Lingering challenges, lasting lessons
Recent disruptions have underscored the weaknesses in supply chain operations. Exposed vulnerabilities have had a profound impact, including decreased efficiencies and personnel burnout.
These detrimental effects aren’t due to a lack of effort or leadership, but they linger primarily due to the fact that disruptions haven’t let up. Strains to the supply chain are nothing new. Yet, occurring as they have in tandem and with such intensity has tested supply chain resiliency like never before.
While trying to right the supply chain ship, many leaders find that the workarounds that got their businesses through the worst of times are still being employed. Organizations need to shift from “making do” to “making things better” and effecting sustainable improvement.
But where and how?
Lessons learned: From pain comes progress
The silver lining of recent supply chain challenges shines through in what these issues have illuminated: areas that most need enduring improvements.
By leveraging lessons learned, leaders can inform future strategies. First, however, leaders need to ask the right questions. How did that weakness develop? What led to that lack of resilience? Which factors contributed to vulnerability? What could we have done to mitigate the impact?
This kind of introspective approach can uncover insights that remedy enduring ills, as well as help develop stronger, more agile organizations that are better positioned to move through future maladies.
Shifting the spotlight from performance to risk
Alongside the importance of learning from the past, it’s vital that supply chain leaders learn from the future, insofar as risk indicators can forecast what’s to come.
An increasing number of leading organizations are focusing on understanding key risk indicators (KRIs). Key performance indicators (KPIs) retain their importance in terms of understanding operational efficacy, but KRIs offer something more: insights into how to adequately mitigate risk.
In a word, KRIs increase resilience.
Greater resilience through risk readiness
For the EY client, a leader in the food and beverage industry, focusing on building resilience through risk assessment spanned 75 different KRIs across core business processes.
In one example, a KRI identified 5% of purchase orders that were raised late, after the receipt of goods. Identifying the disparity help enable the client to address it and drive process changes to remedy the revenue loss.
Procurement and supply chain as differentiators
Difficulties come with dollar signs. The challenges that supply chain and procurement leaders have faced certainly accentuate a focus on cost reduction, an ever-present need.
It’s under this constraint that an important characteristic emerges: supply chains’ unique ability to deliver on key business objectives, including cost reduction.
Working with a global consumer products company brought this ability to light in a very tangible way. Its legacy systems and two-decade-old manufacturing equipment were subject to breakdown, leading to downtime.
The client was able to address the bottleneck that this caused by working together with EY teams. Through a collaborative assessment of the client’s then-current state, the EY team applied artificial intelligence, machine learning and data analytics to the client’s operations.
Rising reliability, declining downtime
The resulting centralized, remote view of performance eclipsed reliance on engineers inspecting equipment while providing notifications for pre-emptive maintenance.
This improved operational reliance markedly, reducing unplanned downtime by 60%. Additionally, mean time between failures improved by an average of 126%, and overall equipment effectiveness increased by 25% on average – going beyond the client’s operational objectives.
More than just operations
While maintaining organizational service and product delivery standards, the supply chain is moving beyond the realm of operations.
In step with its impact on cost reduction and other strategies, the supply chain is increasingly connected to the boardroom, leading to increased collaboration and efficiencies enterprise-wide.
It’s a shift in mindset from “business transactors” to “business partners.” As supply chain and procurement functions align with broader business objectives, a culture of innovation and value creation can come into being.
Weakness or opportunity?
Supply chains’ resiliency will always be tested. As long as that’s tested, the question remains, “What can be done?”
Based on recent issues, it seems that the answer is “learn from your experiences."
By taking stock of weak points along the supply chain, along with a better understanding of risk indicators, leaders can understand where improvements can have the greatest impact. As they focus their resources accordingly, they demonstrate not only the value inherent in their functions, but also the importance of supply chain operations to strategic goals.
This positions them as collaborative business partners who can navigate future adversities with confidence and help the broader business emerge even stronger.
