Heralding a new Era for Supply Chains?
The pandemic crisis that we are witnessing perhaps is the most political of crises that most of us have lived through. A pandemic is being responded to primarily by politicians and the illiteracy that most know it all journalists have become. While all the rhetoric flies, pressure of different kinds get applied to the supply chains which run our world.
You will notice that this time the tug is from both the supply and demand sides.
Many of the chinks in the supply chain armour which always existed got pronounced and exposed during this pandemic crisis and some new ones developed. Many vital systems have been caught-out outdated. Many suppliers, higher up in the chain, have been caught out being disconnected from downtstream producers. These are just two random examples. Many of the long and linear supply chains, operated through hub-spoke models got disrupted causing losses to companies.
What the linearity of supply chains has also shown is the realisation of a “bullwhip” effect. The supply chain (and the manufacturing) responds to push supplies downstream, but the material reaches the store when the crisis is under control and the shelves end up overflowing. The data communications don’t pass real-time and don’t provide a sense of the current situation.
Add to this, the political forces strengthening protectionist and isolationist sentiments while shortages of necessities (in large parts of the world) were being restored. And, plushly funded environmentalists pushing strongly for non-global, within country, and local supply chains. Shortening the supply chains certainly reduces the transportation distances, more for consumer facing goods, but has minimal impact on the emitted carbon and more often than not raises the cost of the material being transported.
The multi-pronged problem does not, unfortunately, have a cureall. The solutions differ across sectors, and even within microcosms e.g. the solutions are different from automotive vs apparel, and are different for a retailer vs a pureplay 3rd party logistics provider.
In the recent times, there have been many prescriptions including the “Control Center” which will enable real-time (or almost) responses. But the problem with many of these new ways is that the reaction time is, often slow to propagate, and the response is always reactive.
Meanwhile, as many of the organized supply chains suffered, a wide spread, peer-to-peer public-police run distibution chain flourished and fed about a million migrant (from different states and regions) workers just in Bangalore for a long while. More about that separately, though you can look this up on the web. But, this has a lesson for us, in its non-linearity.
The solution then, perhaps lies in different related and non-related steps to be taken.
Identifying fissures and vulnerabilities
Because the problems differed from company to company, it is important to spend time and identify where the disruption actually occured, how it spread, where the risk hotspots and feedback loops exist. Problems, as you know, occured in different parts of the supply side, the demand side and also companies not being able to adopt to a new supply chain structure in response to the disruption.
Holistically circular chains
At a higher and holistic level, supply chains will need to move towards a level of circularity. This, obviously, will not happen for a single company but can in ecosystems, and with consortiums. It will need different industries to come together and form new relationships. Circularity can help in:
- lowering consumer costs which might come from shorter supply chains and thus higher cost of labour and /or capital costs
- increasing self sufficiency while avoiding cost lock-ins of replicating old and familiar models because those older models are rather susceptible to volatility, which is expected to be the norm in the post-Covid world
- creating potential diversification of revenue streams
Networked, Cloud-based solutions
A networked supply chain, if structured well with the appropriate technology, can anticipate disruptions. It can also consider multiple variables along the supply chain thus preventing amplification of bad data. It will also be able to locate where the cure might be rather than always wanting to increase manufacturing to meet raised demand.
A networked cloud based chain (we will consider Digital Transformation separately) becomes rather a happy ground for AI based autonomous chains as well, even at a basic level based on previous data patterns.
The above is what technology and good real time data can do. However, there is certainly no replacement for ensuring that there is a single frameworked governance process running the supply chain to keep the complexity of a multi-company, non-linear network under control.
Digital Transformation
Quite like in any other horizontal domain, DX is now crucial and unavoidable. Apart from adopting technologies that support rising consumer interest in product domains will orient companies right, to enable them to thrive in the digital world. Of the various types of technology applications, two particular ones have gained separate importance:
Blockchain – to enable controlled, shared access to data and the capability to trace and verify actions as a package / shipment moves through its supply chain.
Biometric Solutions – to use facial, voice or iris recognition (touch base biometrics go out of the window with Covid-19) to verify that each supply chain participant is linked to the right digital identity. This would get extended to payment solutions thus enabling secure and fast settlement and cash endpoints.
Each of the above needs investments, a different way of thinking and newer systems and processes. Many organisations may perceive this as a risk at this time, but many successful use cases exist, and so does supporting technology. Also, right now is, arguably, the best time to invest when the load on processes (at least in some cases) is lower.
How did your supply chain perform during the disruptive beginning of the pandemic? What proactive steps have you taken to prevent future such disruptions? We would love to hear from you.
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