Businesses had to make drastic in-flight adjustments to their supply chain strategies to navigate disruptions over the past three years. Now, as the world begins to regain a sense of normalcy, it’s time for organizations to holistically reexamine their supply chains, to ensure they’re equipped to meet the demands of an ever-evolving business landscape.
Following are three areas on which companies and suppliers must focus to repair and innovate their supply chains.
Organizational design and change management. Companies are accelerating their transformation initiatives in an attempt to address vulnerabilities brought to light by the COVID-19 pandemic. Yet many are struggling with strategy and implementation as they deal with both micro and macro supply chain disruptions.
That’s because transformation is a people challenge as much as one of technology, and most companies lack the internal talent and bandwidth to evolve with market conditions. Half of change initiatives fail, and only 34% are a clear success, according to Gartner. It’s a stark reality, but a fate that companies can avoid by aligning structures, practices, people, and processes, and promoting effective communications of change.
To succeed, leaders must make sure their transformation initiatives don’t curtail worker productivity and engagement. They must approach change management as a comprehensive and continuous process, one that stresses worker empowerment in accepting and driving ongoing change.
One often overlooked but essential step in any supply chain transformation is the creation of an end-to-end plan. It requires investment in experts in transformation who are able to outline all the implications, understand and explain the risks, and anticipate potential problems. Once the plan is drawn up, it’s the responsibility of leaders not only to embrace and enact it, but also to understand and communicate the value of change management starting at the kickoff. They must extend the rollout and integration to workers in all business units, geographical locations and subsidiaries, as well as to partners and customers.
Leaders must also maintain open lines of communication to ensure that workers are informed of developments and outcomes, both positive and negative.
Supply chain data and analytics. Global supply chains came to an abrupt halt during the pandemic due to a number of bottlenecks. Going forward, data and analytics can help supply chain managers overcome such challenges and maintain a competitive edge. They can determine optimal inventory levels, sense demand and stay responsive to it, improve visibility, and keep the supply chain moving.
Consider all the associated applications. There are systems for procurement, warehouse efficiency and logistics, to name a few. Each day, the software generates large volumes of data that can be used to achieve insights and enhance supply chain performance. These insights, usually in the form of dashboards and reports, are highly valuable because they give leaders the information they need to make decisions.
Indeed, a recent study by PwC showed that data-driven companies are three times more likely to achieve significant improvements in decision-making than those that rely less on data. In today’s world, where 70% of supply chain leaders now report greater and more frequent disruptions, it’s more important than ever to have insights in hand to guide strategy.
Supply chain analytics tools reveal crucial patterns and provide the knowledge that enables organizations to see risks before they arrive, avoid disruptions and save time and money. This is more critical now than ever. In a survey by Gartner, 72% of executives said the impact of disruptions to their supply chain has grown in the last three years. With reliable data and the insights that can be mined with analytics, companies can anticipate disruptions and draw up a response to address them.
Lastly, supply chain analytics can boost efficiency and reduce costs. With real-time data analytics, companies can identify inefficiencies and introduce changes to move products more seamlessly, streamline routes, cut fuel use, improve warehouse flows, minimize delays and more. With analytics, organizations can also look at expenses across an entire network, decide where to trim costs and where to access new opportunities. Analytics can indicate moments at which a company can tweak prices to increase profit and suggest changes in suppliers to reduce expenses.
Strategic supply chain finance and global sourcing. Inflation, changing consumer spending habits and challenges posed by global suppliers have made profitable business more difficult to achieve. Restructuring finance teams and implementing new supplier finance strategies can help. This, combined with new global sourcing strategies, can enable the business to reach its goals.
With a global sourcing strategy, an organization can better select sourcing destinations. Begin by doing market research to get an accurate picture of market conditions, and assess the ability of current and potential suppliers to deliver the product you need.
When you make sourcing decisions, take a team approach. Build a cross-functional team from sourcing, operations, finance and other departments who are directly involved with the target product. With a sound sourcing strategy and process, you’ll significantly improve your company’s chance of success.
The pandemic was a crisis for supply chains. But in every crisis, there’s opportunity, and now is the time for organizations to transform their supply chains with digital tools like data analytics. Those that do will be better prepared to handle the next disruption the future throws at us.
Geoff Coltman is vice president of Catena Solutions.
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