As the COVID-19 pandemic begins to recede in some countries and global businesses take steps toward recovery, what will reemerging supply chains look like? Will they become more geographically dispersed in an effort to mitigate risk? Will they become less so to accommodate a reshoring of manufacturing? Or will they revert to familiar patterns where one region or another, dominant in the market for certain raw materials, can effectively bring worldwide production to a halt when a contagion sets in or a natural disaster strikes?
Business leaders appear evenly divided on the question, with some predicting more localized supply chains in the wake of the coronavirus, and others envisioning a return to unfettered global commerce.
But which view is accurate? It turns out that both are. For certain industries, such as pharmaceuticals, medical devices and personal protective equipment, supply chains are likely to realign regionally. For others, whose products receive less urgent attention from national governments, global commercial networks may undergo little to no change. But across industries, businesses stand to succeed in their recovery efforts depending on the visibility they maintain over their operations and those of their buyers and suppliers.
Modern enterprises rely on hundreds or even thousands of trading partners to ensure day-to-day continuity. No individual, no matter how knowledgeable or adept with spreadsheets, can possibly monitor all the sprawling interdependencies that facilitate global business-to-business commerce. Only a cloud-based network can lend sufficient scope to the task.
If it sounds like brain science, it’s not — but the metaphor bears consideration. As businesses confront the complexities of repairing fractured supply chains in a post-COVID environment, a helpful analogy may be neuroplasticity, the brain’s capacity to rewire itself in response to injury or accident. In every convalescing patient, the vast neural networks reorganize themselves differently, sometimes with dramatic variation. Upon healing, the brain redirects its signals along new and often unexpected pathways.
In operations management, meanwhile, we tend to think of efficiency in terms of Occam’s razor or the shortest distance between two points. Yet recent experience reveals the risk inherent in lean manufacturing and just-in-time inventories. So businesses must rebalance efficiency with reliability in their supply chains. In procurement and enterprise resource planning, not unlike the human brain, the optimal network may not necessarily be the shortest one. In fact, even in a perfectly healthy central nervous system, signals can traverse a surprisingly circuitous route.
Consider what happens when we snap our fingers. The decision to do so originates in the cortex, the brain’s outermost layer. The signal then travels down a long nerve called the upper motor neuron until, midway down the spinal cord, it sets off another long nerve known as the lower motor neuron. This neuron, in turn, transmits a signal from the spine through the arm to the fingers. But what if, while listening to music, we tap our toes in rhythm with our snapping fingers? Coordinated movement involves yet another region of the brain called the cerebellum. Thus the interconnected systems multiply. Isolated action is rare in the human body, just as in supply chains. Coordination in both typically involves patterns far too intricate, and networks far too complex, for any individual to perceive adequately, unaided by sophisticated cloud-based technologies.
As global business leaders instill resiliency into supply chains and prepare for recovery, they can expect business-to-business commerce to take shape differently than before. But whether trading relationships become clustered regionally or remain far-flung across the globe, success will belong to those businesses that embrace the digital tools available to ensure transparency, anticipate disruption and extend competitive advantage throughout the value chain. One might say it’s a no-brainer.
Chad Crook is senior vice president and global head of customer engagement and adoption, Customer First, at SAP Procurement Solutions.
Timely, incisive articles delivered directly to your inbox.