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Visibility. Traceability. Data management. Supplier relations. These used to be the biggest challenges facing supply chain professionals. However, over the last 15 months, uncontrollable factors like COVID-19 have merged with technological evolutions to create a number of new supply chain dynamics.
To help dissect some of these “new normals,” we recently sat down with Bob Hawkey and Len Wierzbicki — supply chain experts and consultants with Grant Thornton.
Jeff Reinke (JR): If you looked at a manufacturer’s current supply chain functionality, management, or composition, and compared it to January 2020, what do you think would be the biggest differences?
Bob Hawkey (BH), Director, Operations Transformation, at Grant Thornton: As the dust begins to settle on the COVID pandemic and its aftermath, I believe an honest comparison to January 2020 would realistically yield four differences in supply chain operations born out of basic necessity and, in some cases, dire need to maintain material flows, service levels, and cost-to-serve targets:
- A significant elevation in supply chain risk management and responsibility, focusing on the need to consolidate disparate functions, adopt clear policies, and deploy a uniform response to known or emerging risks, including supplier financial risk, credit risk, and regulatory compliance risk.
- Strategic supplier performance management, especially contract-based monthly and quarterly business reviews, has taken on far greater prominence in terms of supplier financial health and supplier risk mitigation strategies to confirm continuity or, if necessary, evaluate alternative sources.
- More attention on automated contract management and administration capabilities triggered by the massive surge in strategic sourcing events to replace defunct suppliers or bolster dwindling supply.
- A wholesale review of 18- to 24-month strategic sourcing calendars to account for “act now” issues, including dual-sourcing to reduce supplier portfolio risk.
JR: The COVID situation has led many manufacturers to take a hard look at reshoring at least some of their production capabilities. Do you think we’ll see a legitimate surge in U.S.-based manufacturing as a result? Will Asia see a decline in U.S.-based companies manufacturing or sourcing from the region?
Len Wierzbicki (LW), Supply Chain Consultant at Grant Thornton: COVID has shook supply chains to its core and it should be expected that organizations would take a long hard look at reshoring some of their operations.
I would not expect Asia to see a significant decline in U.S.-based manufacturing or sourcing in the near future, but I would expect to see an increase in production from near-shoring alternatives like imports from the Caribbean region or Mexico. I would also expect to see a larger shift of Asia-based sourcing to be moved from China to Malaysia, Indonesia, India, and Vietnam.
JR: Also getting more attention due to pandemic-related dynamics is manufacturers investing in IoT-based technologies at higher levels. How could these investments impact supply chain functions?
BH: Nearly anything that facilitates real-time data analytics and decisioning, whether it’s product placement, customer segment profitability — and what to supply or not supply — or supply chain health such as available manufacturing capacity, is not only helpful but, I would argue, no longer a luxury.
If the cost-to-serve model is going to have true financial viability driving down operating costs and be hyper-focused on profitable customer segments, meaningful data is crucial.
Executives should always be on the hunt for cost-effective ways to connect or bundle the multitude of devices currently deployed into data flows that align to materials flows, asset productivity, and customer profitability. If I look across the IoT landscape today, there are a number of very interesting applications that can be game-changers:
- Expansive data mining or omnichannel intelligence gathering in which targeted social media platforms, various news feeds, call center logs, and other similar data sources combine to generate highly accurate snapshots of consumer tastes and satisfaction levels, which in turn can drive real-time modifications in supply chain routings, materials flows, production outputs, and inventory levels.
- Predictive repair strategies based on bundled data collection points across shop-floor manufacturing assets, transportation assets, and other similar assets in which the end-to-end production-to-delivery health status is known, quantified, and dissected.
- Another emerging IoT solution which offers tremendous flexibility and adaptability speed is remote manufacturing line scheduling and adjustment in which information can be provided to enabled machines remotely to change their output speed, products, mix, configuration, and other similar attributes.
LW: I agree 100% with Bob. The only thing I would add is to leverage the data collected by these sources and compare the recommended solution to its actual outcome. These data elements will be fed into advanced analytical models where supply chain professionals will “tweak” the weight of inputs in various models to determine which variables have the most impact on outcomes.
JR: Supply chain visibility has always been vitally important. What new challenges do you see rising on this front, post-pandemic?
LW: As you mentioned, visibility has been vitally important, but it has been primarily at the macro level. The trend going forward will be more instantaneous visibility so deviations to plans will be addressed more real-time.
The challenges I see will be reacting to what you see. Basically, supply chain professionals are going to be challenged with answering the question “Now what?” This goes back to Bob’s point about having a risk mitigation strategy. Advanced analytics will allow organizations to perform “what if” modeling scenarios in advance of an event occurring.
Advanced analytics needs to be viewed as a vital insurance policy. You will need advanced algorithms and software to create multi-variable scenarios.
JR: If you could provide supply chain professionals in the U.S. industrial sector with one gift, one wish granted, or one superpower, what would it be?
BH: Looking across the carnage COVID-19 has inflicted upon so many supply chains, my biggest wish would be to equip them all with an integrated supply chain risk management system capable of providing both the early warning system necessary to avert disaster and the actionable intelligence necessary to make informed decisions regarding future strategic sourcing events.
With so much internal horsepower lost over the past year to reactionary tactics across a number of fronts, supply chain executives owe themselves the tools which can proactively navigate strategic options and drive the actions necessary to prevent the supply chain disruptions which have become so commonplace. If the wish had been granted eighteen months ago, executives, long before COVID-19, would have had the tools, practices, and policies in place to avert or minimize COVID-19’s many impacts.
Image Credit: Monkey Business Images / Shutterstock.com
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