5 important supply chain lessons
Supply chains worldwide were put under the most critical stress test in history in March 2020. Business leaders reacted quickly by mobilizing responses, building resilience and focusing on core values at the same time. Now that a year has passed and the shockwaves have settled, it’s time to think about what we’ve learned, and how to apply these lessons to power growth in the supply chain of the future.
Based on Accenture’s experience working in supply chain management for three decades and in our work with clients all over the globe, here are five important lessons to keep in mind as we emerge from the crisis.
1. Visibility is vital (in more ways than we thought)
It is impossible for supply chain leaders to understand issues if they do not have end-to-end visibility of every node in their supply chain. We have long talked about using analytics to play out “what-if” scenarios, but what about having deep and vast enough data to not just model, but truly know “what will be”—and determine how to respond to it. The pandemic taught us that we cannot always plan for the unexpected, but we can use the data we have to be more prepared for an everchanging future.
When we can plan for the near future, corrective actions can be taken. For example, traditional monitoring of inventory and service levels may suggest that no action needs to be taken; however, empirical shipment tracking trendline data may indicate that lead times are likely to increase and countermeasures are required.
The past year also taught us that true visibility extends beyond inventory—knowing what products you have and where they are located. Leaders need visibility into all operating assets. This includes products (finished as well as input materials), but also transportation assets and, importantly, employees. Now that many workforces have been distributed, it is essential to know how many workers are working at a plant, distribution center, in an office or from home. Are people physically and emotionally healthy and if not, are we giving them the tools they need to succeed?
Visibility of everything from the supply source to the workforce can be directly applied to enable better decisions.
2. Configurability is required to adapt to disruption at speed
It’s one thing to be able to see into “what will be” or try to predict future needs, but it’s another thing to be able to rapidly reconfigure the supply chain to meet those needs. Some businesses demonstrated how it’s done during the pandemic. For instance, Rolls-Royce, as part of the Ventilator Challenge UK Consortium, helped coordinate production of medical ventilators urgently needed by the UK’s health service.1 This consortium of companies came together to rapidly reconfigure their supply chains to manufacture new ventilators to help meet the unprecedented demand.
3. Supply chain agility is fuel for growth
Some can anticipate, some can comprehend changes and some can reconfigure on the fly. Supply chain agility happens when you get all three right. Massachusetts Institute of Technology (MIT) professor David Simchi-Levi has long studied the use of analytics to enable better forecasting and supply chain agility. In his work, he has discovered that many companies have upwards of nine different forecasts, constantly assessing each to best predict demand, then compromising on which one to follow. Instead, they could be using robust analytics to uncover the underlying drivers and shape the forecast to prioritize scientifically proven demand drivers while minimizing fringe factors.2 By doing this on an ongoing basis, the business can continuously reprioritize factors and translate demand signals across the supply chain.
For instance, when there is a particular market need, the business can use analytics insights to flex distribution to align with demand state by state and even county by county. Equally as important is having the right operational capabilities all the way back to the supply base so that the business can rapidly adjust capacity, flexing up and down when demand is spiking vs. cratering.
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4. Connectedness reveals the big picture
Many companies have 30+ different technologies to manage their supply chain on multiple platforms—oftentimes without a common data platform. Data is manually manipulated. The pandemic proved that a break in the chain can compromise the entire chain. Data must be shared and always accessible, connected across systems, to provide end-to-end visibility, not only single-node visibility. For example, if a company lost a supply source, they must be able to determine what will be impacted. How will they have to change production plans? Where can they quickly access inventory to get it to where demand is highest? Which customer orders will be late?
We have talked about the digital supply chain for years, but now more than ever it is apparent that a lack of connectedness hinders agility, efficiency, productivity and growth. One of the world’s leading innovators in materials science and makers of glass, ceramics and other products, replaced legacy tools with a digital supply chain to increase visibility and manage risk. Their platform allows insight into 52 external risk factors, a material and order visibility system providing real-time updates, and business intelligence tools to enable data aggregation, reporting and incident management. The company even captures a continuous feed of product information as panes of glass, for instance, move on their journey. Insights about road vibrations from load sensors help supply chain leaders make decisions about inventory and even understand the exact moment a pane accidentally breaks.3
5. Responsibility and ethics are everything
This has been a difficult year for nearly every type of business and the world as a whole. Companies are more cognizant of making the right choices about sustainability, ethics and social responsibility. Consumers and stakeholders alike are holding businesses accountable for the safety and well-being of people, the safety of customers and the safety of operations. For instance, Cargill sought advice about COVID-19 safety best practices from medical practitioners and augmented health and wellness benefits for employees, even creating a disaster relief fund to support employees who need financial support as they navigate the impacts of the virus.4 Companies like Apple quickly enforced protections for supply chain workers, such as social distancing, limited density and health screenings.5
Companies such as General Mills are making the planet a priority, combatting climate change and focusing on water stewardship and sustainable sourcing. To enable this capability, some businesses are using technologies such as blockchain to provide visibility of raw source materials.6
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Learn. Adapt. Grow.
Supply chains were—and continue to be—a vital lifeline during the pandemic. We have witnessed amazing feats. It is clear that businesses can rise to any challenge and come out stronger for it. Let’s pause to reflect on and applaud these efforts, but let’s also remember the lessons learned because they can help pave the path to the next wave of growth.
See more Supply Chain & Operations posts.
3 2021 Virtual Summit Series with Harvard Faculty and Accenture