By Peter Jones, Managing Director and Founder, Prological Consulting
Dr Ravi Prakash Mathur, Head of Logistics and Supply Chain Excellence at Dr. Reddy’s Laboratories said during a recent Harvard Business Review webinar: “Collaboration has gone one step further. In the initial days of lockdown, it was very difficult. The learnings are here to stay, we will see more and more collaboration happening and the frequency of reviews with external agencies will only go up.”
Like so many other things throughout the pandemic, it’s incredibly challenging to predict how a system as complex as global supply chains will react next year and beyond. What you can control is your response and ability to act now.
Dr Mathur says that supply chains will develop much faster, with greater agility and better capability to meet future demand if they undertake external audits. Focusing on the fundamentals is at the core of Prological’s business, and our perspective on operations can be the answer to unlocking an efficient inbound supply chain.
There are certainly things that businesses can do in the meantime, like managing internal barriers. The right thing to be doing for success tomorrow is to get your basics right (people and processes), ensure your systems support your processes as well as provide both visibility and control from ‘supply through to customer’ and then start digitising your business.
The consensus within the global supply chain community is that it could be as late as the middle of the decade before the existing issues are fully resolved. Events such as the European energy crisis and new covid variants are continuing to impact every supply chain on the global stage, and the issues that businesses and consumers face are far from over.
For a short period, it was thought that global supply chain disruptions would be temporary. Disruptions are expected to gradually ease within the next two years, but the challenges presented in 2021 have abolished any thoughts of returning to a ‘normal’ schedule or cost base. However, at the baseline, supply chains rely on people and the processes within the business. That means there is plenty to be done to minimise risks, manage costs and use this disruption as an opportunity to grow market share.
In today’s world, all business leaders must react swiftly with informed decision-making, implement alternative plans of action and increase supply chain resilience. Every operation is striving for deeper visibility, without added time and cost. This is a critical priority for every industry, so how can you improve efficiency and recover quickly from unforeseen or unexpected challenges? This is the million-dollar question, but thankfully success can be achieved through building resilience and focusing on sustainability.
Disruption is the new constant
How well have supply chains reacted to uncertainty? Perhaps this is a question for you, how have your operations shifted within the last 12 months? One thing is for certain – 2021 has challenged every supply chain’s ability to adapt, to change or to transform, with minimum damage in time, cost, resources and performance.
The ongoing uncertainty within global supply chains has contributed to a profound restructuring in the supply chain sector, and it is obvious that high levels of uncertainty will continue. To adapt quickly and efficiently to changes in the environment, many companies have invested in increasing the flexibility of their supply chains.
The global stage isn’t immune to major disruptions, in fact, they have been defining events. The GFC exposed vulnerabilities in the global economy at the time and the world re-adjusted. Covid-19 has done the same to todays active supply chains and again, we must re-adjust.
In the UK, almost two-thirds of companies surveyed by the Confederation of British Industry (CBI) warned that shortages of components would impact production in the next three months. Across the world, including the global manufacturing hub, China, there is already a long list of challenges, from the ongoing shortages of coal and an overall slowing of that economy.
With everything from the European energy crisis to further lockdowns continuing to impact global supply chains, the Australian Ad-Blue shortages confirm the issues that businesses and consumers face are far from over. Therefore, as we approach a new year, building resilience has never been so crucial for business sustainability.
Should processes change now?
Is there a trade-off between ‘risk’ versus ‘resilience’, in the ability to minimise the impact or quickly recover from a disruption? Business Continuity Institute’s Supply Chain Resilience 2021 report highlights that 83 per cent of professionals involved in continuity, risk and resilience, report that management commitment to supply chain risk is now medium to high. The report also highlighted a shift in processes, finding that more than half of organisations are now using technology to analyse and report on supply chain disruptions.
Positively, findings such as these show that companies are understanding the need to reposition themselves. There are several remedies businesses can undertake to mitigate supply chain issues to a certain degree until full recovery, but corners can’t be cut, especially when it comes to quality control and ethical compliance.
Companies are finding it increasingly tough to control their supply chain costs, but it shouldn’t be seen as a cost saver anymore. Failures in a supply chain mean companies leave their reputation in the hands of suppliers, either because they don’t understand how they operate, or they simply don’t have adequate risk management strategies in place.
Therefore, supply chain should be used to drive the top line, rather than cost cutting. Instead, businesses should be building capability that enables growth, which is why supply chain should be seen as a value generator and not a cost cutter. Identifying the weakest links within operations shouldn’t be solved with automation if the basics of quality and compliance, risk analysis and blind spots aren’t solved first.
According to a QIMA one survey, around two-thirds of respondents reported that they implemented new technology in 2020 in an immediate response to the pandemic. Efficiency and inefficiency are cultural, and no matter what systems and automation you put in, if the basics of getting the people and processes right don’t occur first, then your investment risks becoming very expensive sub-optimisation.
However, this doesn’t mean allocating majority of your budget to investing in the latest automation that promises the world to your business on paper. Even if you’ve put in an order for a new WMS, forklifts, or automation, operations will not see the benefits until well into the new year. Dr Mathur says an external provider can aid with supply chain strategy and “the overall architecture” of the business. Therefore, we are passionate about our collaboration with clients, because we know getting the fundamentals right now will allow immediate cost savings and efficiency gains.
An attendee during the webinar asked Dr Mathur what the best solution is to transform data, a question we’ve heard many times before. As Dr Mathur says, to change operations, the data must be cleaned up and organised. “The answer to building capability is putting together pieces of data.” Therefore, having a data-driven approach to evaluating operations provides meaningful insights across the organisation and helps identify and unlock opportunities to enhance operations and improve efficiencies.
Taking supply chain visibility and resilience to new levels will enable agility, the ability to predict the unpredictable. No one can predict the uncertainties that lie ahead, however, if you can predict five possible future realities, and then plan for those five future realities in terms of the structure, you’ve now removed a lot of the uncertainty from the business because of scenario planning.
2022 is already being named “the year of hope” following the chaos that this year and 2020 brought. But the pandemic isn’t over, even when it is – uncertainty will remain. From now on, businesses can seize the moment by supporting strategic and tactical decision-making when it comes to resolving supply chain issues.
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