Situational Awareness has never been more important in global supply chains than today. Supply chain costs per unit are skyrocketing due to the pandemic. In the last decades, these systems scaled, got more complex through advanced production methodologies and encompass multiple tiers of suppliers that are all interconnected.
“There is no Toyota of the digital supply chain, providing a template for other organizations to copy. Indeed, supply chains are so specific to each company’s product range, operating footprint, and customer needs that such universal archetypes may never emerge, even after years of experimenting.” - McKinsey, Digital supply-chain transformation with a human face
This complexity drives risks and the ongoing covid19 pandemic has significantly upended supply chains throughout the world.
Unfortunately, there is still a lot to catch up in terms of effectively integrating and using data. Many companies still collect information in silos and analyze it using excel files. Access to real-time data is a long way off.
Already the past has shown that supply chain disruptions are very costly and leadership teams that have suffered a sudden shortfall in raw materials or parts know how costly it can be. The illustration by the management consultancy Bain shows that a global electronics manufacturer suffered a 16% drop in revenue and a 66% decrease in net income in 2016 when a series of earthquakes in Kumamoto, Japan cut off the supply of parts. And for one global automaker dependent on parts produced in Thailand, the floods of 2011 resulted in a 5% drop in global output, equivalent to $5 billion in lost sales. All three examples also show very long recovery times.
The Covid19 crisis will have an even greater impact on the global ecosystem. But how can companies prepare themselves and ultimately improve their supply chain resiliency? Now is the best time to rethink the cost of network risk and invest in more resilient supply chains.
In general, data can help tremendously to improve efficiency, visibility, flexibility, responsiveness, and transparency along the supply chain. But often enough, companies only have the capacity to process certain data and small amounts of information. This leads to a very limited perspective. However, companies can adopt a more strategic approach. A much higher level of supply chain resiliency can be achieved. Additionally, data analysis can be used to better process information and keep an eye on potential problems. To do this, it is important to draw data in real-time from internal or external sources to identify trends.
“If you don’t have full visibility into data, it will provide little insight into which decisions to make. Currently, companies are questioning whether new tools should be acquired in light of shrinking cash flow. Technology is the only way to have visibility into assets across extended supply networks,” - Rob Harrison, managing director for SAP Concur UK
For example, the integration of sensor data and making it available on the cloud allows suppliers to be more responsive to supply variations. It also makes it possible to transmit customers' needs to factories, suppliers, and distribution centers in real-time, thus streamlining the procurement, production, and delivery process.
“To improve contingency planning under rapidly evolving circumstances, real-time visibility will depend not only on tracking the on-time status of freight in transit but also on monitoring broader changes, such as airport congestion and border closings. Maintaining a nimble approach to logistics management will be imperative in rapidly adapting to any situational or environmental changes.” McKinsey, Supply-chain recovery in coronavirus times—plan for now and the future
Bain names some capabilities that leaders should now invest in to create more resilient supply chains:
Rapid adaptation to disruptions requires a flexible ecosystem of partners and suppliers that can react quickly to any disruptions. This includes the establishment of alternative production sites or the optimal use of solutions to optimize costs, improve transparency throughout the network and the option to onboard new partners faster.
A fast and effective exchange of information is key. Cloud-based supply chain applications and collaborative platforms and tools improve the quality and speed of corporate decision-making. To achieve this, however, connecting internal information with data from suppliers and other external partners must be simplified and standardized (for example with integration platforms like Xapix). At the same time, leading companies are using automation and robotics to make their supply chains more autonomous, at the same time they require even more robustness and stability in regards to data connectivity.
Decisions have to be made on the basis of most actual information. In highly complex and rapidly moving networks such as modern supply chains, the situation can change within hours, if not in minutes. Solutions that integrate supply chain data, telematics or other sensor data must, therefore, be real-time compatible.
By improving their ability to rapidly analyze internal data and external sources of big data, leadership teams can better react to supply chain disruptions. Machine learning and AI must be enabled by using prescriptive and descriptive analytics to evaluate large amounts of data and by helping to identify the smallest changes or recurring patterns.
The Covid-19 crisis has significantly disrupted trade and the global supply of goods and services. Leveraging real-time data from sensors or telematics has been proven to be a long-term solution to strengthen supply chains. To speak in numbers, Bain quantifies the benefits of resilient supply chain management as follows:
If you're looking to incorporate real-time data into your supply chain, do not hesitate to contact us to learn about its high-end data integration solutions.
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Digital supply-chain transformation with a human face