Why your supply chain will never be the same again
Supply chains have become front-page news in the wake of the pandemic: Border closures, the grounding of airlines and the lack of essential household goods has made them a concern for businesses and consumers alike.
“Supply chain has become part of our everyday conversation. We talk about it at work, we talk about it at home across the dinner table. Supply chains not only impact our businesses, they impact the world around us, our quality of life and how we as a society respond to the challenges that we face,“ observed Matthew Lekstutis, Head of Global Supply Chain Consulting Practice at TCS C&SI.
He was hosting a panel of business leaders to discuss the long-term impact of this disruption on supply chains as part of the third edition of the 2020 TCS Innovation Forum. The virtual event entitled “A New Beginning – Building Supply Chain Resilience,” explored how organizations are using technology to transform their supply chains, driving resilience and adaptability. The event was curated by TCS Pace PortTM Pittsburgh, the newest edition to TCS’ “phygital” centres, helping organisations drive their innovation and digital transformation efforts.
Every year, TCS Innovation Forum is an invite-only event that brings together more than a thousand senior business leaders from around the globe to discuss the innovation, research and technology agenda. This year, reflecting the role of technology during the pandemic, the event has become global and virtual and is being held over a series of streamed events.
In a poll among participants, 60% said that their supply chain performance had decreased during the pandemic. A quarter of respondents qualified this decrease as substantial.
While some of the immediate repercussions on supply chains may recede as the world gets to grips with COVID-19, there is no going back to the previous status quo.
The pandemic has revealed the weaknesses of today’s globalized supply chains, and panellists agreed that the sector needed to draw a line and turn its recovery into a new beginning. To avoid something similar happening, supply chains must become more resilient, more co-operative and easier to adapt to new challenges as well as opportunities.
Predicting the unpredictable
Those in charge of supply chain management all face a big unknown, as it is hard to predict if, when and how quickly their markets will bounce back.
“It is really difficult to accurately predict which trends we've seen so far will stick,” said Michael Bailey, Head of Technology, SCM at UK retailer Marks and Spencer.
”The approach we're taking is to be really open-minded and try to be as flexible and innovative as possible because there are going to be some deep structural changes in the retail industry.”
To avoid falling into the same trap as before, supply chain managers will need to look at their mix of suppliers and collaborate much more closely with them. They will need more detailed, in-depth planning – and technology to bring this all together.
As Kathy Fulton, Executive Director for the non-profit American Logistics Aid Network (ALAN) pointed out: “Across the board, there are big structural changes in the works, but we're in a time where people are willing to be innovative and creative. It's time to seize that opportunity.”
A new beginning for the supply chain
Panellists agreed that there would be a shakeout of suppliers, leading to deeper relationships with fewer suppliers and a more holistic approach to managing these.
Alongside, the weaknesses of distant suppliers having been exposed, there will be a geographic shift of supply chains.
”Some of the structural changes that we will see certainly include a lot less sourcing from Asia. After 30 years of global sourcing, maybe we’re now at the point where we say: ‘Wait a second, maybe we did too much’,” said Rogerio Branco, Chief Supply Chain Officer at US-based power management company, Eaton Corporation. “So now we're rethinking our strategy and coming back closer to the points of consumption.”
This does not mean, however, that global supply chains will be replaced by local or regional ones, just a more balanced setup. “We can still have global sources, but the point of the lever has to be managed by supply, not by us.”
Together, the trends towards fewer, closer supplier relationships and more localized sourcing also feed into the transformation of traditional, linear supply chains into purpose-driven ecosystems. These ecosystems are built around the customer journey and include both direct suppliers and enabling and supporting networks. These can include anything from lenders to logistics companies and legislators.
“A quick response to a disruption requires a flexible ecosystem of partners who can handle sudden shortfalls and spikes in demand, it also helps to repurpose an existing supply chain to produce new products,” outlined Susheel Vasudevan, President, Manufacturing and Utilities, TCS.
The way forward is digital
Bringing such diverse players together will add a complexity that requires high levels of visibility and orchestration. This goes beyond “a small army of analysts crammed into a conference room trying to run spreadsheet models with incomplete information”, as Mark Newbury, Partner at TCS said during the event.
It requires a much greater movement of the industry toward digitalization and automation.
“Before, we were talking about the impact of digitalization: how can that help us? What is the business model? What is the benefit? Now, if you don't have it, you don't survive, period,” said Eaton Corporation’s Branco.
One area where digitalization delivers immediate benefits for the supply chain is visibility: often companies know their direct suppliers very well but are much less familiar with suppliers further down the line. Digital supply chain management can provide dashboards to make the ecosystem visible end-to-end, not just the top tier.
Technologies such as blockchain can be instrumental in creating an audit trail of interactions across the entire supply chain.
This is beneficial not just in a crisis, when a company needs to quickly adapt its sourcing, it also helps with long-term planning. For example, for Steve Laurent, CIO & SVP-Global Supply Chain at GE Healthcare, the planning horizon had shifted from quarter-by-quarter to an 18-month vantage point as a result of the crisis.
Artificial intelligence and data analytics will become critical to anticipating change but also to help optimize operations, eliminate waste and streamline the supply chain to create operational efficiencies and reduce costs.
Similarly, digital twins – which create a digital ‘copy’ of a company and its processes - can help with scenario planning to assess the impact of shifts in demand and supply or the geopolitical environment. Virtual levers can be applied at different levels to gauge the effect on the company’s operations and supply chain.
“The importance of data and analytics, the visibility and access to data, predictive models – they are all helping our supply chain immensely. Opening up more data channels to make decisions is critical,” said Laurent.
Seizing the opportunity
What transpired across the panel was an attitude of renewal and the urgency of acting now to make the most of the industry’s heightened visibility thanks to the pandemic.
As host Matthew summarized: “We supply chain professionals are in the spotlight. Now is our time, now is our opportunity to drive our agenda and to create a new beginning: one that's compelling for our businesses, as well as for our customers and the communities that we operate in.”