5 minute read 24 Mar 2022
How supply chain orchestration builds agility and resilience

How supply chain orchestration builds agility and resilience

By Dheera Anand

Principal, Business Consulting, Supply Chain & Operations, Ernst & Young LLP

Passionate about solving complex supply chain issues. Significant experience advising global clients and helping transform complex global supply chains while driving sustainable value.

5 minute read 24 Mar 2022
Related topics Consulting Supply chain

Enabling technology such as control towers can help businesses achieve differentiating capabilities. These three steps can pave the way.

Three questions to ask

  • Can you monitor supply and demand signals in real time and then react for maximum agility?
  • What advanced technologies are you using to orchestrate your end-to-end supply chain?
  • Do you have an up-to-date playbook to manage supply chain disruption? 

The supply chain of the last two years has been a case study in “whatever can happen, will happen.” The COVID-19 pandemic, pent-up consumer demand, global trade disputes, port congestion and extreme weather have underscored the vulnerabilities that many businesses confront across their far-reaching supply chains. As disruptive events increase in both frequency and severity — a trend we expect to continue — companies face an imperative to get a clear view of what’s most likely to happen next and what they should do to prepare. But how can enterprises not only anticipate the next disruption but also maximize their opportunities in light of disruption?

End-to-end supply chain orchestration is an approach that offers businesses a clear view of what is in their supply chain and where — through early warning systems, monitoring of shipments, real-time events tracking, real-time data sharing with business partners, and advanced analytics. A properly orchestrated supply chain enables the combination of agility and resilience that so many enterprises found they lacked as the pandemic emerged. The key characteristics needed to achieve this are the ability to sense/predict disruptions; simulate the impacts on inbound raw materials as well as outbound shipments and the supplier network; and generate dynamic resolutions using scenario planning, supply-demand tracking and inventory management.

 

Figure 1: Advanced technology is a key enabler of the orchestrated supply chain. The image shows how control towers operate at the center of a range of technologies.

Advanced technology is a key enabler of the orchestrated supply chain. Control towers, for instance, operate at the center of a range of technologies. They connect with internet of things (IoT) sensors, sensing capabilities such as web analytics services and social media mining, and with a company’s enterprise resource planning (ERP), transportation and warehouse management systems (see Figure 1). They consolidate myriad data points from across the organization’s supply chain and the broader ecosystem to provide near-real-time visibility beyond the organization and into suppliers, third-party logistics providers, manufacturing plants and customers. But before implementing technology, companies first must examine where they stand in key areas of readiness. Here are three steps to consider.

1) Establish a framework for assessing your supply chain visibility needs and capabilities.

Companies with leading-edge supply chains can sense oncoming disruptions, visualize and analyze the effects, run simulations that allow them to see a full range of options, take action based on the best available alternative and expand further by seizing the advantage to meet their highest priority needs and fill service gaps that their competitors cannot.

 
Figure 2: The image shows a framework for assessing your supply chain visibility needs and capabilities.

Many organizations can visualize and analyze their supply chains (see Figure 2) but lack the differentiating capabilities that allow them to respond with agility. The ability to sense likely disruptions ahead of time is a vital trait that allows them to prepare rather than constantly be in reactive mode. The effects of a severe weather event can be mitigated by moving inventory to less affected areas or expediting order shipments before disaster strikes. 

After disruptions hit, businesses need a codified response — a playbook for what to do and whom to contact, with processes that are automated and repeatable. With a control tower processing data from sources across the supplier ecosystem, companies can be positioned to not only quickly act and resolve issues, but to optimize their response and create a virtuous cycle. 

2) Gain a clear understanding of your baseline resilience.

Control towers can run scenarios that help companies develop backup plans for when their supply chains are jolted. But a business can only realize such benefits if it has a foundational level of resilience built into the enterprise. Before scenarios can be helpful, a business must be able to identify alternative suppliers, materials, products and logistics routes. At that point, the technology comes into play — crunching the data on what’s happening or soon could happen at all current and alternate suppliers and providing options for how to proceed. 

Scenarios also provide details on the ramifications of each option. Perhaps an alternative supplier is available but is located farther away and will cost more. That added cost still may be far more desirable than having to shut down a plant if a threatening event indeed transpires. Thus, the company diversifies its risk and has buffers — which, for too many businesses, have been sorely lacking during the ebbs and flows of the pandemic. 

Companies still must prioritize how they buffer the business, lest costs rise to unmanageable levels. This heightens the importance of taking customer segmentation and product segmentation into account. More than ever, companies must be focused on serving their most valuable customers and keeping their most profitable products in circulation. Sustainability considerations, such as the overall carbon footprint of the organization’s supply chain, are a significant and growing concern that also must be factored into the scenarios and options weighed by the business. 

3) Review your operating model.

Attempts to achieve end-to-end supply chain orchestration can be foiled if organizations don’t first consider the implications of their operating model. For example, where are your warehouses today, and where should they be to sense and respond when extreme events occur? Are your people in a position to respond if, for some reason, they can’t come into the office? What alternate routes to market are available in case first and second options are unavailable? Are there elements of the supply chain that you are considering bringing closer to home to improve your agility?

In addition, companies must have a clear understanding of the target skills, behaviors and mindset they need to successfully orchestrate their system. Pitfalls lurk, depending on how leadership handles delicate decisions on who should have access to the view provided by a control tower and who can make changes in the supply chain based on that visibility. If access is too restricted, it can lead to resentment in the ranks; if it’s too open, the business risks spreading responsibility for decisions with huge ramifications for the enterprise across too broad a population. These risks underscore the premium that has to be placed on talent; businesses have to have the right skill sets in place — highly trained people adept at analyzing incoming information and presenting it in a way that helps leaders make the right decisions. 

The bottom line on supply chain orchestration 

End-to-end supply chain orchestration is a crucial component to help businesses recapture revenue losses from the numerous external events that wreak havoc on the efficient delivery of goods. While it can help companies weather the next generational cataclysm, it also helps them optimize their response to ever-more-frequent disruptions that come in the form of power outages, storms, wildfires, port congestion, rail disruptions, container shortages and other logistics delays. Companies that lay the groundwork for a well-orchestrated supply chain position themselves to face the future with confidence that their heightened agility and resilience will sustain them through even the most uncertain times.

Summary

With constant geopolitical events, natural disasters and recovery from the global pandemic, supply chain visibility is critical. However, many supply chain leaders do not have visibility of their raw materials, work-in-progress and finished goods beyond their four walls. Supply chain orchestration offers an enterprise a complete end-to-end view of products in their supply chain at any point in time. Now supply chain leaders can use real-time events tracking and data sharing with all suppliers to orchestrate optimum business outcomes, even in the face of increasing disruption.

About this article

By Dheera Anand

Principal, Business Consulting, Supply Chain & Operations, Ernst & Young LLP

Passionate about solving complex supply chain issues. Significant experience advising global clients and helping transform complex global supply chains while driving sustainable value.

Related topics Consulting Supply chain