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:

• On-time deliveries of the right product with continuous shipment tracking and communication,
• Synchronized fulfillment and returns,
• Alerts along the supply chain for adverse events, and
• Timely out-of-stock or delay notification to supply-chain partners.

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:

• Product planning, demand forecasting and inventory planning. This is critical because of the need to supply demand by region or location. Efficiency and effectiveness will have tremendous repercussions on the supply chain, because they minimize wasteful production and overprocessing, transportation, waiting, defects, inventory and money — in other words, the seven mudas. Think about the magnitude of the reduction across the entire supply chain if this element alone were optimized. It’s worth mentioning that problems arising from the front end are magnified 10 times at the next stage. Thus, prevention is always better than the cure.
• Rationalizing product offers and catalogs. This is an exercise often missed or not rigorously done. An examination of demand planning and actual sales will indicate which products to rationalize. Retiring products and introducing market-driven new ones will require flexibility to realign the supply chain. Integrating multi-country websites of product inventory, and providing the correct inventory and associated information, is one key requirement. This is truly integrative of various functions, including product development, I.T., distribution and supplier information networks.
• Provisioning the right inventory to next forwarding destination. This obviously requires the right product to ship as well as supporting local capabilities, including labor, operational and technical skills.
• Delivering to the last mile, whether for an individual consumer or organization. This requires synchronizing transportation and labor. While we take this for granted today and expect every package to reach our doorstep, there are many things that can and do go wrong, diminishing the customer experience.

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:

• Flexible demand planning, with visibility across the supply chain. Effective optimization of the entire supply chain is completely dependent on accurate demand and visibility across the network. Any supplier at any level of the supply chain will be well positioned to meet the need if it’s able to see the demand and fluctuations for a planning time horizon. To minimize the downstream bullwhip effect, market-based product demand planning should be accurate and visible.
• Inventory visibility. Each entity of the supply chain should have inventory visibility at its own level and in collaboration with customers and suppliers, and balance inventory with the network, such that the overall demand is met and fluctuation minimized.
• Labor scheduling and load balancing. What to make, and when to make, ship and deliver, are all intertwined with labor capacity and capability. Onsite and fleet management production scheduling software needs to be integrated to balance loads and assign labor when needed. For example, if the truck driver or a truck isn’t available for a delivery, it doesn’t matter if the product dock date was met.
• Returns management. While effective returns management is a customer satisfier, it has significant implications on upstream activities such as materials processing, recovery, re-processing and storage. Returns management systems, therefore, need to be integrated with the network. This is quite difficult to achieve due to resource and capability constraints; however, a common shared goal within a network might help.
• Management and reward of the entire supply-chain performance. This will go a long way toward creation of a true “value chain.” It requires management commitment to set up the network and align with common goal sharing.
• Customer-focused fulfillment metrics. In aligning with the above points, metrics and key performance indicators should be focused on customer fulfillment at each stage, rolling-up to the final customer. Individual node metrics should be developed from overall supply-chain metrics. This will drive supply-chain optimization.

Shubho Chatterjee is a digital transformation, strategy, technology and operations executive.