The pandemic has indeed accelerated many preexisting trends, and supply chain is no exception: 64% of surveyed supply chain executives say digital transformation will accelerate due to the pandemic. The race is on for digital enablement and automation: 52% of executives say that the autonomous supply chain (e.g., robots in warehouses and stores, driverless forklifts and trucks, delivery drones and fully automated planning) is either here or will be by 2025.
However, simply utilizing digital technologies does not equate to creating a digitized, autonomous supply chain — it also needs connected supply chain technologies across planning, procurement, manufacturing and logistics that work beyond the organization’s four walls. It’s the difference between “doing digital” and “being digital.”
We can think about autonomous operations in terms of “lights-out,” “hands-free” and “self-driving,” where organizations use AI technologies across the end-to-end supply chain to help make predictive and prescriptive decisions. An example is responding to a change in customer demand, seen instantly by the entire value chain (the organizations, its suppliers and their suppliers’ suppliers) so they can collectively adjust supply plans and production schedules immediately. Ultimately digital and autonomous technologies will help make people’s jobs easier and the supply chain more efficient and optimized.
What comes next?
From the research, we see that 60% of executives say the pandemic has increased their supply chain’s strategic importance. Accordingly, enterprises urgently need to design a supply chain organization that will fit the new digital and autonomous-focused era.
The supply chain of the future will need to be agile, flexible, efficient, resilient and digitally networked for improved visibility. Organizations, therefore, should focus on five priorities for recovery and beyond.
1. Reimagine the strategic architecture of your supply chain
- Rapidly redefine your supply chain strategy and alter global trade flows, considering new trade agreements, country incentives and omnichannel acceleration.
- Reimagine your supply chain operating model — what work should get done locally, regionally and globally, including warehouses and manufacturing sites. There are considerable tax implications here, and a new model can also help you prepare for future disruption.
2. Build transparency and resiliency
- Improve disruption response with real-time visibility and monitoring of your end-to-end supply chain, as well as performing scenario planning and simulations.
- Review your supply chain footprint. Do you have alternate sources of supply established? Are you ensuring you do not have vendor or geographic concentration?
3. Extract cash and cost from your supply chain
- Drive a step change in your supply chain cost structure and working capital profile by focusing on SKU rationalization, procurement spend reduction, logistics and warehouse optimization, and manufacturing productivity.
- Reduce working capital via supply chain segmentation, refreshed inventory planning parameters and changes in payment terms.
4. Create a competitive advantage with sustainability
- The future is a circular economy where there is no waste in your products or manufacturing.
- Explore ways to redesign and engineer new products to achieve this circular economy and monitor third-party risk with supplier sustainability assessments across tiers 1-3.
5. Drive agility and opportunities for growth through a digital supply chain
- Work towards implementing the digital and end-to-end supply chain across planning, procurement, manufacturing and logistics. This can drive efficiencies and also open new revenue streams.
- Realize that companies are using supply chains as an engine for growth and a key differentiator versus competitors.
Many executives are hoping that the COVID-19 pandemic is a once-in-a-lifetime event. However, as the adage goes, “hope is not a strategy.” There are ways to stand out and better navigate the storms of the next inevitable disruption. These include reimaging your supply chain strategies for risk and resilience and finding ways to extract cash and invest in digital technologies at speed. It also is important to continually put humans at the center of your efforts and empower them to do extraordinary things. Finally, innovate with customers in mind through a truly sustainable supply chain — one that is designed with circularity and the environment in mind. Following this path, your enterprise will be better prepared to manage whatever crises come next — turning potential disruptions into tremendous opportunities.