Inside Supply Management Magazine
November / December 2020
Building Supply Chain Resiliency: 6 Signs You Should Throw Out A Profitable Business Model
How to go from risk-blind to risk-resilient by knowing what can tear your supply chain apart
Supply chains are finicky beasts that need constant attention and refinements to keep them humming even when the economy is good. When recessions hit, markets shift and economies dip, supply chains become cataclysmic monsters ready to pull you and your company into a downward spiral.
With the world rich in data, and advanced analytics (such as predictive and prescriptive modeling) now widely available to any organization, it’s easy to see what’s working, what needs to change, and what you can do about it.
All you must do is start looking for the indicators that might predict future challenges.
1) Your Supply Chain Depends on People for Split-Second Decisions
No matter how strong your supply chain is, if you’re not automating as many processes as possible, you’re leaving yourself open to avoidable risk. You’re also not alone.
According to McKinsey & Company, the slowest adoption of automation has occurred in logistics, with a rate of between 3 and 5 percent. Yet, those that automated their warehouses saw a savings of 15 percent without reducing their services.
Despite already being a large, national retailer with good performance, one of our customers automated parcel deliveries, achieving a 99.4-percent on-time parcel delivery rate, with savings of 11 percent.
Even if your current business model is profitable, the time to automate what you can is now.
2) Your Supply Chain Lacks Transparency
Automating as much of your supply chain as possible will inevitably make it more transparent. But, without transparency, you’re hurting your supply chain.
Delayed reports, insights based on outdated and hidden data, missing information — all of it can lead to double-checking a decision or, worse, making a decision that leaves revenue for your competition.
Everyone should work from a single source of truth, whether they’re a small team in a local warehouse or an international team spread across the globe.
Governments, health-care facilities, and other organizations could save billions of dollars — or hundreds of billions of dollars — by increasing transparency and reducing prices and errors in their supply processes.
3) Your Supply Chain Fails Simulated Stress Tests
Sometimes, the thing you least expect could be the event that leaves you struggling to keep up or missing out on profit. For example, a competitor closing shop.
McKinsey & Company reports that the number of supply-chain-disrupting events have increased in recent years and how disruption of even one supplier could have devastating effects. During the early stages of the coronavirus (COVID-19) pandemic, when China enacted quarantines, many of the world’s top companies lost access to commodities sourced from Asia.
And, with advanced analytics and automation in your supply chain, you can predict and prescribe solutions for just about any scenario: bottlenecks, slowdowns, rapid growth, policy changes, taxes, regulations, natural disasters and more.
4) Your Supply Chain Isn’t Configured for Remote Work
In 2020, thousands of companies saw themselves immediately shifting to a remote work environment to help slow the spread of COVID-19. But remote work can include people working in an office, too.
Supply chains, by nature, involve a lot of on-site work. People that perform such work as stocking shelves, delivering products and driving trucks are hard to replace. Tracking all this information, however, should be easier — no matter where someone is located.
Managing remote business operations facilities from a centralized location; accessing data from suppliers, partners, and warehouses; sharing insights; and aligning internal departments and third-party partners to make decisions becomes challenging the more a company is spread out.
At some point, your supply chain will need to be prepared for remote workers, both in and out of the office. If your supply chain isn’t set up with a data-analytics platform that can provide advanced analytics while maintaining governance, now is the time.
5) Your Supply Chain Can’t Innovate or Scale Because It Avoids Risk
Healthy supply chains can innovate, scale and take on risk. This year, supply chains and manufacturers shifted focuses — producing masks and ventilators, investing more in vaccine research, and finding new ways to sell products during a shift.
Next year could require different innovations and scaling. Maybe new food regulations force food-processing plants to find and use new ingredients and additives. Perhaps budget cuts force a company to reprogram hundreds of machines to increase efficiency. Or maybe customer demand for your product maxes out your production capacity, or a supplier’s.
Innovation and scaling require transparency, automation, and the convergence of every piece of data, every process and every person — across a mix of internal and remote locations.
6) Your Supply Chain is Profitable Despite High Turnover Rates
If you have a profitable supply chain despite low employee retention and high turnover rates, something’s broken, and you’re not capitalizing on potential.
Employee turnover is a trillion-dollar problem. For a company with 100 employees and an average salary of US$50,000, it can be a million-dollar problem.
What’s more, it’s an easy problem to fix. About half of employees say their employers could have done something to make them stay — and it usually isn’t more money. It’s asking them how they feel about their job and their future.
At the end of the day, your supply chain’s most valuable assets are the employees that use data, automation and other tools to make the smart decisions that drive it forward. If they’re stuck in an endless loop of repetitive work, then you’re stuck in an endless loop of stagnant answers and insights.
Save your employees, and your life gets easier, too.
Also, your supply chain becomes resilient, and the profits you make are more aligned for the long haul. Build supply chain resilience with analytics.