The Great Supply Chain Transformation

In the ever-changing world of supply chain management, one clear trend is emerging: the need to move on from the reactiveness of recent years and contribute proactively to growth. According to a 2022 Gartner report, for example, over half of CEOs in supply-chain-intensive industries reported growth as within their top three business priorities. Furthermore, one third of them expected that growth to come from changes in supply chain management. 

The message is that surviving unexpected political upheavals, climate change events and economic lows may no longer be enough. The mission is now delivering a positive impact despite these challenges. 

Do you have the right capabilities?

Whatever the detail of your supply chain operation, your response is likely to involve a move away from day-to-day operational behaviors. A more forward-thinking and analytical approach is required. In a recent survey, 41% of supply professionals recognised this, reporting data analysis was now their ‘top tech priority.’ 

The supply chain software market is predicted to grow at almost 5% annually, reaching a total value of $23bn by 2027. These tools make advanced data analysis, modeling and planning increasingly accessible.

There are, fortunately, more digital tools to help than ever. The supply chain software market is predicted to grow at almost 5% annually, reaching a total value of USD $23.21bn by 2027.  These tools make advanced data analysis, modeling and planning increasingly accessible. Tools are, of course, only part of the story. You might need to look at your capability mix too.  Do your people have a forward-thinking mindset? Can they spot trends and patterns? Can they balance risk and opportunity? 

Preparing for the worst

Supply chain leaders looking for a positive impact on resilience levels should be undertaking two types of forecasting. The first, perhaps representing business as usual, maps out regular and predictable events such as seasonal changes in demand or planned amendments to regulation. The second, maybe more at the forefront of all our minds lately, is the identification of potential shocks and crises. This latter challenge perhaps feels new, especially in the context of maintaining business growth rather than emergency planning. 

Spotting trouble coming over the horizon is one challenge. Successfully navigating through it is, of course, another. Tools now exist that create a digitized mirror of your supply operation to help.

Spotting trouble coming over the horizon is one challenge. Successfully navigating through it is, of course, another. Tools now exist that create a digitized mirror of your supply operation to help. Known as digital twinning, this type of specialist analysis benefits your business by simulating catastrophes, testing responses and capturing vital data safely from your desktop.  If you’re a global operation, for instance, is it better to call on local resources from Dusseldorf or Liège if your Netherlands operation falters? A simulation, supported by the right internal skills, lets you run the numbers to check. 

We tend to think of these tools in the context of risk reduction. Modeling might also, however, provide information to leverage growth. In the above example, might Germany or Belgium deliver new revenue? If spotting such opportunities does not feature in your recovery plans, headlines about Amazon’s growth during the pandemic tell us it probably should. 

Tales of the unexpected

We don’t have to look at the pandemic for examples. Before lockdown, shifts in global politics impacted on many national telecommunications projects when Chinese component manufacturers fell out of favor. Contractors with a finger on the pulse were prepared to turn to acceptable component suppliers at short notice. They completed installations worth billions of dollars. Those that couldn’t, took a big hit on the bottom line. 

Not all supply chain shocks are geopolitical or even driven by external events. They can be self-inflicted. Sometimes, these can be positive. It would be interesting to know how prepared the UK supply chain was when the US soft drink brand Prime Hydration, launched by YouTubers Logan Paul and KSI, went viral and flew off the shelves. 

At other times, brands will simply have to respond to plain bad luck. The Belgian company AB InBev, which owns the Corona beer brand, had to react when its name was hijacked by Coronavirus for example. Retail brand ambassadors, typically models, musicians or sportspeople can also, famously, act in unexpected ways.

Fast fashion, sports brands, technology companies and supermarkets have also been rocked by business shocks when non-compliance with ESG best practices has reached the public. A supply chain that doesn’t respect sustainability, workers’ rights or global fairness can badly damage brands too.    

Visibility and insight

The management of suppliers is always a finely balanced operation. As well as making supply chain one of the business functions most susceptible to shock, this can make them seem frustratingly immobile to others in the business. Viewed as sources of sin and obstacles to sidestep sometimes, supply chains are not always given sufficient strategic visibility. Fast-moving reactive events make it even more important for leaders to challenge this perception, be seen around the right tables and champion their contribution. 

Collaborating and sharing information with preferred suppliers has long been seen as beneficial. As a supply chain leader, for example, I might share my 3-5 year business plan with them or ask them to support my ESG goals. Do I, however, include the kind of forecasting we have discussed above? Do key supply chain members know my plans should the unexpected happen? There’s a strong argument they should not only know, they should also be encouraged to contribute too. 

Technology can play a role in making general vendor capability and performance data more visible. Secondary sources such as press and social media can provide useful insights too. It is important to build a picture from every available source.

Not everyone is a preferred supplier, of course. Technology can play a role here in making general vendor capability and performance data more visible. Secondary sources such as press and social media can provide useful insights too. It is important to build a picture from every available source.  

The role of the supply chain is already evolving dramatically. Large, global organizations are possibly the most advanced, but smaller businesses will inevitably follow the trend towards greater resilience. We’ve proven it works. Right now, we are working through Europe’s first war in over a generation.  To expect growth in such circumstances might feel like a bridge too far, yet it shouldn’t. The required shift in supply chain management is well underway. I am excited to see where it takes us.