In an address during the G20 summit in November 2022, Indian Prime Minister Narendra Modi referred to the global supply chain as an industry “in ruins”, and his words ring truer than ever in light of the events in recent years.
During the peak of the COVID-19 pandemic, worldwide lockdowns and labor shortages halted the flow of goods, delayed the delivery of raw materials, and affected both manufacturers and individual clients. Barely recovered from that hit, global supply chains faced yet another challenge as Russian troops crossed the borders of Ukraine. Some businesses had to find alternative trade routes between China and Europe, while others urgently needed new suppliers of raw materials like copper, iron, and steel. This, in addition to the soaring fuel prices and the continued dependency on Russian energy all over Europe, put an enormous strain on modern supply chains. Unprecedented events will always have their impact on the industry; however, the world crises from recent years only brought forward the underlying issues we are facing daily. Currently, we are solving problems as they occur, and losing valuable time and resources in finding solutions, with 91% of businesses struggling to manage supply chain complexities.1
Businesses need to change the way they operate if they want to survive this or future global challenges; but can they quickly switch from a reactive to a proactive approach? Well, we cannot prevent a pandemic or a war from happening, but optimizing supply chains to overcome the roadblocks that come as a result, should be achievable, but to do so two issues need to be addressed:
1. THE COMPLEXITY OF MODERN SUPPLY CHAINS.
Supply chains are multi-tiered global networks, strongly dependent on a series of internal and external factors. On one hand, we are talking about large organizations, with complex structures and multiple departments, where effective communication is difficult. On the other, businesses depend on numerous vendors, spread globally, with differing management systems and processes rarely talking to each other. This makes it a challenge, to put it mildly, to ever see the details of what exactly matters the most.
2. MANUAL PROCESS, POOR VISIBILITY AND SLOW ACTIONABILITY.
Technological breakthroughs change the world we live in daily. Still, surprisingly many processes in supply chain management are outdated and manual. Time is a finite resource, and often it is spent on manual tasks, which are tedious and prone to human error. Such errors inevitably lead to inconsistencies and inefficiencies and can turn out to be quite costly for the business.
Access to data is currently all the buzz in the business world. Yet, in a McKinsey survey of global supply chain leaders, 73% of respondents reported that they are still using spreadsheets for supply-chain planning.2 While there is nothing wrong with the simplicity of spreadsheets per se, data is an extremely valuable resource, and we are wasting it by keeping it in disconnected data sets. Information silos are an obstacle in the way of achieving complete visibility of supply chain operations, effectively tracking important metrics, and clearly seeing problematic areas.
And entering in a recession is not helping – with fuel and raw material prices soaring, the cost of operations for modern businesses is skyrocketing and with a decline in demand on the horizon, the risk of being stuck with leftover inventory is quite real.
The COVID-19 pandemic and the war in Ukraine shaped the new challenges we are facing today but did not create them. For example, the ongoing war in Ukraine forced neon gas suppliers to shut down their factories temporarily. With neon gas being crucial for semiconductors production, this disturbance is felt globally, and the shortage will likely continue for several years. If one link in the supply chain breaks down, it causes a snowball effect, and the lack of flexibility, due to the complexity of supply chains, is preventing us from bouncing back on our feet quickly after an unexpected event.
And then there is the not-so-small topic of sustainability. In a world of recognizable and finite resources, regulators and most of us as consumers expect our businesses to be environmentally conscious and to be taking concrete steps to meet sustainability targets and reverse or limit our impact on the world’s ecosystem.
All of this taken together sounds like a somewhat overwhelming challenge for us to address. It is of course crucial for any business to become resilient to remain competitive, reduce costs and meet sustainability targets, but the key just might be already within our grasp, and contained in data somewhere. Data-centric organizations have greater visibility of their key metrics and KPIs, can quickly spot and remove inefficiencies, and routinely outperform their competitors. Still, according to a McKinsey study, only 53% of supply chain companies report a sufficient or high level of data quality. The same study suggests that companies with high data quality were 1.5 times more likely to report they experienced no challenges from supply chain disruptions in 2021.3
Adopting a data-driven approach for your supply chain is not an easy task. However, advanced data solutions can help you make the transformation smoother.
The first step is to break information silos. Organizing, cleaning, and connecting data will enable businesses to get a complete end-to-end visibility of supply chain operations, including real-time tracking of KPIs and key metrics. But perhaps more importantly, once the data has been properly organized, applying advanced technologies such as machine learning and artificial intelligence can help discover previously unknown insights from that data, such as where problems are brewing or might occur if action is not taken. For example, one large technology OEM now prioritizes the delivery and returns of their service inventory based on a dynamic list of their customers’ very different service level agreements, and the service history of the specific parts involved. The scheduling and routing of these parts is now made as a dynamic decision, based on the real-time needs of other customers, the age of the part and the possibility of refurbishing or reusing the part elsewhere.
This ‘actionable insight’ promises to revolutionize how we manage our supply chains into the future. Perhaps we might just be sitting on the data and solution to the “ruined global supply chain” highlighted by Prime Minister Modi.
1 - https://www.scmdojo.com/rising-supply-chains-complexity-and-how-to-manage-it/
2 - https://www.mckinsey.com/capabilities/operations/our-insights/to-improve-yoursupply-chain-modernize-your-supply-chain-it
3 - https://www.mckinsey.com/capabilities/operations/our-insights/taking-the-pulseof-shifting-supply-chains