Reinventing Your Supply Chain Design For Business Disruptions

"Supply Chain Disruption" is a common topic among business leaders and consumers today. Many believe it to be the leading root cause for today's economic problems triggered by the pandemic. The pandemic has caused companies to realize that their ability to produce results lies in how they design and manage their supply chain. Creating an optimal supply chain design provides numerous advantages. However, it is essential to note that these advantages are temporary in a market where competitive forces change at lightning speed. How companies can perform dynamic design activities in a competitive and changing environment is an integral part of their business model. An agile digital supply chain network enables companies to maximize profit, drive growth, and orchestrate change.

Pre-pandemic, most companies leveraged outsourcing, just-in-time production, and globalization, leading to cost-effective supply chains that provided reduced inventory and lowered costs for the manufacturers, which in turn was passed on to consumers. However, just-in-time production and globalization failed miserably during the pandemic. Enterprises had to change their supply chain design and sourcing strategy rapidly. Many companies moved their sourcing providers locally, reducing their dependence on overseas sourcing. For example, Stanley Black & Decker, the world's largest tool and storage company, is planning a significant portion of its manufacturing operations in Mexico and asking 20 of its suppliers to set up factories in the U.S. and Mexico (Lynch, 2021). Companies have also changed their distribution centers to reduce their supply chain clock speed. Nike moved from a centralized national distribution center to a multi-node network that supported new regional service centers across the country. This included a service centre in Los Angeles to serve U.S. West, Pennsylvania for U.S. East, and Texas for U.S. South (Rowsell, 2022). Companies are adapting to this disruption and blending elements of traditional just-in-time operations with more cautious and expensive just-in-case approaches in the supply chain.

As a digital transformation evangelist, I believe this post-pandemic era provides vast opportunities for companies to transform their business model and adapt their businesses to offer agile, cost-effective, and efficient solutions to their end consumers. According to Gartner, digital transformation is the No. 1 supply chain initiative funding area (Titze & Klappich, 2022). Digital Transformation, if done correctly, would reduce the impact of disruptions and help companies adapt, be resilient, and respond rapidly. Building an?Autonomous Digital Enterprise?involves a structured approach, where shortcuts should not be made.

The following critical areas are where companies can make supply chain improvements:

1.??Increased collaboration.?Digital transformation for businesses involves creating new products, processes, and services. To provide these new offerings effectively, companies must share information and assets?in previously off-limits ways - such as competitors sharing warehouse space. This will require companies to change how they forge and manage relationships with other entities in the supply chain to facilitate new types of alliances and agreements. Personnel responsible for developing supply chain relationships,?such as account managers or supply managers, adopt a boundary-spanning mindset to facilitate collaboration, experimentation, and trust across organizational boundaries. The Metaverse provides an excellent opportunity for suppliers, retailers, etc., to collaborate effectively.?

2.??Enhanced end-to-end supply chain visibility.?Increasing visibility across the end-to-end supply chain needs investment in digital technologies and advanced analytics to understand when something changes, such as disruptions or increased demand, and the ripple effects across the entire supply chain. Implementing tracking technology to track goods at each point within their supply chain journey to detect contention points and enable steps to mitigate them is critical. Integrating the data, analytics and intelligence into the fabric of the supply chain business application is necessary. A bimodal approach of integrating analytics as part of the existing critical supply chain applications and complemented by AI/ML & Analytics would benefit organizations. A good example is enabling preventative maintenance in automotive settings by leveraging IoT-embedded devices with continuous monitoring for anomalies.

3. Digital Supply Chain Twin (DSCT).?DSCT is the appropriate digital representation of the physical supply chain through a real-time and time-phased representation of data objects. This linkage of both worlds enhances end-to-end supply chain decision-making and visibility by making them faster and of higher quality. With DSCT, it is easier for planners to run AI / ML predictive models to generate insights into supply chain network risks before the risk materializes.

4.??Enable automation of the workforce.??The use of autonomous robots to supplement the human workforce (triggered by growing labour shortages and rising labour costs) has increased. They help increase workers' productivity, reduce errors, access dangerous locations, and perform high-risk tasks. Autonomous robots have become more sophisticated due to lower setup times, less supervision, and consistent quality and productivity levels. They can work around the clock, working side by side with their human counterparts. For example, the AI and advanced vision systems in the warehouse picking robots enable them to recognize and pick up inconsistent warehouse items or increase the use of autonomous vehicles to deliver goods to end consumers can further reduce the overall supply chain cost.

5. Enhanced consumer experience.?The shift online in recent years due to urban millennials' preference for convenience has pushed several retailers to provide an enhanced omnichannel customer experience. Gaining urban online consumer confidence in the retailer's ability to serve them effectively has become a primary goal of the retailers. Walmart has seamlessly integrated its retail stores and eCommerce systems to improve its customers' omnichannel (mobile, desktop, store or combination) shopping experience. Walmart currently provides various fulfilment options, such as shipment from its stores directly, shipment from its replenishment centers, and curbside pickup. The increased level of automation during online ordering, the shipping process or curbside pickup by digital transformation initiatives that reduce the lead time for shipping has further enhanced its customer experience.

6. Future of Supply Chain in the Metaverse.? The supply chain network is at the point where the physical and the virtual worlds meet—and that's where the Metaverse lives. Metaverse will further enhance the supply chain design future. The Metaverse brings what companies have and what customers want by providing better visibility into processes, facilities, capabilities, inventory and capacity, thereby removing supply chain constraints. For example, a metaverse "collaboration room" for a retailer and its suppliers where they can share sales forecasts, production plans, etc. (Scaff, 2022). Nike has invested in building up its digital presence in the Metaverse. Nike acquired two-year-old digital fashion startup Rtfkt in 2021. Nike's president and CEO, John Donahoe, sees this acquisition as a critical step that accelerates Nike's digital transformation, allowing Nike to serve athletes and creators at the intersection of sport, creativity, gaming, and culture. It has opened Nikeland in the Metaverse platform Roblox providing people options to try on high-profiled Nike products and play games. Nike also intends to make and sell virtual branded sneakers and apparel (McDowell, 2021).?Mercedes Benz is taking a digital-first approach in vehicle production using NVIDIAOmniverse to reduce waste, decrease energy consumption and enhance quality. Mercedes is using digital twins and simulating new production processes in the Omniverse, which can work alongside existing vehicle production. This virtual workflow allows Mercedes to react to supply chain disruption and reconfigure the assembly line as needed (Shapiro, 2023).

Continuous rethinking of a company's supply chain design in a competitive environment is integral to the business. Companies must improve their supply chain digital capabilities in stages to develop and scale their digital businesses rapidly. An organization will not go very far if it doesn't have the right qualifications to execute its acceleration strategy. Before leaders launch their initiatives, they should take three steps to determine whether their organization has all the capabilities it needs (Iyengar et al., 2021):?

1.????Evaluate the maturity of the company's supply chain digital business?

2.????Determine what digital business acceleration looks like for the enterprise.

3.????Identify the new capabilities the organization will need.

Digital business involves six business and technology dimensions, which create a certain level of digital maturity across the organization (see Figure 1). Different kinds of initiatives, such as optimizing the current business model and transforming the business model, require different levels of maturity for these dimensions. Leverage the below dimensions as the basis for a five-level maturity model ranging from digital embryonic to digital leader to gauge the organization's digital business programs' status. Also, determine at what speed the digital business initiatives could be accelerated for the enterprise, identify the new capabilities needed, create the roadmap for digital transformation for supply chain initiatives, and implement them in an agile, iterative manner.?Refer to my Digital Maturity Model evaluation?linked article for more details.

Figure 1 - Digital Business Dimensions / Capabilities

Note.?Visual representation of Digital Business Dimensions / Capabilities. (Dawson, 2021)

In conclusion, increased investment in digital transformation initiatives to improve automation within the supply chain design is critical for an organization to compete effectively in this disruptive era. Companies need to have a solid Enterprise Architecture and Business Architecture foundation and leverage an agile method for an implementation to be successful. A comprehensive digital transformation strategy involving the above six business and technology dimensions and capabilities provides a plan to achieve data goals such as improving business decisions by providing actionable insights, increasing customer satisfaction, reducing supply chain risks, and optimizing processes, even in significant uncertainty. It is essential to start there if you already don't have one.

References:

Dawson, S. (2021, June 9).?Digital Maturity Model - where does your organization stand??LinkedIn. Retrieved December 20, 2022, from https://www.dhirubhai.net/pulse/digital-maturity-model-where-does-your-organization-stand-dawson/?

Iyengar et. al. (2021). Use Gartner’s Digital Business Maturity Model to Plan Your Digital Business Acceleration. Gartner. February. (ID: G00736137)

Johnson, F. P., & Mark, K. (2019, July 8).?Walmart: Supply Chain Management. Ivey Publishing - Ivey Business School. Retrieved November 25, 2022, from https://iveypubs.my.site.com/store/s/product/walmart-supply-chain-management/01t5c00000CwqoOAAR

Lynch, D. J. (2021, November 16).?As supply lines strain, some corporations rewrite production playbook. The Washington Post. Retrieved August 30, 2022, from https://www.washingtonpost.com/business/2021/11/15/supply-chains-companies-strategy/

McDowell, M. (2021, December 14).?With RTFKT acquisition, Nike invests in the metaverse. Vogue Business. Retrieved July 21, 2022, from?https://www.voguebusiness.com/technology/with-rtfkt-acquisition-nike-invests-in-the-metaverse

Rowsell, J. (2022, January 21).?How Nike transformed supply chains to survive covid. Supply Management. Retrieved September 9, 2022, from https://www.cips.org/supply-management/news/2022/january/how-nike-transformed-supply-chains-to-survive-covid/

Scaff, R. (2022, June 27).?The metaverse will transform future supply chains: Accenture. WordPressBlog. Retrieved September 11, 2022, from https://www.accenture.com/us-en/blogs/business-functions-blog/metaverse-supply-chain-networks

Shapiro, D. (2023, January 3).?Mercedes-Benz to build factories with Omniverse. NVIDIA Blog. Retrieved January 5, 2023, from https://blogs.nvidia.com/blog/2023/01/03/mercedes-benz-next-gen-factories-omniverse/?

Titze, C. & Klappich, D. (2022). The 2022 Strategic Supply Chain Technology Themes. Gartner. March. (ID G00759007)

Disclaimer:

The Opinions expressed in this post are my own and not necessarily those of my employer.