Supply chain leaders: This is how you can better navigate change

The war in Ukraine continues to have a devastating impact on the Ukrainian people. It has also had a profound impact on the global economy that’s affecting us all. It has inflicted a huge shock to the supply of both energy and wheat. It also has impacted certain important commodities. This supply chain disruption is challenging businesses everywhere. But it’s also forcing companies to think differently about how they do things.

The war was, of course, a big topic of conversation at this year’s World Economic Forum (WEF) annual meeting in Davos. As you probably know, the event brings together global leaders to discuss the economic, environmental, social and technological challenges facing the world.

Three executives talked about the war’s economic and business impact at one event this year. They included Ester Baiget, President of Novozymes; Florence Verzelen, Executive Vice President, Industry, Marketing and Sustainability at Dassault Systèmes; and my Accenture colleague, Jean-Marc Ollagnier, CEO - Europe.

Their insights are enlightening. For instance, they all reiterated cost efficiency can’t be the sole focus of supply chain networks anymore. Sustainability—especially, energy efficiency—has become critical. So has building a resilient supply chain that can withstand current disruption but also help secure future revenue. They agreed that the war is having a profound impact on companies. It’s causing them to think about a different world order that’s emerging from this new economic cycle.

The panelists pointed out that, regarding supply chain sustainability, the war has created the impetus for companies to move faster. They shouldn’t be content to simply replace Russian oil and gas with the same from a different source. Companies should be taking advantage of the technologies and solutions that exist today to accelerate their transition to renewables. That said, practically speaking, companies can’t go from fossil fuels to everything green and sustainable overnight. There will have to be a transition period. Fossil fuels and renewables will need to coexist with and complement each other for a while. But the end goal should still be ending dependence on fossil fuels in favor of clean, locally produced, renewable energy. And making that happen faster will likely require a different regulatory framework that incentivizes the ecosystem to change.

One company that’s taking supply chain sustainability very seriously is a global pharmaceutical company that produces insulin and distributes 500 million injectable medicine devices worldwide. The company launched its first pilot program where people return used insulin devices. The pilot program addresses the challenge of product waste and builds circularity into the company’s value chain. The company is now rolling out the industry’s first global take-back program, aiming to divert waste from landfills and pioneering the recycling of medical devices at scale. It diverts tons of waste away from landfills while also reducing end-of-life carbon emissions from devices.

When it comes to supply chain resilience, Jean-Marc noted, the war has shown that companies truly need to build a different supply chain. They need to create a supply chain network that navigates disruptions while still being competitive. That doesn’t mean building bigger inventories or creating redundant operations. It means using technology to provide visibility across the supply chain network. The network benefit of this visibility can help them identify disruptions and vulnerabilities, and find the right alternatives to survive and thrive. Digital twins and control towers, for example, can help here. They can help companies find practical options from a proliferation of alternatives to how they currently operate. They can give business leaders the visibility they need to make the right decisions to continue serving customers, day in and day out, regardless of what’s happening in the market.

A tier one technology supplier is a good example. The company’s supply chain, impacted by the microchip shortage, was struggling to manufacture enough product to meet demand. Given the magnitude of the problem and its strategic nature, company leaders realized they had to focus on future resilience instead of simply solving the current crisis. Working with Accenture, the company began by looking at critical suppliers and materials, as well as current practices, to identify “low-resilience” areas to prioritize. Accenture helped the company analyze multiple risk factors and develop a heat map of how they affect revenue. Going a step further, the company and Accenture developed a digital twin to provide visibility into interdependencies. They were also able to identify revenue streams and impacted customers. Accenture digitally modeled the end-to-end supply chain and applied stress tests based on joint research with M.I.T. The goal was to expose key vulnerabilities, which Accenture then helped mitigate. 

It's too early to say what the ultimate impact of the war in Ukraine will be on global supply chain networks. But the panelists noted that an acceleration of “something” is highly likely. We saw this in how COVID accelerated companies’ digital supply chain agendas. Is it energy efficiency this time? Is it sustainability? Is it the reinvention of supply chains? We don’t know for sure. But what we do know is that companies are going to need to rely on technology and AI, new operating and talent models and the courage and confidence to transform faster.