Design a resilient and responsive supply chain for the future – Part two

“Never waste a good crisis.” – Winston Churchill

In the first part of this two-part blog series, I addressed the key emerging trends from global scenarios to design a resilient and responsive supply chain and the new capabilities required by business to manage it. 

Key emerging trends and business capabilities

In the second blog post of the series, I outline the potential solutions to capitalize on these trends and address the constraints to building a resilient and responsive supply chain.

Global value chain and locate production closer to markets

There is no one-size-fits-all approach, but there are few solutions that are expected to emerge once the COVID-19 pandemic ends:

• To create a balance between the principle of efficiency of the global value chain and the resilience needed to diversify the supply chain - which can be achieved by adding supply locations to secure manufacturing networks and distribution activities.
• This should be considered a cost of doing business rather than as an inefficiency.
• Specific industries, such as personal protective equipment, medical devices, and pharmaceutical will align production regionally to meet national government requirements.
• For certain commodities, such as electrical machinery and equipment, organic chemicals, and markets for specific raw materials, there will be a need to find alternative suppliers or other options as per business strategy to avoid shortage of raw materials and components. 

Accelerate digital transformation

In the current situation, the transformation of the digital supply chain should be focused more on omnichannel and home delivery services.

When it comes to deploying digital transformation plans in the factory, companies should take a pragmatic approach that starts with simple automation projects and leads to complex projects. 

There are many opportunities for simple automation projects in physical, financial, and information flow.

• For the physical flow of goods, the industry is getting ready to adopt drones and automated guided vehicles to achieve end-to-end physical delivery. However, infrastructure and regulatory changes may need more time to fully unleash the potential of physical automation. 
• The information flow of connecting systems in real time, between suppliers, manufacturers, and end customers is shared through a platform connecting ecosystem partners.
• For financial flow, the industry is adopting new technologies, such as inter-banking communication in support of letters of credit.

IoT devices and applications can help limit the spread of the coronavirus through the use of remote monitoring, access to a physical asset, and touchless information processing alongside supply chain information.

Other intelligent technology solutions, such as augmented reality, enable employees to collaborate in the operation, maintenance, and repair of products for industrial settings, enabling a “digital thread” that allows a connected, integrated data flow of the asset’s data throughout its lifecycle.

Integrated supply chain management and end-to-end information integration

Companies can use the command center for all information updates to create alignment across different business units and develop risk and response management for contingency planning.

End-to-end supply chain impact analysis can be achieved by analyzing sourcing restraints, dynamic demand planning, modifying warehousing operations to assess the need for additional capacity for high-demand products, or modifying replenishment strategies, among others.

Manage supply chain risk – transparency and supply chain visibility

Companies will need an online-based, real-time sharing and tracking system to make contingency plans and, using real-time adjustments, respond to emergencies (such as COVID-19) quickly for supply chain visibility. 

With many organizations still using Excel spreadsheets to manage supplier risk, a large part of supply chain risk management requires data from multiple internal and external sources. Companies can create a 360-degree view of the supply chain risk dashboard using analytics with a scorecard from real-time, internal and external data analysis.

Companies should also determine the cost associated with each mitigation activity, including the time needed to mitigate risk and see the impact of risk at a regional or global level, so business units can take appropriate action when faced with potentially risky scenarios.

SAP can support the management of supply chain risk by providing transparency and visibility to multi-tiers. For example, the SAP Ariba Supply Risk module can be integrated with third parties such as Semantic Visions Gloria to get a real-time news feed on location-specific supply chain disruptions via APIs.

There are third-party tools that can provide a detailed heat map of risks at multiple tier levels through drill down to raw material levels.

There is also a need to review and protect the organization’s financial stability and the entire ecosystem (vendors/suppliers, customers, contract manufacturers, distributors) to manage supply chain risk. 

Agility across the entire ecosystem

Supply chain agility and collaboration can be enhanced by improving cooperation with supply chain partners.

The second- or third-tier supply chain partner’s willingness to cooperate during the crisis and their commitment to support the supply chain relationship may be more valuable than a tier-one supplier that fails to do so. Therefore, executives need to rethink their selection criteria and mutual development strategies for supply chain partners.

The Business to business network solution from SAP Ariba from trading partners and open and secure Logistic business network solutions from SAP can also support agility across the entire ecosystem of supply chain processes in strategic sourcing and freight logistics collaboration, goods tracking, and material traceability. 

There are some proposed solutions to make agility across the entire ecosystem for resilient and responsive global and regional supply chains: 

• Supply side – By reallocating the supply mix between existing suppliers across geographies and diversifying supply base by adding new suppliers
• Manufacturing side – By expanding regional manufacturing capabilities to increase flexibility, increase backup capacity, and qualify backup contract manufacturers to handle disruptions
• Demand-side – By adding new distribution partners, identifying third-party warehouses closer to end markets, modifying transportation mix and optimizing inventory of finished goods.

Sustainability solutions will be covered in detail in a separate blog post on long-term structural change through a business-led “green recovery” to revive economies and prepare for the next inevitable pandemic – climate change.

Please connect with me to find out more about resilient supply chains and procurement transformation and how Capgemini can help you design a resilient and responsive supply chain for the future.

You might also browse my POV for detailed insights on how the procurement function can bring your Renewable Enterprise vision to life and drive your business transformation via Capgemini’s Renewable Enterprise offer to become the renewable enterprise of the future – today.