Supply Chain – How To Build A Resilient Supply Chain For A Post-Covid World?
A priority for a post COVID revival plan of global organisations is to build more resilient supply chains. A study by Capgemini Research Institute stated that more than 80% of organisations have reported their supply chains being negatively impacted by the COVID-19 crisis, with a majority of these businesses struggling across all aspects of their operations. Sophisticated supply chain management is critical to the competitiveness of companies. Businesses need to shield their global supply chain from disruptions while optimising the entire process and minimising the cost. Traditional risk management protocols were designed to respond to localised disturbance but that’s not sufficient to address global disruptions as seen in the aftermath of COVID. It’s evident that the current state of affairs in regards to supply chain management requires more flexibility and agility to adapt quickly to potential risks.
An astonishing 68% of organisations have said that the current crisis has forced them to re-strategise their business models while increasing supply chain resilience. Only a mere 14% of organisations are expecting a return to business as usual. Organisations have realised that there is a growing need to diversify both top-tier suppliers and lower-tier suppliers to mitigate any impact on the production line or delivery channels. The lack of contingency plans and/or dependency on a single firm or geographically source of certain goods has forced companies to halt their manufacturing facilities, at least temporarily. Supply chain risk management must account for human intelligence as well as data collection, analysis, and organisation to ensure that companies have a 360-degree view of the entire supply chain structure (including stakeholders, contact lists, and key suppliers) such that they can easily identify areas of vulnerability and minimise the risks.
A resilient supply chain must include the following attributes:
- Contingency plan (backup plan as a response to a crisis)
- Localisation of suppliers and manufacturing sites (a focus on identifying regional suppliers and production sites)
- Diversification (both product diversification and diversification of suppliers, production hubs, and delivery modes)
- Sustainability (incorporating sustainable practices in the entire supply chain in accordance with local and international laws)
- Agility (agility in the decision-making process and adaptability to new business strategies)
- Transparency (accounting of end-to-end costs for better risk management)
- Visibility (bird’s eye view of the entire supply chain)
- Velocity (real-time information availability across every touchpoint)
- Responsiveness (quick decision making based real-time data and insights)
Companies must reassess customer demand, improve demand forecast, and global operations. There has been a shift from linear supply chains to digital supply networks (DSNs) wherein the silos within organisations are being compartmentalised to enable better connectivity and transparency. DSN is credited for a reduction in transaction cost of operations, both internally and externally. Simultaneously, this system has improved physical production through the implementation of computing powers for some processes as well as help organisations to increase competitive differentiation by implementing a more dynamic network. DSN networks have multidirectional communication across every node of the supply chain allowing companies to make better decisions based on real-time data, greater transparency, and enhanced collaboration across the entire network. Digital tools such as AI, machine learning, IoT, cloud computing, etc is helping fuel the transition to a more agile supply chain management.
IoT sensors and other information centres are helping organisations to collect big data meanwhile AI algorithms are decoding these enormous datasets to create frameworks of resilient supply networks with added capabilities of predictive analytics to recognise high-risk suppliers and supply routes, and preemptive measures to implement in emergent scenarios. IoT has been and will continue to play a vital role in core logistics operations such as dispatching, locating, tracking, and route planning of shipments. Real-time data is expediting the processing pipeline while enhancing the experience of vendors, suppliers, stakeholders and, and customers in the supply chain.
For bigger enterprises, who have multi-tiered and complex supply chains, technologies like deep learning and blockchain can create greater transparency and accountability. Deep learning algorithms can simultaneously gather, analyse, store, and dispatch information as well as help logistical teams to correlate variable datasets to identify recurring patterns. On the other hand, blockchain technology can improve the security of the organisation’s ledgers and transactions, and eliminate the delayed clearing process of banks with instantaneous transmission through the internet. Implementation of blockchain technology can replace slow, manual processes thereby enabling organisations to handle bigger, more complex datasets. It can improve traceability and add more value to the network through mitigation of highly relevant problems such as massive recalls, PR disasters, etc. Leveraging blockchain can reduce IT costs across the supply chain.
There is also a greater necessity to facilitate the use of robotics in order to optimise the entire supply chain. Robots can save a business nearly $22 million in annual savings, an approximately 20% reduction in operating costs. Automating processes with the help of robots can generate more revenue for organisations, reduce cost, improve production, and efficiency. The heavy lifting can be left to the machines which can free up human resources to handle more complex, critical functions.
Strategies that companies can implement to build more resilient, agile supply chains:
- Organise and strategise all tiers of suppliers, and analyse and manage risks related to each supplier.
- Apply predictive analytics and statistical models to gather insights, estimate future customer demand, and align risks management strategies.
- Make investments in advanced technologies like AI, blockchain, robotics, VR, etc to solve business problems.
- Automate repetitive processes to reduce labour costs and improve productivity.
- Diversify the supply chain network geographically to reduce the risk of disruption.
- Build short term ROI-focused strategies that are achievable and add value to the supply chain.
While the future is uncertain, true resilience in supply chains can only be attained through careful planning and preparation. At Alkye, we offer clients business strategy services to help them analyse and prepare for market trends, competitive pressures, and technological disruptions.