Guest Article

Competition is no longer between companies – it’s between supply chains

Disasters like Covid-19 pandemic can wreak havoc on even the biggest businesses. Even when your employees and office spaces are secure, the difference in a time of calamity lies in having a secure and resilient supply chain. The pandemic has proven to us that the direct competition between brands is no longer relevant. The only competition that remains is between the companies’ supply chains.

The recent disruption of global business supply chains is mostly on account of them being either concentrated in a single geographic area or following just-in-time manufacturing and lean production strategies to cut costs. Such businesses now find themselves in a precarious situation with a noticeable shift in the customer consumption patterns, where purchases are now more inclined towards local availability, followed by how responsibly the brand behaves against the earlier considerations of price or brand/product preference.

Any chain, including a supply chain, is as strong as its weakest link. According to a recent McKinsey survey of senior level supply chain executives, the study found that 73% businesses had encountered issues with their suppliers, while 75% faced issues with production and distribution, and 100% of the respondents in food consumer-goods industries encountered production and distribution problems.

A separate IDC survey on ‘Supply Chain Agility in the Pharmaceutical Industry’ found that 46% of respondents had faced drug shortages during the pandemic, while 70% agreed that their supply chain was very vulnerable or facing more problems with the continuation of the pandemic. As many as 65% respondents also reported they could no longer accurately plan supply and had lost faith in their demand forecast; and a stark 43% respondents lacked necessary agility and redundancy to survive major business disruptions.

What’s needed today is true transformation by altering the very fabric on which a business operates – how the supply chain is planned, managed, and ensures last-mile delivery. In fact, everything from building capabilities to changing the work culture and elevating financial performance will only be sustainable once businesses adopt this transformation.

1.Build an early warning system

To be resilient, businesses need to develop a balance between just-in-time manufacturing and lean production strategies and developing AI & Analytics powered Early Warning System models within supply chain risk assessment tools. Such tools can offer complete visibility across all levels and can sound off alarms whenever they identify any slowdown, interruption, or any other issue. Early Warning System based on well-defined predictive model, KPI and leading indicators can also help businesses identify their weak links in supply chain, so they can plan around it by building redundancies.

2.Diversify manufacturing and supply chain

While in the past two decades businesses have built their supply chains around cost optimisation, the current pandemic has shown that this may not be the best practice. Lower levels of available inventory and disrupted supply chains have driven many businesses to the ground.

In the next few years, businesses should focus on simplifying their product portfolio and diversify the manufacturing capability (aspects like different locations, different suppliers).

3.Create an agile supply chain

Businesses need to create a much more agile supply chain. This can be done by collaborating and sharing data between all stakeholders involved in building the supply chain. Both agility and resiliency can be improved by new near real-time B2B integration (advanced Connected Platforms) and sharing data down the supply chain. Especially, with the Tier 2 & 3 suppliers, providing them more visibility of plans can allow them to scale production in a much smoother manner.

4.Fresh commercial, contract and delivery strategies

The main issue with the pandemic has been a restricted geographical access. There needs to be fresher approach by businesses to explore and identify new commercial strategies to fuel growth in areas that were left untouched before the pandemic. Companies should relook at contracts and redundancies in supply chain, identify new last-mile delivery channels.

5.Operate a hub-spoke model for vendor and supply chain relationship

Organisations should centralise any information necessary for the core functioning of the vendors and supply chains to prevent any eventuality where the concerned managers may not be available. They should also look to localise various vendor relationships and delegate decisions to local teams.

6.Implement resilience-as-a-service

Businesses are being crippled by losses as insurance providers are introducing new insurance policy exclusions. They need to understand that traditional insurance is not adequate when dealing with pandemic related business interruptions. The best insurance in future against incurring any such losses is prevention itself. Building resilience-as-a-service into the system is now a necessity.

7.Leverage technology as business enabler

Scale the use of responsible AI as data-driven reinvention of business practices will be critical in post-pandemic growth. Businesses will need to embrace the use of responsible AI capabilities to both recover and return to their pre-pandemic growth plans. Digitisation needs to be accelerated and businesses should adopt the use of digital data and insights more extensively as part of their strategy. To be successful, businesses need to define more flexible, adaptive, and resilient processes and establish multi-disciplinary teams to define new process and innovate for new products.

8.Develop new strategy for remote working and social workforce management

Increasingly companies are discovering that remote working scenario has created a mismatch between the type of skills that are needed and what their employees have. As business leaders turn to automation, digitisation and value data extraction, the workforce should be able to complement the value that is being added by the new technology.

While businesses have been automating processes for efficiency in operations, they need to do so for every department in a post-Covid world. Utilising composite AI to re-imagine the ways of doing business while factoring in various productivity scenarios will be an in-demand strategy in the new world.

For businesses to make remote working a more responsible process, the HR teams have to come up with their own set of procedures that can communicate organisational expectations to employees and also ensure any upskilling that may be required on their part.

9.Innovate for New Products and Services

In a new interconnected world, to drive realistic customer demand and to sustain continuity of business, organisations should look to create a ‘digital twin’ of the entire supply chain (or of key processes) to simulate and adjust for the developing scenarios.

10.Invest in Cybersecurity

Businesses need to ensure their cybersecurity teams are all geared up to protect their data, applications, and resources from any kind of threats or to respond to alerts. As remote working finds a more comprehensive place in the business ecosystem, CISOs must draft new security policies (for Data Security, Network Security, App Security, and Remote Wipe Out) to accommodate for the increase in telework.

While ‘globalisation’ was the talk of the town in the 1990s, eventually global supply chains may end up becoming a victim of their own success. As businesses were over reliant on strategies focused on cutting costs, they had increasingly become less flexible and resilient with their supply chain structures. This needs to change and the ones to adapt quickly will be the new market leaders.

About the Author:

Gaurav Aggarwal is a thought leader and strategist in Cloud and Digital Transformation with 26 plus years of experience. He is known for innovative and disruptive approach in driving Digital Transformation, developing scalable practices for Cloud, Application Modernization, Intelligent Experience, and IT outsourcing domains.

Gaurav is currently the Global Lead for Everything on Azure Solution Strategy & GTM at Avanade, where he continues to help businesses that exploit technical breakthroughs. He is the principal strategist and visionary for business growth. In current role he drives a portfolio of $1 Billion+ pipeline for Cloud and Application Modernization business. Earlier as Modern Application and Application outsourcing business lead for Asia and LATAM he has delivered 30%+ YOY growth for Cloud & Application business ($250M+).

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