyChainBrain, 28 December 2020.
[6] Sean Galea-Pace, “Gartner: Eight technology trends in supply chain,” Supply Chain Digital, 12 August 2020.
[7] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.