Moving goods around the globe has always had its challenges. From a ship stuck in a canal to unpredictable international and domestic border closures, recent years have supplied an even greater test to what we thought we knew about supply chains.
According to EY’s think tank, EYQ, the current linear global supply chain model has proven too rigid and is failing to meet current demands, lacking the scalability and flexibility needed for today’s consumers. Add to this the severe impact to operational capacity by increasingly frequent climate events, coupled with a constantly changing trade regulatory landscape and the linear nature of the global supply chain is proving untenable.
Many of the current operating models are heavily dependent on human interaction and cosseted relationships, without the visibility or flexibility to combat new categories of risk such as global warming and cyber crime.
Insights From EYQ
There are a number of factors applying pressure to these obsolete models, from environmental to political, which will require significant upgrades in technology and capabilities to be sustainable in the longer term.
The key factors driving obsolescence in the global supply chain stem from three factors:
- Change in customer demand is accelerating
- Environmental factors are having greater impact
- The global order is fundamentally reshaping.
The insights from EYQ suggest the most sustainable transformation strategy is to become fully digital and autonomous, to develop an ability to automatically identify and respond to challenges brought about by macro events such as natural disasters and geopolitics.
A new digital-first model would feature enhanced future capabilities which enable real-time activities, traceable responses to customers driven by seamless communication between assets and systems. Real-time information sharing through data fusion centres will enable an autonomous supply chain, designed to reduce human involvement.
How We Get There
To transform our organisations and create more data-centric decision making, EY suggests a reinvention of the supply chain framework, with four key recommendations to make our businesses more resilient to increasing consumer demands.
Get Smarter Improve supply chain intelligence and do away with siloed departmental data. Start by investing in the right mix of infrastructure and trained talent to enable end-to-end, real-time visibility. This allows the identification of company-specific, industry-specific and geographic-specific pain points.
With a better understanding of these pain points, businesses can then turn their attention to how they harness data and optimise information systems to not only improve visibility and decision making in the short term, but support the AI-driven autonomous decision making of the future.
Build better Optimise supply chain architecture across all elements, from structure to governance and processes. EYQ emphasises an optimised design will increase visibility, allowing for the design of a more effective supply chain operating model. Greater visibility also provides the intelligence to assist in making resourcing and procurement decisions, identifying the most efficient allocation among local, regional and global sourcing and manufacturing capabilities. The pathways to effective design are endless and as unique as the needs of the business. No matter the systems which need monitoring or processes which drive efficiency, even those which need human involvement for contextual awareness and interpretation, there are likely still elements which will lend themselves to smart automatisation. With a better designed architecture of the supply chain, businesses can then consider what additional human expertise is required across IT, System Design Lifecycle planning and analytical capacities to achieve even greater outcomes.
Go Deeper Integrate operational excellence into supply chain planning. The most difficult and time-consuming aspect of the transformation, businesses need to closely examine key elements such as procurement, manufacturing, logistics and fulfillment while adopting a systems mindset to develop all-horizon implementation plans, employing technologies such as smart factory, digital fulfilment and integrated digital planning.The incorporation of hardware components such as sensors and nodes within business processes to more accurately record data will enable Data Telemetry and provide insights which can support and drive future digital transformation.
Look Ahead Increase sustainability and bolster resilience. Once supply chain excellence is achieved, the next evolutionary step is adopting future business models to sustain competitive advantage.
Companies at all stages of the life cycle are being faced with increasing stakeholder pressure to build environmentally sustainable businesses. The same behaviour which is driving the need for updated supply chain models is the same behaviour change we’re seeing in purchasing, customer expectations and the disruptions from COVID-19.
The world may not see another shock like the current pandemic in this lifetime, but it doesn’t mean businesses can’t learn from the experience and bake resilience of all processes into the very fabric of how we operate.
Transforming supply chains is never going to be easy and it takes a coordinated effort by all parts of the business to buy into the vision and balance long-term prosperity against short-term business needs. However, it’s the early movers who will seize the advantage and set themselves up with a robust, resilient and responsive supply chain designed for wherever the world takes us next.