Global Supply Chains need urgent realignment — a wakeup Call

The impact of COVID-19 and the way Supply Chains responded to this pandemic, highlighted the serious and systematic challenges within our space. The current setup of many Supply Chains is misaligned and in need of urgent restructuring and strategic repositioning. Supply Chains are often largely disjointed, siloed, too rigid and slow in their response. It is this lack of interconnectedness, agility and resilience that calls upon lasting change. COVID-19 has been a catalyst for organizations to revisit their Supply Chain strategies and accelerated the adoption of digital network models and digitally enabled capabilities, driving end-to-end real time visibility.

The question is; why are so many Global Supply Chains highly fragmented? A simple answer is; lack of synchronized systems, transparency and coordination. It is a shock really that despite great advancements in technology, large parts of the global Supply Chain are still driven by the old and sluggish spreadsheet-based, manual systems. Parties to a supply network largely work in isolation or silos, next door neighbours don’t talk to each other enough, cross functional collaboration isn’t supported or even expected enough. And sadly, this fracture in operational systems and collaboration deepens as we go further down the network.

It is this disjointed Supply approach that perpetuates fragmentation and inefficiencies in Supply Chains globally. As we recognize the disruptive changes happening at unprecedented speed around us, it’s time to digitally enable our surrounding environment.

There are several solutions Supply Chains can implement to realign itself and become strongly interconnected, agile, resilient and responsive to unforeseeable disruptive events.

These solutions include the following Six:

1. A Long term Approach

Supply chains are not short term endeavours, they are complex processes with extended networks, therefore in need of long-term plans and strategies.

It is for this reason — among many, that a long term and strategic approach has to be applied, definitive capabilities and competencies have to be acquired, appropriate investments have to be made so as to realize the core objective of Supply Chain.

The objective being; to ensure that products that meet an ever changing customer demand are efficiently and cost effectively created and delivered to the right customer on time, in the required quality and quantity.

A long-term view will enable businesses along supply networks, to carefully analyze and select their supply sources or partners with whom they can enter into; long-term and strategic procurement and supply agreements, and join efforts in building closely interconnected, innovative, agile and resilient supply chains that effectively respond to the mutually rewarding objective.

2. Real-Time Data

Demand by customers is what triggers Supply Chain processes.

Therefore, unless all members of a supply network have access and visibility to uniform information on the demand in question (i. e. Spec, Quality, Quantity etc.), they cannot mount a joint and appropriate effort required, to provide a product or service that fully meets the demand.

Take internal procurement processes — for example, companies usually invest in infrastructure, systems and aiding technology across the board, in order to enhance the seamless flow of real-time data, materials and resources between its functions.

Such real-time internal data provides transparency for organizations to track their procurement operations from sourcing, through purchase order issuance, freight logistics, all the way to order/demand fulfillment.

Technologies that provide access to real-time demand data will enable supply chains to properly align its supply network, improve on its capacity, competence and conformance to demand.

It is worth mentioning that; tried and tested technologies like Artificial Intelligence and Blockchain improves instantaneous access to real-time data.

The broader Supply Chain has deploy real-time data accessing processes and technology end-to-end across its supply nodes.

This is what will contribute towards its interconnectedness, agility, resilience, speed, efficiency and cost effectiveness.

3. Appropriate Infrastructure

It is so ironic that common interactions between Supply Chain partners is like those usually seen in once off spot purchases. Parties in a Supply Chain network must be reminded that; these are bigger than their regular buy-and-sell interactions.

They are first and foremost partners in (tiers of) a larger supply network, bound by a shared objective, namely; jointly delivering to the final customers a performance better than that of a competitor.

A strong and well aligned Supply Chain is what differentiates leaders from laggards in the global market. But to compete and become a leader in your industry, investment in proper infrastructure must be made. An infrastructure that comprise of systems, technology and capability across the board.

Operational capabilities that do not only create a shift in the operating systems, but in the worker’s skill, mind and behaviour as well.

For Supply Chain to interconnect, operate and compete as one, proper end-to-end infrastructure must be rolled out across the board, particularly with core or strategic supplier networks.

Such an infrastructure is what will largely transform Supply Chains into highly responsive, competitive, agile and resilient networks in the face of sudden developments or disruptive events.

4. Nearshoring

Where necessary, Nearshoring is a better option to ensure a more closely aligned Supply Chain, in terms of speed, order frequency and quick inventory turnover.

Nearshoring refers to the approach where the production and distribution plant is located near the final market or consumer, so as to minimize delivery delays and minimize long transit related challenges.

Having the source of supply closer to the consumer, shrinks lead time, reduces risks and cost associated with long distance freight logistics.

It also shortens response or turnaround time and increases revenue.

5. Regionalization

Regionalization is somehow similar to Nearshoring. It is a Supply Chain enhancement strategy of deliberately spreading key sources of supply (e.g. manufacturing plants/distribution hubs) in specific locations or geographies, in order to capacitate and strengthen regional Supply Chains, in the view of creating a more balanced, resilient and responsive sources of supply, that in essence feeds into the broader global setup.

Likewise, I am in agreement that the current global Supply Chain ‘risk management scope’ is too narrow.

A Supply chain risk focus area needs to be broadened beyond delivery delays, supplier’s financial stability and/or experience, to include; natural disasters, unexpected interruptions and / geopolitical unrest that may lead into prolonged disruptions in global supply.

This is where strategies like Regionalization, which essentially aims at ensuring steady and uninterrupted flow of regional global supplies, comes in handy.

Importantly, comparative advantages will have to be taken into account when deciding on best locations for Supply Chain Regionalization.

6. Collaboration

Key and most important requirement to building a strong end-to-end interconnection is; Collaboration and a collaborative mindset.

Collaboration is mainly built on trust. Trust is built on honesty and transparency which are usually built on fairness and mutual benefit.

Let’s be clear, businesses in a supply network are independent organizations that transact with each other in pursuit of their respective goals — profit in most cases.

Such being the case, the fragmentation in Supply Chain is caused mainly due to a lack of trust, transparency and collaboration between these members of a supply network.

To improve Supply Chain agility and resilience members in a supply network will need to collaborate, align and pull together towards a shared objective.

However, it is fact that; unless and until every member of the supply chain network gets fairly rewarded for their collaboration, transparency, effort and loyalty to the network, they will neither respect the guiding rules nor pursue the common objective.

Fragmentation in the global Supply Chain is exacerbated because members of supply networks often lack fairness, hide information from one another, forge different trajectories towards separate goals within the goal.

Honestly, for ‘the supposed strategic partners’ to shield relevant information from each other, it points to the supplier sourcing and selecting procedures — or lack thereof.

Were the necessary feasibility study conducted? Was should-costing applied? Was capabilities, liquidity and other analyses performed?…

Unfortunately, fragmentation of processes are not the problem for global Supply Chain only. Often, internal business functions face the very similar challenges as well.

Take the Procurement function for instance, where sometimes they find that sourcing desk is not fully aware of what goes on at order fulfillment or receipt desk, mainly due to lack of instant coordination systems.

Collaboration enhance visibility into operations and processes, and it is through visibility that trust is built, enabling supply network partners to fully understand what really goes on at their neighbours backyard. So that they are able to talk to each other and join efforts as often as required.

With collaboration supply chains get aligned and strengthened into agile, resilient and highly responsive networks well equipped and ready to compete in the delivery of their shared objective — i.e. an optimum performance that fully responds to demand in the market.

Members of a supply network, beginning with the top tier, bottom tier and further up or down the network, must always remember that they are in essence strategic partners. A blunder by one of them costs every member of the network.

It defeats the whole Supply Chain purpose for members of a supply network to shield relevant information from each other and opt to work in silos. This fragments the Supply Chain, breeds inefficiency, fragility and causes all sorts of major breakdowns in the Global Supply Chains.

However, to comprehend and appreciate the importance of an end-to-end system alignment, a certain calibre of leadership is required.

Visionary leaders with analytical capabilities and interconnected systems thinking skills, able to connect the dots and make decisions that not only provide solutions to current volatility and impediments in supply, but also address broader future Supply Chain challenges.

Yes, a mega restructuring and systems realignment requires heavy investments. But the rewards of investing in a harmonized, seamless, well coordinated and long-term supply network, far outweighs the costs.

On the other hand, I don’t believe that Supply Chains really need investment in entirely new risk mitigating processes.

What it mostly needs is; the restructuring and strengthening of its systems with the necessary leadership, resources, capacity, capabilities.

In all, the six solutions outlined above, are just some of the options to building a more interconnected, agile and resilient Global Supply Chain.

However, without a united force and total collaboration, any expensive investment in Supply Chain systems, technology and capacity, will yield nothing.

Joint and collaborative efforts — across the board, towards a specific, shared and mutually rewarding outcome, is urgently needed.

That is what will build, interconnect, strengthen and make global Supply Chains — agile and resilient.