#47: Winning with Integrated Supply Chains
Prakash Baskar
Ex-Chief Data Officer - Transforming companies by developing and enabling intrapreneurs to win with data.
The concept of a supply chain (SC) is nothing new. But just like every other function across companies, the supply chain has also been deeply impacted by the evolution of technology and platforms, the pace of change in business, the talent market, global trade and associated risks, and the ever-increasing expectations of well-informed, knowledgeable, and highly demanding customers.
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A supply chain includes companies and people producing and delivering a product or service. It includes producers, vendors, warehouses, transportation companies, distribution centers, and retailers.
The SC has traditionally been described in this way. However, the modern supply chain extends the involvement and engagement of suppliers, customers, employees, technology, and devices to become a connected supply chain.
Additionally, the lead time requirements, tolerance for going from product concept to production, and customers' ever-increasing expectation of shortened fulfillment windows bring new challenges and opportunities for companies.
As difficult as this may sound, the companies and leaders who understand and embrace this new reality will get to maximize results from the new possibilities.
Why is this important? What has changed? And how can we approach this new reality across these segments? Read below for more on each.
What has not changed
The good news is that the core themes of company strategy have stayed the same. Every for-profit company aims to improve on many or all of the following major themes. (Taken from The Data Strategy Guide - Download Your Copy here: https://www.corpsulting.com/data-strategy-series/ )
Any company wanting to survive, grow, and thrive in the new economy is rightly focused on the above seven items as part of its strategy. We often see this pattern when we work with clients.
Most SC processes and initiatives focus heavily on two of the following items from the above list:
#1. Capital & Revenue
The goal is to ensure that the capital investments are directed at growth efforts and can generate adequate revenue generation and expansion potential, either by selling more of the same in existing markets or various items to the same or expanding customer base across existing and new markets.
As a result, teams and leaders focus on warehouses, shipping routes, and store location strategy.
#3. Efficiency & Effectiveness
With affordable tech and digital capabilities around automation, IoT, and real-time data/analytics possibilities, it is now easy to realize immense benefits across distribution, intelligent routing, sensor monitoring, vendor-managed inventory, and alternate sourcing options.
What Must Change and Why?
I want to highlight three other increasingly important segments when making decisions around supply chain improvements, optimization, or complete strategic innovation.
These may not appear directly connected with the supply chain functions, but they provide tremendous opportunities to realize added benefits.
To win with an integrated supply chain approach, companies must get good at:
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Let us explore these in detail, referring to the themes covered earlier.
#2. Risk & Compliance Management
The impact of global and country-specific regulations, customer privacy mandates, product use safety expectations, geopolitical instability and its role in determining supplier and shipping risks, anti-money laundering, fair trade/fair-pricing laws, and many more bring heightened focus to how decisions around supply chains must include a more extensive set of data points, decision parameters, and their consequences on business continuity.
Emerging Aspects of Supplier Risk Management
For this article, let us focus on one area within Risk and Compliance Management—the rise of comprehensive supplier risk management. I will cover this with two examples.
1. Extended Risk Management: During COVID-19, SC disruption arising from critical suppliers reducing output or exiting the business was an increasing risk for many large companies. The companies assessed supplier risk beyond purchase order fulfillment, on-time delivery, and product quality to effectively manage this. They shifted towards understanding and monitoring their overall exposure and business continuity dependency on suppliers.
One global manufacturer wanted to understand which supplier would need help staying in business over the next several quarters. To enable a return to normalcy, they studied management mix, COVID intensity across geographies, and the effectiveness of the political regime in those areas. The supplier's financial strength, raw material reserves, and production capacities were considered to project internal production and OEM parts fulfillment time ranges. The company then invested directly in a small set of suppliers they considered critical to their operations.
2. Enhanced Visibility into SC Milestones: As new business models evolve, it's critical to establish suitable expectations around data sharing, advanced visibility into supplier's processes, and set up alternate sourcing and shipping options. It is not enough to overcome the data and digital silos within the buying company, but across the supplier network, to have near-real-time visibility and intervention capabilities to set right when things go wrong.
One large automotive component manufacturer stepped in to complete an acquisition deal when one of their large suppliers went bankrupt and asked another healthy supplier to buy the distressed company to ensure business continuity.
Additionally, some companies are tier-1 suppliers to large global manufacturers and have more tier-2 suppliers than the number of manufacturing plants they operate. These tier-1 suppliers own product design to fulfillment globally and sometimes even have Vendor-Managed Inventory (VMI) arrangements with their customers. It is crucial to fully understand the tier-2 supplier's capacity, raw material situation, production output, quality, in-transit, delivery details, and more in such situations.
#4. Customer Experience
The modern-day customer is highly informed, uniquely knowledgeable, demands excellence, and prioritizes speed, quality, and superior service while even willing to pay more for a product or service they like from a brand they love. Most customer touchpoints with a company happen at the end of the supply chain. Whether it is delivery, a return, a warranty part replacement, a service call, or a question to the support team, companies need to become aware of the experience their customers are getting.
What are they not happy about? What complaints are they repeatedly surfing? Where could we proactively automate or make it straightforward? This would save our customers time, effort, and unnecessary anxiety. What can we do better so customers will refer us without asking?
What you can do and your company's critical focus areas will depend on whether you serve the B2B or B2C segments. In both cases, many things can go wrong with customer experience related to the supply chain. Are we providing our leaders and teams with the necessary visibility to make policies and decisions and offering an ability to build mistake-proofing into the business processes? Are we driving product development by including items that can be anticipated based on the customer's use or experience?
#6. Talent Management
Complex problems require outstanding teams to solve them. Cross-functional opportunities that connect business functions, processes, technology capabilities and platforms, data, analytics, and visionary leadership require companies to rethink their organizational and talent design approach.
Engaging adequate leader-doers who can work well with the CXOs, architects, analysts, developers, and business users is essential. Breaking from rigid hierarchies to somewhat flatter, self-organizing micro-teams is needed to ensure that nimbleness and the right experience are brought together to promote a fail-fast, prove-fast culture.
It is critical to ensure that the teams we put in place have an excellent mix of talented people who can think across the business opportunities, challenges, hidden possibilities, technological capabilities, and current state of legacy applications and platforms and build realistic roadmaps that incrementally deliver value.
In Closing
The world is getting flatter. Our customers do not care if a product is made in China, India, or Indonesia because when they get the intended use at a price they are willing to pay and with an experience they cherish, they want to return.
It is especially important to get this right since technological advances and the global economy, with its supplier and talent market, have made it easy for new companies to emerge and disrupt established, decades-old, or even centuries-old companies.
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