Envision Future Fit Supply Chains
The COVID-19 crisis has pianfully exposed how efficiency in Global Supply Chains came at the cost of resilience and agility. A constant and decade long focus on efficiency and cost competitiveness has created increasingly complex and slow moving Supply Chains. The pandemic demonstrates that for many organizations, inadequate visibility and understanding of the situation within their Supply Chains hinder an effective, coordinated response to external shocks.
To design a Supply Chain that is fit to flourish in the years to come, Supply Chain leaders need to anticipate how key forces of disruption will impact their Supply Chains and look to evolve their Supply Chain management approaches accordingly. This inflection point is an opportunity for forward-thinking Supply Chain leaders to build future-fit Supply Chains that both drive progress on top procurement priorities and advance the sustainable agenda.
Organizations rely on an ever-growing network of organizations to deliver their goods and services. Yet many businesses have an insufficient understanding of the players involved and the risks and opportunities these bring.
Based on its extended enterprise risk management survey, Deloitte suggests that ecosystems have been growing across organizations at a rate of ~15 percent a year. Recent research from Refinitiv found that 43 percent of third-party relationships are not subject to any form of due diligence. In short, more complexity to deal with.
Though there is significant uncertainty in how these forces of disruption will unfold, Supply Chain leaders can take concrete steps today to plan for a broad set of possible future scenarios.
Below are five recommendations for how organizations can embrace and capitalize on the key forces of disruption that are changing Supply Chains and achieve their top procurement priorities in the process.
1. Automation and Migration
Mass migration on a scale previously unimaginable, combined with projections that significant numbers of workers will be displaced by automation, will increase volatility in supply chain labor dynamics; organizations need to adopt their approaches accordingly. Organizations can mitigate this volatility through fostering responsible and inclusive labor practices. For example, businesses sourcing from regions impacted by mass migration can re-direct resources to engage with industry peers and cross-border actors, including government, labor unions, and employers, to reinforce legal frameworks and insist on better enforcement of labor laws. Organizaions with Supply Chains that expect significant uptake of automation through the next years can insist that key suppliers develop clear plans to support a sustainable workforce transition.
Businesses can also support the empowerment of individual workers within their Supply Chains through enabling them to participate in and lead trade unions and other forms of worker representation, by using technology like mobile apps to help workers understand their legal rights, and through evolving technologies that directly gather workers’ views.
2. Regional Sourcing Hubs
Growth in new markets and demographics and meeting customer demands for customized, on-demand goods and services will require understanding and meeting new consumption patterns and preferences, as well as providing goods and services in new locations and formats. In response, Supply Chain leaders will have an opportunity to develop nimble, regional supplier networks that can meet both commercial expectations and sustainability aspirations. Organizations can build on the lessons learned in well-worn sourcing locations such as China to develop smart sourcing models in emerging hubs such as sub-Saharan Africa.
Supply Chain leaders will have the chance to embed social and environmental responsibility into the design of these regional sourcing hubs and to leapfrog supplier monitoring activities that have not delivered improvements in labor conditions or environmental resilience.
3. Supplier Assessment and Engagement
With more data about Supply Chains produced and disseminated than ever before, Supply Chain leaders have the opportunity to rethink how they collect and interpret related information. Practitioners will need to hone in on the Supply Chain information that is decision-useful in a sea of available data and dashboards and will need to reconsider which data they need to commission and how it is collected. Supply Chain leaders looking to the future should firmly weigh the value of investing resources in a battery of one-time, on-site supplier audits when open access channels, already publicize factory emissions and wastewater in real time, and numerous digital platforms exist today to assess worker satisfaction and engagement, as described by workers themselves.
In Supply Chains likely to be disrupted by automation, recalcitrant labor issues like wages, working hours, and safety are likely to be supplanted by new challenges such as responsible down-sizing and re-skilling of supply chain workers. Today’s audit and remediation processes will hardly be fit for purpose to support responsible factory closures or retraining programs, and therefore Supply Chain leaders planning for the impact of automation will need to guide their teams from a focus on corrective action plans toward leading a sustainable transition in partnership with their suppliers.
4. Transparency and Disclosure
In the context of high levels of uncertainty about the future of global trade and of the regulations that shape mandatory corporate disclosures about sourcing practices, futuristic Supply Chain leaders can prepare for a variety of possible future scenarios through enhancing both visibility into Supply Chain practices and disclosures about those practices. Enhanced transparency will support Supply Chain leaders in the case that global trade is transformed by political shifts toward economic nationalism and will be valuable should free trade continue. Likewise, improving the quality and scope of Supply Shain disclosure will enable practitioners to stand ready should regulatory requirements increase and to weather the increased stakeholder scrutiny that is the likely corollary of a weaker regulatory environment.
5. Sustainability
To prepare for the changing physical environment and other Supply Chain risks related to global climate change, organizations will need to factor climate risk and preparedness into Supply Chain planning tools, seek alternative materials and resources where necessary, and look for new ways to secure supply and minimize disruptions in their Supply Chains.
This will also mean partnering with suppliers that share a commitment to climate awareness and action and providing incentives and access to technical and management skill-building to suppliers that lag behind peers. Suppliers situated in jurisdictions that have already made policy commitments to transition to low-carbon economies — such as China and India — are likely to accelerate their contributions to global buyers’ visions of sustainable Supply Chains. In all industries, sustainable Supply Chain planning should become a fundamental part of good Supply Chain management going forward.
