Before COVID-19 become a household name, the idea that a virus could cause such severe harm to the global economy was the storyline of Hollywood films. The public, including business executives from across the globe, never imagined the level of supply chain disruption that we see today.
Now, as the world tries to pull itself out from under Covid’s dark cloud, assess the damage and move forward, it’s hard not to notice the damage that the pandemic caused to the supply chain. And to compound the crisis, we’re beginning to experience rising inflation.
The broader implications of this state of affairs are becoming increasingly apparent, and possibly worse than expected. Today, supply chain disruptions remain a significant problem. A lack of visibility is at the core of the dilemma. Bottlenecks are occurring in sectors that aren’t equipped for the ebb and flow of production created by the pandemic. Factories are running on skeleton crews as orders and deliveries for nearly every industry slow to a crawl. With an end to supplemental unemployment checks and other government assistance, families are struggling to make ends meet. No one considered just how far-reaching the effects of a diminished supply chain could be. Now we know.
Many companies are still betting on traditional enterprise resource planning (ERP) software, which provides the ability to interact only with trading partners one level up and one level down. That approach is incapable of providing the rapid connectivity, end-to-end visibility and responsiveness required across global supply chains today. Standalone systems with point-to-point connections and high latency offer a limited view of problems, convey vital information far too late, and make rapid remedial action virtually impossible.
Many companies today outsource the manufacturing, moving, packaging, storage and delivery of goods. This increasingly complex trading-partner ecosystem adds to the potential for more disruptions. The ability to access the entire network with a single, real-time version of the truth, where potential and actual disruptions are visible, becomes critical.
Limited in their ability to efficiently solve problems across their supply networks, companies incur more costs, in the form of increased inventory, premium freight charges, expediting fees, lost goods, spoilage, supply-demand mismatch, lost revenue and more. Ultimately, these costs are passed on to the consumer, leading to inflation. The problem only grows worse as older software companies continue to push outdated architecture, in the face of continued globalization of trade.
There is a better way, in the form of network-based supply chain software that gathers all trading partners into a consolidated ecosystem, from end-consumer through tier 2 and 3 suppliers. By matching supply with demand, companies can deliver the right product at the right time, with the highest customer service levels at the least landed cost.
Looking Beyond 2021
In the months ahead, the impact of rising inflation on supply management will reduce purchasing power, increase the cost of production and procurement, and affect bottom-line costs. Inflationary pressures will build across supply chains. In response, some manufacturers have stockpiled inventory to meet uncertain demand, but that only exacerbates the problem.
Most technology tools are insufficient to address today’s global network economy. They can’t manage processes during difficult times. Company executives have to be able to anticipate the risks and solutions associated with supply chain disruptions. They need to understand that incrementalism in the form of a new user interface on traditional software, or a latent data-warehouse analytical dashboard, won’t get them there.
To be competitive moving forward, companies must deploy a disruptive technology architecture that’s network-based, global, real-time and able to provide a single version of the truth for all trading partners.
In addition, companies need to implement a control tower to manage the entire trading partner ecosystem. Only then can they see disruptions as they’re happening, and work with network trading partners to quickly and proactively solve them.
Managing Variability and Disruption
Businesses are realizing that their enterprise systems are no longer sufficient when dealing with demand and supply variability. Managers need the ability to respond to variation across a global ecosystem of suppliers, in real time and in collaboration with all trading partners. They also need the flexibility to adjust suppliers as necessary.
Companies should implement a digital supply chain network that provides a single version of the truth, with artificial intelligence that powers predictive and prescriptive analytics. The technology allows them to draw on all available planning and execution data in the network to make better decisions. The ultimate goal is to achieve resilience, continuity and operational readiness for the supply chain.
Solving future disruption problems and implementing new business processes isn’t a novel idea. Companies face this problem with each new introduction of technology that changes consumer purchasing patterns and the way that products move through supply chains. With the power of network technology, they can create new and more influential roles that cut across organizational boundaries, and engage in collaborative problem-solving.
With a digital supply chain network and the power of automated AI-based agent technology, partners can make better decisions, and solve more problems than previously thought possible. The roles that have been in place for decades, supported by legacy stovepipe software architectures, are no longer valid. Companies need to refocus their resources on new and more value-added activities.
Mark Brady is chief executive officer of One Network Enterprises.
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