How to minimise (the next) supply chain disruption

Once the sole preserve and concern of professionals dedicated to serving this essential economic conduit, the health of wealth of the global supply chain is now a topic of wider business interest. As we strive to operate in a new era of pandemic productivity, Director of Digitalisation Strategy at TIBCO Alessandro Chimera looks to the future of digitally intelligent supply chain networks.

In the past, discussion surrounding the topic of supply chains was restricted to logistics and transport engineers, procurement directors and, logically enough, dedicated supply chain professionals.

With a vast number of working component parts extending from factory production lines to trucks, ships and aircraft, the physical products traversing the world’s supply chains performed to a choreographed pattern known only to the trained staff working in this economic conduit. 

With non-tangible service-based elements of the global supply chain being managed in a similar way, the supply chain cognoscenti could look forward to their annual industry awards dinners without too much external interference. But times have changed… and now we all want a piece of the supply chain awareness paradigm.

Post- and pre-pandemic realities

We’ve all seen and read about the disruptions that many of the world’s supply chains have undergone throughout the last two years of the pandemic. But this period is not as unique as many might think; we have learned some of these lessons before and we can now take the sum total of our experiences forward to build a better and more integrated digital supply chain network.

Obviously, the recent pandemic can’t be classified as a typical risk event i.e. the scale of its impact hasn’t been seen in any supply chain before, but similar disruptions have happened in history:

  • Boeing’s 787 Dreamliner was delayed in 2007 because of a shortage of ‘fasteners’, which were actually just the basic nuts and bolts that hold a plane together.
  • Predating the Ever Given incident in 2021, an oil tanker ran aground in the Suez Canal in 2004 – this was a container ship filled with the Sony’s PlayStation 2 console, bound for the European market. It was stuck for two weeks, just before Christmas.
  • In 2012 an explosion in a resin production factory caused a shortage which impacted the production of automobile seats, brakes and fuel tanks. It took chemical company Evonik six months to restart manufacturing, causing major delays for automaker Ford.

The 75% disruption factor

It has been estimated that today, as many as 75% of companies have been impacted by supply chain disruptions. We must also remember that some industries have a snowball effect upon others; when the semiconductor industry experiences a shortfall in production, most other industries are affected by the change in supply.

But as cataclysmic as these incidents can be, business leaders need to be aware that when disruptions do happen, it is possible to minimise their impact. There are of course many challenges; very often we don’t have timely access to accurate data in order to understand (let alone anticipate) potential disruptions. 

Where a business is able to process early warning signals, it can proactively control and manage the scale of impact that any given disruption has on its business. 

Strategy #1 – Optimise the supply chain 

By tactically optimising the supply chain that a business operates in, it can elevate itself to a new ‘never the last to know’ status. This involves empowering its IT stack with a modern, event-driven infrastructure to deliver superior forecasting and agile decision-making. The business then benefits from real-time insights that enable it to manage disruptive events, forecast demand, improve customer satisfaction and ultimately increase sales. 

Strategy #2 – Build an agile & adaptable business model

The business lesson here is rather like a palm tree in a storm. If you’re able to bend, you’re less likely to break. It’s a little-known fact; when the wind blows hard against palm trees, it actually strengthens their roots. They come out of a storm even stronger than they go into one.

The same principle applies to an organisation’s supply chain. It has to be flexible enough to absorb shocks both major or minor, including natural disasters, unpredictable demand fluctuations and even unforeseen pandemics. 

An adaptive and resilient supply chain can also unlock opportunities to build entirely new lines of business. One such example is Panera Bread, a chain of bakery-cafes with more than 2,300 locations across the United States. In response to the COVID-19 pandemic, Panera was able to adapt to accommodate the growing needs of its communities and changing consumer tastes. Many grocers were experiencing mass shortages of foods and ingredients, and even if there was stock available, many people were hesitant to visit a large store due to the risk of contracting the illness. Thus, Panera Grocery was born. Going from idea to implementation in less than two weeks, Panera Grocery gave customers a safe and convenient way to buy basic goods and have them delivered—and it ensured its ability to leverage its existing supply chain while withstanding the pandemic and economic pressures.

Strategy #3 – Be sustainable, diverse and compliant 

A sustainable supply chain is not only about reducing carbon emissions, but also about engaging with suppliers on key aspects like environment, labour, diversity and risk. It is also all about measuring, tracking and working towards 100% compliance. Analysing suppliers down to the Nth tier minimises the risk of being disrupted since early signals can be used to select an alternative supplier. Unfortunately, most executives don’t have clear visibility into their supply chain beyond tier 1, let alone N. 

Drilling down to the Nth tier enables a company to ingest, analyse and apply AI on all its datasets and so contribute to deeper insights and better decision making. Deeper still, organisations need to look not just at the patterns, players and protagonists in their immediate supply chain, they also need to examine their supplier’s suppliers. If a direct supply is compliant and ethically sound, that’s fine — but are that organisation’s own suppliers engaged in any form of child labour, human trafficking or other modern-day infraction or wrongdoing?

Build a supply chain network

The sum result of these actions can enable a business to build a supply chain network. This is a virtual construct with a corresponding set of physical entities that increases collaboration between supply chain processes where trading partners are participating. 

Data can be exchanged through APIs over modern cloud-based architectures and processed in real-time. Interconnecting multiple internal data sources with external service providers, like news feeds, weather data, logistic information, market data, sales data, production data, a more accurate supply chain can be created. 

The analysis of those datasets with trained AI models can detect early signs of disruption and can suggest how to minimise their impact. Cloud-based technologies are also more agile in pivoting faster to new business models and redefining the supply chain network. 

The time is now… this is the moment to strengthen our roots and bend like the palm trees.

Author of the above analysis: Director of Digitalisation Strategy at TIBCO Alessandro Chimera.

 

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