5 minute read 11 Jun 2020
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COVID-19: Why real-time visibility is a game changer for supply chains

By Glenn Steinberg

EY Global and EY Americas Supply Chain Leader

Helping companies transform, create value and optimize business performance. Thirsty for knowledge. Ski enthusiast. Husband and father of two Michigan Wolverines.

5 minute read 11 Jun 2020

Most enterprises lack end-to-end visibility in the supply chain to effectively reduce costs and risks.

In a recent EY webcast, COVID-19: why real-time visibility is a game changer for supply chains, we discussed how leading organizations are starting to pivot and shift from response to recovery. However, this is easier said than done when enterprises continue to lack true end-to-end supply chain visibility. In fact, in a recent EY survey, supply chain executives said end-to-end visibility is the number one factor in creating a successful supply chain. Yet, only 6% of respondents are very confident in their systems and capabilities for end-to-end supply chain visibility. There’s a significant gap between the importance of supply chain visibility and the actual capabilities of most enterprises.

Several points from the webcast are worth highlighting:

1. The imperative of end-to-end visibility

“Hitting a moving target, especially when you cannot see it, is incredibly difficult,” said Jerry Gootee, EY Global and EY Americas Advanced Manufacturing Leader. Visibility allows enterprises to identify disruptions up and down the supply chain, and synchronize supply and demand both at the point of sale and at the required time of delivery.

During the pandemic, Gootee said, companies have been focused on safety and working closely with suppliers and production managers across their manufacturing footprints. Those with end-to-end visibility can perform what-if analyses and simulations to optimize production and use of materials. Gootee mentioned that with improved visibility, EY consultants are seeing some supply chains deliver 20% to 25% cost savings and reductions in inventory while improving overall service levels.

Visibility also helps leading companies reduce risks and costs throughout the supply chain. These companies can conduct scenario planning on how disruption will affect their suppliers – all the way through “tier N” suppliers (suppliers’ suppliers) – and proactively determine alternative sources and cost-effective approaches. EY webcast polling data (figure 1) suggests that reduced risks and costs are the number one reason (48%) for improving supply chain visibility. “This is one of the biggest issues we’re facing,” Gootee added. “Clearly, risk assessment and monitoring of suppliers, including tier N suppliers, is one of the key benefits of visibility. It’s critical to de-risking your supply chain.”

Supply chain visibility graphic

2. Benefits of advanced technologies

End-to-end visibility means having data available across the supply chain in real time to enable better decisions on risk management and performance improvement. Control tower is the next iteration or generation of analytics for visibility. Control tower uses artificial intelligence (AI) and machine learning (ML) to identify potential disruptions and optimize supply chain resources. Most control towers have a self-correcting workflow that detects issues, assesses alternative actions and makes recommendations on managing the event.

Another beneficial technology is digital twin, which is a virtual model of either core products, components or the entire physical supply chain. It is generated by using transactional and machine data from connected devices across the supply chain and bringing the data together using simulation technologies.

However, with new emerging technology such as control tower and digital twin, it can be easy to get caught up in “shiny toy” syndrome – focusing on adopting the latest technology without a clear business case. “The most important thing to remember is to start with the problem statement,” cautioned Anne Johnston Weaver, EY Global Supply Chain Intelligence Platform Leader. “Ask yourself: What problems are you trying to solve, and how does solving this problem help achieve your business goals?”

3. The proof is in the use cases

The automotive industry provides a good example of businesses that have a critical need for tier N supplier visibility. In one engagement, EY consultants worked with a leading automotive company to identify at-risk suppliers and direct targeted interventions to them, ranging from financial restructuring to shop floor improvement. “[The supplier risk project] helped protect the entire supply chain,” said Matthew Burton, EY EMEIA Supply Chain Leader and EY Global Supply Chain Solutions Lead, “because you can’t fully make a car if you’re missing a component.”

A particularly relevant need for enterprises today involves the ability to monitor and respond to external events. For organizations with few concentrated supply points – such as mobile phone companies or pharmaceutical producers – global event monitoring can be important. For retailers or logistics companies focused on time-sensitive delivery, local monitoring of traffic, delays and road closures might be more critical.  At one leading global retailer, said Burton, our consultants developed a control tower capability integrating transport management, order management, warehouse management and store delivery constraints, which helped save approximately 10% in total logistics costs.

4. Effective sales and operations planning (S&OP) leads to integrated business planning

In the webcast, representatives from Procter & Gamble (P&G) shared how their enterprise is continually transforming its supply chains and improving visibility. One of the presenters, Andrew Byer, Associate Director, P&G Global Supply Network Operations, discussed how end-to-end visibility has become increasingly important across the supply chain as customer and consumer expectations rise.

P&G charts its supply chain journey through a series of “S curves,” starting with building a foundation for transformational growth. “The backbone of our transformations in end-to-end visibility is the work we started early on to simply create standards around work, roles, skills, qualification systems and health checks to provide governance,” Byer said. “We also implemented an operating strategy system to fully integrate the needs of the business with the capabilities of the supply chain. These capabilities are not glamorous, but they became the foundation we have continually built upon.”

Once a foundation with supply chain standards and business integration was in place, P&G advanced to its next S curve: standing up a small number of scaled planning centers (i.e., control towers) to replace planning work that was previously performed in 300 separate locations. “Originally, these [efforts] were targeted to help deliver benefits in productivity and consistent standards of work,” Byer said. “Frankly, as we matured, the results included significantly increased responsiveness, improved service and reduced inventory and scrap. Additionally, these planning locations created hothouses for digital innovation.”

Bob Herzog, Associate Director, Global Planning Digital Solutions Leader and Supply Network Operations for P&G, added that the planning centers yielded another key benefit: self-funding innovation. “The savings from a particular project or program might be small. But the resources the projects freed could, in turn, work on solving much larger needs. In that way, [the improved planning capabilities] became a virtuous cycle for us.

Advanced supply chain visibility capabilities can also help enterprises respond to disruption. For example, during COVID-19, P&G has placed priority on maximizing the availability of its products that help people and their families with their health, hygiene and cleaning needs. The company’s “citizen developer” culture has proved invaluable in helping with supply chain response. Working remotely, digitally skilled planners were able to quickly provide insights on demand, supply and other variables in the supply chain in real time. For example, the company has been reframing dashboards to reflect new industry-wide supply chain constraints such as transport availability in the US or border crossings in the EU. This helps the company overcome these constraints, so it can serve its customers and consumers. 

Going forward, end-to-end supply chain visibility will be a critical differentiator for leading companies. It already was a top-of-mind concern for many enterprises; however, the COVID-19 crisis has magnified the need. Addressing supply chain visibility may seem daunting, but organizations that understand the need, clearly define their business problems and apply the most applicable advanced technologies will be positioned to thrive both today and beyond.

Disclaimer: The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.

Summary

An EY webcast recap discusses the importance of visibility across the supply chain – especially in order to navigate disruption. Going forward, supply chain visibility will be a critical differentiator for leading companies.

About this article

By Glenn Steinberg

EY Global and EY Americas Supply Chain Leader

Helping companies transform, create value and optimize business performance. Thirsty for knowledge. Ski enthusiast. Husband and father of two Michigan Wolverines.