Supply Chain

Can a radical way of thinking be the solution for broken supply chain management?

In the past few years, traditional supply chain management paradigms have been put to the test like never before. We have seen unprecedented disruptions like the pandemic, geopolitical issues, climatic calamities, and recession-related uncertainties. These disruptions have exposed the vulnerabilities of conventional supply chain systems. It became abundantly clear to supply chain professionals that they would have to find innovative solutions to fix the broken supply chain. That’s how the linear supply chains started giving way to multi-dimensional networks that helped enterprises gain agility.

Enterprises began rethinking aspects, such as operational locations, material sourcing, supplier networks, and operating models, to balance the risk and cost. They realised the issues causing broken chains spread across the entire supply chain ecosystem. What they thought to be linear chains was a vast network of suppliers, partners and many other stakeholders. It's just that they did not have visibility into this extended network, and unpredictability, a constant factor these days, only complicated the issue.

There was a need for a radical departure from the accepted norms and practices to make the system more resilient, agile, sustainable, and collaborative. The question was how?

Before we delve into the possible strategies, let’s quickly glance at some interesting insights that bring home some moot points.

The changing supply chain landscape

Ernst & Young LLP (EY US) surveyed senior supply chain executives across sectors twice – once in late 2020 and again in September 2022. One of the surprising insights was about technology investments in the supply chain. 92% of respondents said they did not halt technology investments during disruptions. Rather, many enterprises finally invested in technology to improve their supply chain efficiency, which was the topmost priority. These insights highlight the trust enterprises have in digital supply chain management solutions to counter disruptive forces. Improving supply chain visibility and reskilling the supply chain workforce were the other top priorities.

Interestingly, 80% of respondents said they were now more focused on sustainability goals. A significant survey prediction was that 45% of supply chains will mostly be autonomous by 2035, clearly signalling the role of technology in the supply chain reset. 

Let’s look at the key points and how they pan out.

There is a need to build resilience through increased visibility, backed by digitisation and AI-backed analytics. A statistic by Zippia says only 6% of companies possess complete insights into their supply chain processes. Yet another research indicates that Excel spreadsheets are a popular management tool with 67.4% of managers in the supply chain ecosystem opting for the tool. The tool, though useful, does have its limitations, especially in large-scale operations.

Enterprises have to reimagine the entire supply chain architecture to optimise the ecosystem rather than fix the individual broken chains. They must adopt a holistic approach to managing supply chains to protect against perpetual disruptions. For example, mergers and acquisitions are a top cause of global supply chain disruptions, as are weather, factory fires and IT outages. Enterprises must, therefore, attempt to solve challenges relating to cost, workforce, technology, etc., at every stage. Hence, there is a need to optimise the supply chain ecosystem with a radical approach that can aid savings for all stakeholders.

The radical approach – A few strategies 

One of the most significant changes seen is the shift from offshoring manufacturing to a single low-wage country to localised manufacturing. 79% of European companies are now considering establishing manufacturing operations in Europe. Also called nearshoring, this changed tactic is what most enterprises now prefer as it brings their operations closer to their customers. Reshoring or moving manufacturing back to their domestic markets is another related trend. This was indicated by 43% of respondents, in the EY 2022 European Attractiveness Survey, who said that they are considering this option.

Many enterprises have created supply chain management hubs in fiscally attractive jurisdictions. These enterprises reimagined their traditional hub strategies to co-locate supply chain teams with other functions such as sales, marketing and product management. These centralised hub teams working with digital tools were able to improve visibility to drive value across the ecosystem – from sourcing and procurement to manufacturing logistics, including reverse logistics. To build on this, enterprises are now exploring the possibilities of a geographically distributed workforce for these centralised hubs backed by technology. There are also thoughts on multi-hub structures to reduce operational risks of a single-point failure or disruption.

Enterprises have begun to look at collaborative relationships with stakeholders across the supply chain ecosystem rather than focusing only on their challenges. While earlier, cost was one of the key considerations driving these relationships, today, it is about deriving value at every step of the supply chain. Hence, supply chains are becoming less linear and more complex – a network of onshore and offshore partners linked by a common goal of sustainability from design to logistics. Some enterprises even have apps that allow their customers to view the carbon footprint analytics of their purchases. The collective intent of these strategic partnerships is to achieve supply chain resilience while optimising costs so that everyone in the chain gains equally.

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