Rethinking supply chains in a digital world

The coronavirus pandemic has revealed the weaknesses of our globalised manufacturing system and highlighted the need for a fundamental rethink of supply chains. This article discusses how companies are achieving better control of supply chains, and how digitalisation – using IoT and predictive analytics – can help in planning all-case scenarios to mitigate disruptions.

In recent months, many companies have become acutely aware of a lack of resilience in their supply chains and of the need for better collaboration between partners. This has led to a boost in creativity, innovation, and investment. As a result, logistics professionals have identified opportunities for change, both long and short-term.

Some have been forced to make big changes quickly, and have proved that they can do so. With this new and unprecedented agility, supply chain strategies can now be revised daily.

Companies have also understood the need for greater resilience and security through flexibility and multi-level sourcing via local and international suppliers. They’ve seen that just-in-time delivery lacks redundancy and is intolerant of disruptions. The benefits of just-in-case deliveries, i.e. holding buffer stocks, are increasingly apparent.

Organisations with a well-established digital tracking and tracing system – often created as part of their sustainability strategies – have proven relatively resilient in the current crisis, and it is now considered essential to develop detailed contingency plans for all kinds of scenarios.

This has led to more frequent modelling of supply chains and boosted interest in predictive analytics. Tech budgets have started to grow as leaders grasp the value of investing in such supply chain innovation.

The need for supply chain resilience

Unpredictable events can bring supply chains, and consequently businesses, to a standstill. Businesses can protect themselves by developing multiple, geographically diverse sourcing options, backed with buffer stocks to provide redundancy and risk tolerance.

How do intelligent connected solutions facilitate these measures? A digitalised, IoT-based supply chain visibility system can provide both real-time data and the analytics to transform it into actionable insights. It can highlight risks and give warnings, enabling local and global supply chain operations to be refined.

IoT-based supply chain visibility technologies make it possible to balance just-in-case with just-in-time logistics, minimising redundancy and costs.

Data collection and interpretation are also key to supply chain modelling. Businesses using intelligent connected solutions to fully understand and manage their supply chains at the start of the pandemic have fared best.

An IoT-based system helps boost resilience in many ways. It provides the data needed to solve problems and keep deliveries flowing smoothly. It gives the insights needed to control risks and make better informed business decisions.

Global supply chains are more interconnected than ever. As the coronavirus has shown, disruption of a single node can have significant downstream effects on all the others. What can companies do to manage future disruptions more effectively?

Better collaboration will certainly be a key factor. Only by working together can the different parties across extended supply chains compensate effectively for unexpected ups and downs. Only by sharing information, networks, warehouses and transports can they significantly increase their agility – both individually and collectively.

A necessary precondition for successful collaboration is transparency i.e. making sure everyone involved knows what’s happening, who’s doing what, and when deviations have occurred.

Transparency between partners increases trust and strengthens relationships. It also allows them to work effectively together to mitigate risks.

Giving all parties access to the same supply chain information at the same time sounds simple in theory. But in practice it can be highly complex. Consider the company that sources 1,000s of components from 100s of countries. With only traditional methods to hand, global information sharing consumes way too many man hours.

Collaboration tools

What kinds of IT tools enable collaboration? There are certainly plenty to choose from. One example is distributed ledger technology, which facilitates the exchange of assets or data across a network of supply chain participants.

Another is IoT-based tracking systems, which take information sharing to the next level. With modern, IoT-based supply chain tracking, any number of parties can access real-time data simultaneously.

Such solutions have been on the radar of logistics professionals for some time, but until recently, companies were slow to invest. Procurement and finance teams wanted proof of concept before they were willing to grant supply chain managers the financing they needed.

Since the onset of the coronavirus pandemic, this situation has changed dramatically. The supply chain function – previously a behind-the-scenes role – has acquired higher status and is now seen as a prime business driver. Business leaders are more willing to invest in bringing their systems up to date, and that includes adopting technologies to facilitate collaboration.

Besides connecting external parties, IoT-based tracking solutions can also be used to facilitate collaboration within a company. This is an excellent first step for any organisation that’s still concerned about the security aspects of digitalisation.

Often, as they start reaping the rewards of seamless cooperation between functions and locations, their concerns fall away and they become willing to open up for external collaboration too.

Supply chain operations, which have already seen an impressive surge in creativity and innovation, are expected to undergo a major overhaul in the post-COVID world. However, some observers wonder if they will be able to keep up the momentum and avoid slipping into apathy when it’s over.

That is, of course, a valid concern, but as Ralph Waldo Emerson famously said, “The mind, once stretched by a new idea, never returns to its original dimensions.” So far, the evidence suggests that this is as true in logistics as it is elsewhere. And that the successful companies of the future will be those that fully embrace new ways of thinking and concomitant innovations, rather than falling back into old habits.

This article is an abridged version of a longer whitepaper, available for download here.