Companies are looking to streamline and improve supply chains, but are also under pressure to manage supply chain disruptions and meet the corporate social responsibility requirements associated with their supply chains. All of this has only been bolstered by COVID-19, but companies can build the resilience of their supply chains by digitizing their infrastructure with IoT.
The disruption is here to stay
Technology is rapidly changing all elements of the industry and enabling the agile adaptation of challenge after challenge supply chains, from tsunamis to trade wars and now to a global pandemic. Today, disruption is the new normal and it affects supply chains more frequently. The scale and frequency of these disruptions have intensified, in part due to the globalization of supply chains and new risks presented by geopolitical and climate change issues.
The disruption is here to stay, but those who profit from the disruption and changing demand are more likely to be successful. While manufacturers have suffered from the disruption in the supply chain, online retailers such as Amazon have benefited. Going online has forced many businesses to hastily adapt their business processes to ensure their survival.
Prioritize investments in the supply chain
Supply chains have proven, especially with COVID-19, that if they are resilient and flexible, they can be critical, if not vital, to recovery. More than ever, supply chains are on the board agenda because of their impact on global business and CSR. Traditional supply chain modeling and optimization are changing and old assumptions, such as prioritizing cost reduction, are becoming less and less important.
Companies are actively seeking to mitigate risk. In the past, suppliers were left out and supply chain improvements were not a priority because they were not seen as essential for profit and growth. Today, the focus is on investing to mitigate risk and increase resilience for rapid recovery and restoration of profits. COVID-19 has been the catalyst for more businesses to understand the scale and importance of investing in a supply chain. Costs can increase, as can the chances of businesses surviving.
Resilient supply chains don’t just recover from destruction, when done right, with the right level of investment, a plan and robust systems in place, supply chains become a source of benefit competitive and open up new interesting markets or value segments.
Agile, digital, connected, responsive and able to recover quickly
When companies proactively invest in supply chain resilience, they are typically successful in reducing exposure to risk. However, investments in building resilience must be well planned, with resilient supply chains having five common characteristics, agility, digitization and connectivity, insight and the ability to recover quickly.
An agile supply chain network has a flexible ecosystem of suppliers and partners where materials can be traded, and a double or triple sourcing strategy is adopted. There is evidence of a shift towards this strategy as companies relocate manufacturing from China. Companies that shift capacity create manufacturing sites that are smaller, more agile, more agile, and more able to adapt to challenges and change.
The connectivity and digital transformation of Industry 4.0 is creating agile operations that are more able to respond to and recover from disruptions. Warehouses and production lines can be fully automated, while autonomous vehicles can be used for short distance deliveries; these and other technologies, especially those based on digitization and IoT, provide supply chain flexibility.
This agility can aid in efforts to manage market volatility, especially in sectors that track assets. These companies are moving towards more outsourcing or pooling, which frees up capex and reduces the risk of demand volatility.
Adopting cloud-based supply chain applications, with plug-and-play interfaces for connectivity, is critical to building a resilient supply chain. Regardless of the manufacturer, if applications and devices are interoperable, they can be widely used to generate deeper data. Everything from raw materials to the finished product, and the vehicles that transport them, can be digitally tracked and traced, providing complete supply chain visibility of the movement of products and assets, to identify and respond to disruptions faster.
Connectivity, or full visibility, is achieved in fully digitized supply chains, even leveraging a “control tower” model, where companies have control centers to manage their supply chains. The setup resembles an airport control tower with flashing screens with continuous updates on raw and finished materials, orders, and production levels at manufacturing sites. Whether you own this control tower or have a third party manage it for you, this model offers full local visibility, even of global supply chains, which speeds up reaction times if something goes wrong. This visibility is essential to ensure that businesses react quickly to avoid being adversely affected. But with digitization there is also a cyber risk, so security must be firmly considered in a resilient supply chain strategy. The data from full digitization has deep tactical and strategic value, so defining a clear assessment model is essential.
The use of data analytics is essential for resilience as it provides insight into the supply chain and enables teams to build forecasting, scenario planning and early warning systems. As the pandemic evolves, the use of continuous scenario simulation ensures that supply chains are clear on next steps in a number of different situations.
Finally, by empowering teams to solve problems wherever they are, we build corporate cultures that decentralize decision-making. Field teams decide how to handle a situation while feeding data back into a central control, helping a business understand and quickly manage crises.
Ian Terblanche is Strategic Sales & Channel Director at Sigfox