As crises tend to do, COVID-19 pulled back the curtain to reveal undeniable truths about the state of our world; specifically, our global supply chains. In one fell swoop, the pandemic pummeled supply networks, reaffirmed their significance, and redefined the foreseeable future of the industry.
Ask any supply chain leader and they’ll tell you that true supply chain optimization is more critical—and more challenging—than ever. A perfect storm of rising customer expectations increased consolidation via M&A activity, and the fallout from the pandemic has given rise to several new trends that will evolve over the course of 2021 and beyond.
A number of current industry predictions hinge on supply chain technology. Disclaimer: We’re not here to tell you which technologies—blockchain, AI, machine learning, or otherwise—will solve all your problems. These tools can help to improve your operations, but they are not the solution, nor are they the means to reaching one. Before you go down the tech rabbit hole, you must reevaluate your supply chain strategy, identifying which aspects of your network should be reimagined, rehabilitated, or abandoned altogether.
To reach a state of relative stability, businesses will need to take a measured approach, which involves everything from performing operational risk assessments to considering alternative sourcing strategies. By taking these steps, you can develop a sound supply chain plan that will help your organization reemerge from COVID-induced chaos with confidence and clarity.
Shift Focus: Take an End-to-End View of Your Supply Chain
Simply put, the best way to get a clear view of your supply chain, warts and all, is to look at how each piece fits together. There’s a lot that goes on between the procurement of raw materials and production of the finished product, but we often only see small snippets of the larger process, slicing and dicing it into segments rather than getting a holistic perspective. Although it might seem logical to focus on one bit at a time, this can lead to siloed thinking and inefficient decision making.
To combat this common problem and get an end-to-end view of your supply chain, prioritize collaboration among business units. Even small changes to your supply network can impact a range of internal stakeholders, external partners, vendors, and customers. Planning an end-to-end strategy also requires you to map out your entire supply chain network, diagnose blind spots, and understand your supply chain’s reliance on external partners.
Treat Them Like Royalty: Remember, the Customer is King
The pandemic ushered in a period of unprecedented omnichannel growth. It taught companies that in order to succeed and be resilient, they need to maximize every available channel: direct-to-consumer, retail, eCommerce, distributors, and more. What does that have to do with the customer? Everything. By relying on several channels instead of just one, you can leverage the power of your network and still serve your customers if disruption strikes.
The customer may not always be right, but they must always come first. That’s why it’s crucial to put a customer service mindset at the forefront of your supply chain strategy. Otherwise, you risk falling behind your competition, because no matter what happens, customer expectations remain high. Crisis or no crisis, brand loyalty will go out the window if you can’t deliver and someone else can.
Forget the P&L: Concentrate on Total Supply Chain Costs (TSCC)
P&Ls might be a CFO’s best friend, but they will only get you so far when trying to understand the full scope of your supply chain costs. That’s because the P&L is a lagging performance indicator, meaning it’s only equipped to recap supply chain performance after the fact—you simply cannot identify negative trends fast enough, which makes it difficult to reverse those trends. When P&L data is your sole source of truth, you’ll inevitably be making decisions based on outdated financial data, leaving you at a loss when it comes to understanding what other factors are causing the business to be more or less successful.
A total cost model, on the other hand, will give you a more holistic, operational view of your data. TSCC is designed to look at both lagging and leading cost indicators that impact the total cost of operating your supply chain. This allows you to make smarter, faster adjustments to your strategy and, in turn, accurately anticipate future costs.
Face Your Fears: Get Comfortable with Conflict Resolution
Supply chain management is, at its core, all about conflict. When you bring together disparate stakeholders, from internal players trying to get their organization’s product to market, to external partners providing raw materials and manufacturing the goods, there’s no shortage of conflicting opinions on how the process should flow. Let’s not forget that many supply chains are global in scale, which requires cooperation among different cultures, languages, and countries, too. Recognizing that these challenges are inherent to the process itself will help supply chain leaders surface conflict and work through it productively.
Make Smarter Decisions: Eliminate Functional Silos
In case you haven’t caught on by now, supply chain management is a team effort, which means functional silos must go. The inefficiencies of misaligned internal business performance due to functional silos and sub-optimized “mini P&Ls” hold companies back from reaching their full potential. These silos have proven to prop up poor decision-making, cause costly inventory and information delays, hurt service levels, and often come with an enormous IT price tag in the form of interfaces and upgrades that rarely lead to customer service and performance gains. In fact, most would argue that all they lead to is disruption and higher costs.
Escaping the silo hamster wheel requires you to move your supply chain decision-making across functional boundaries with very clear customer service objectives that are tied to distinct customer channels and targeted, optimized TSCC. It’s important to match your decision support tools and systems to the business’s overarching priorities, which will generate value at each step in the supply chain along the way.
Manufacturing facilities and production lines are beginning to rebound, but we’re not out of the woods just yet. Building a better, stronger supply chain requires not just a different strategy, but a different mindset. Outdated processes and old ways of thinking won’t get you where you want to go, especially when—not if—future events lead to further disruption. Whether you want to overhaul your strategy or measure the success of your entire supply chain, we’ve got the tools to help you get started.