Supply chain transformations and technology initiatives are always complex. There’s a lot of moving parts and considerations, especially during our current supply chain crisis. In today’s global environment, supply chain transformation has been thrown a big curveball.
The US as with the likes of other countries is going through a supply chain crisis along with dealing with the effects of an ongoing global pandemic. We’ve closed businesses and slowly have cut back on the shipping and handling of products that keep our world running. A lot of us are still working from home. Some kids are back in school, but things are different, and businesses are not operating in full capacity as normal.
There’s also obviously an important health crisis unfolding in real-time, which is creating significant economic implications. This perfect storm of challenges is ultimately affecting how organizations are dealing with their supply chains. A majority of organizations and many of our current clients are experiencing extreme supply chain disruptions.
In the best case, for some organizations, they’re seeing huge spikes because they are selling products that are in high demand right now. Consumer staples, any kind of food and beverage type of product are a hot commodity.
We’re seeing organizations like the government, military, medical devices, and healthcare preparing for additional growth and demand. These are examples of industries where the supply chains are strained and they’re struggling to figure out how to deal with this sort of demand.
On the other side of the equation, you have companies who have the opposite problem. Their supply chain activity has completely dropped, and demand is down. If they’re in retail, distribution, or some sort of luxury / non-essential type product, those businesses are falling very quickly.
Unfortunately, there is no “normal” right now. Most organizations are experiencing one of these two scenarios.
So,,, how do you navigate a stressed supply chain?
Here are some questions I want you to keep in mind before we learn how to lead a supply chain management transformation in the right way.
- What does this mean for the world in general?
- What does it mean for our supply chain transformations, and how can we leverage business, technology, and people to focus on improving those supply chains to prepare for this new reality that we’re in?
Evaluate Your Current Processes and Systems
One of the first things that we advise clients on, especially now, is to make sure that you’re not leading with technology. This is a reality is for a lot of organizations – they don’t have the resources to handle that sort of initiative right now. It’s essentially because they’re so busy and their supply chains are strained. Businesses have fallen off and capital spending is getting stressed, which in turn, budgets are getting cut.
Whichever side of the equation you’re on, chances are a new technology initiative is going to be the high-cost, high-risk option.
We typically will recommend clients look at their current state and optimize these processes or business functions first. That’s going to be the low cost, low value, and quickest ROI that we can typically get.
A lot of “industry types” will lead with silver bullet systems and suggest that you need new technology in order to survive supply chain trauma. That’s simply just not where a lot of us are right now. The supply chain turmoil coupled with labor shortages is plenty to focus on without another risk generator like a technology implementation.
Typically, we find that companies, even in good times and bad, are amazed at how much value they can get out of their current environment. It may not get them all the way to where they want to be longer-term, but in the short to intermediate-term, you can get a tremendous amount of value just by looking at simple process improvements, leveraging current technologies, and people.
Once we’ve completed the evaluation of current processes and systems, now we look to discover how we can potentially fix them. I understand that It’s not always ideal to live with what you’ve got. For some of you, it’s not an option and you may still need to go down the path of leveraging new technology.
For most of you, I would suspect there’s a lot of value in optimizing your current processes, especially if capital spending is being put on hold due to supply chain pain. Whatever the case may be, there’s no reason to stop and do nothing. There’s a lot we can do to live with what we have and get more value out of it.
The good news is this will better prepare us for when we are ready to start deploying bigger transformation initiatives.
Some examples are to analyze business processes and understand where they’re potentially broken. Where the strains are, and what we can be doing to improve the processes even without new technologies.
Let’s say that one of the challenges you’re having as an organization is predicting demand. Fulfillment is a pain point as you don’t understand demand. It’s important to dive into those processes and really dissect what’s happening.
Some things to keep a note of is:
- How are we forecasting demand?
- What inputs are we dependent on?
- Where are those inputs coming from?
- Why are we having trouble getting those inputs?
- Why are those inputs inaccurate?
- Why are the outputs inaccurate?
If we look at dissecting these processes step-by-step deep within the system, a lot of times we find that there are simple problems behind this. It could be because of some of the inputs upstream in the process, employees not entering the data the way they should be, or maybe that employee is tracking information in a spreadsheet instead of an enterprise system.
This is an extremely valuable and a great way to optimize current systems to stronger business processes and reestablish organizational roles in your company. It will not only help us now in the short term but in the longer term as well.
In the end, when it does come time for a bigger transformation on the supply chain side, we’ll have a better blueprint and a stronger foundation already established.
Define Your Future State
Another current state influence an organization has is to identify future state business processes and clear enterprise strategies. On the surface, that sounds like a no-brainer, however, the big difference here is that we really must take a step back and come at this from the angle of what we thought was our future state once was, may not be what it is going to be.
We must now come to terms that we are living in a new normal. The global economy is headed in a different direction. Though I can’t predict the exact future, there are going to be massive changes in the way that businesses operate and the way that supply chains function as a result of our current business landscape.
Having a clear and relevant future state vision will allow organizations to identify valuable process changes and enhancements.
Diversification of Partner Network
Another internal controllable that companies can activate immediately is to diversify the vendor base. A lot of enterprises that we’re working with, and even a lot you might read about in the media, such as Apple and other big companies with global supply chains are working to figure out how to expand vendor and supplier partner networks so they’re not overly dependent on one region of the world or a specific vendor.
Whether it’s because we have a single supplier, a single vendor for a certain component of our product, or because it’s in a certain country that’s subject to economic changes, there’s always a chance the government regulatory changes could disrupt our supply chain. This is just one example of how we want to look at our future state in a way that we hadn’t may be thought of in the past.
We can view these current challenges as an opportunity to take a step back and really rethink how we’ve built our supply chains and make sure that we’re optimizing our current supply chain for that environment. We don’t necessarily anticipate that this supply chain roller coaster is going to become the norm, but it’s critical for businesses to have a strategy regarding uncertainty.
Supply Chain Innovation
How can we build a supply chain that is built by fluctuation and other Black Swan types of events that could lead us to the massive disruption to our supply chain?
We craft a supply chain built on innovation.
Leveraging assets such as data, predictive analytics, forecasting, automation, machine learning, and AI, or any sort of way to anticipate future demand. Like I said before, I don’t think anyone could have really predicted the sorts of peak and valley that we’re seeing in certain supply chains because of the global situation, but it opens our eyes to a reality that stuff like that does happen.
There are things that we’re missing. There are blind spots we seem to have as a human race and as a business population that we couldn’t have predicted and didn’t predict, in terms of how it’s going to affect our supply chain.
All of this can apply to our warehouses as well. In our actual distribution or the last point of contact before distribution.
How can we make sure we have better warehouse management or ensure that warehouses are operating at optimal levels?
Do we have the right people, technology, and processes in place to help us manage any sorts of increases or decreases in our supply chains in the future?
Looking ahead, I suspect that the days of big, massive technology initiatives and spending are on the back burner for a while. I don’t know how long, but I think for some period, we’re not going to see these massive supply chain transformations where we automate everything from procurement, warehouses, logistics, distribution, shipping, etc.
It’s going to become more of a situation where we leverage technology on a select and targeted basis. New technologies on a spot strategic basis is going to be important. I think that’s what we’ll see a lot more companies do.
Instead of focusing on a large tech spend, it’s more important for us as organizations and as teams to use our expertise, to be more focused and strategic in how we use technology to improve our supply chains.
To wrap up, supply chains as we know are dead. They’re changing right in front of our eyes and they’re going to look a lot different in the future. Now is a good opportunity for us to rebuild, make our supply chains healthier, leverage people, processes, and technology.
I hope this has provided some helpful tips to help you get started on your supply chain transformation or help you resume your supply chain transformation in today’s economic realities.
For more information check out our 2021 Digital Transformation Report and I also encourage you to reach out to me directly if you have any questions surrounding the supply chain crisis. I am happy to be an informal sounding board as you move through your digital transformation journey.