COVID-19 has forced a rethinking of the entire supply chain, including immediate suppliers and tiered networks. Digital capabilities are also accelerating the transformation of supply-chain business models. Many retailers, suppliers and OEMs have pivoted to services such as online order with store or curbside pick-up, direct fulfillment to stores, and pre-assembled fulfillment.
It’s clear that fulfillment is emerging as a key value player, especially in retail, and quality fulfillment equates to good business. It also means that supply chain should be viewed as a value driver as opposed to a cost center.
What does the “value” of a supply chain look like? Following are some criteria:
Integration of these value drivers would mean moving toward a fulfillment experience and away from individual cost optimization at various nodes. For example, on-time delivery would mean not optimizing the local transport fleet for least cost, but arranging the supply chain such that all nodes are balanced and optimized for best on-time deliveries at each node and to the final customer. Thus, moving to a value model requires that entire network costs be optimized, and that each party have a profitable supply-chain business model. This also means that performance measurements need to be created with the entire supply chain in mind, not just individual nodes or siloed functions.
To elevate to a value-driven supply chain, businesses need to think of their processes from beginning to end. When re-designing their supply chains, they should consider not only their internal functions, but other organizations and supplier networks and tiers as well. This is essentially integrating processes and re-architecting organizations, a very hard task. Here are some of the key elements to be considered:
Achieving the above requires strategic investments in processes, systems and skills, to realize complete demand visibility across the supply chain. Only then can each downstream (or upstream) node plan for the best possible outcome. Which new capabilities would be needed then? Technology should be deployed to the maximum to achieve them. Here are some pointers:
Shubho Chatterjee is a digital transformation, strategy, technology and operations executive.
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