GUEST COMMENT Overhaul of the supply chain is needed immediately

Dr Andreas Baader, European leader SCM SL Europe & managing partner, Genpact, explains that today, the nuances of the supply chain are no longer just a business issue. They are now a part of the national consciousness due to the pandemic, geopolitical turmoil, and inflation.

Supply chain imbalances are severe and multi-faceted with 20% of UK businesses experiencing global supply chain disruption in 2022. The volatility facing the supply chain shows no signs of stopping in 2023, and let’s face it, disruption, in some form or another, will never end. So, how can logistics companies adapt and thrive in the face of constant disruption?

A shift in perspective is needed; next year will not be one for lying back, taking the hits, and hoping for things to return to “normal”. Businesses must be comfortable and embrace chaos by overhauling existing tools and technologies to streamline processes and mitigate the consequences of future disruptions.

The supply chain is broken – and may never be fixed
Real-time production delays hit sales and drag down corporate earnings and commercial and economic growth. With reports showing that only two percent of businesses have visibility into their supply chain base beyond the second tier, it’s no wonder fixing the supply chain is near impossible as most of the pressing supply chain shortages happen in the deeper tiers. The number of third-party vendor relationships in the supply chain will only grow, making the process of connectivity even more overwhelming and confusing. Visibility will be paramount for businesses to adjust and adapt quickly.

Now is the time to diversify, connect, and shop around. Innovative control tower and supplier management solutions, organisational design, process mining, and technological advances using AI and predictive analytics are ripe for the picking. These advancements allow businesses to lower their carbon footprint, making them more sustainable and agile than ever before. There is no doubt that companies that rely on legacy partnerships and one-size-fits-all solutions to deliver the same tried- and-true processes will be left wanting.

In all actuality, value can be found by incorporating more collaboration and variety into supplier relationships during this period of rapid change. Fragility throughout the supply chain has brought stronger awareness to build supply chains that allow sales to match customer demand and supply. Businesses can research alternative options, diversify partnerships, and incorporate innovative technologies to reduce risk and increase competition. Further, digitalisation breaks down silos and transforms supply chains into fully integrated ecosystems that are completely transparent to all stakeholders.

This transparency, driven by data, technology and AI, throughout the supply chain only boosts efficiency. For example, by harnessing the power of artificial intelligence to fine-tune demand planning, supply chain managers are empowered to make better decisions, which directly results in greater efficiencies and lower operational costs. With advanced, data-driven insights, forecasts can also be more transparent and accurate, helping to adequately navigate and even anticipate disruption.

Speed comes for free through reliability
Despite the world looking much different than pre-pandemic, there still lies a sense of urgency to return to the status quo, which in some minds, equates to speed. It’s time to change our beliefs about the supply chain needing to be lightning fast to succeed. Companies should create a hyper-connected supply chain that through successful supplier relationships, planning, data, tech and AI can simultaneously reduce their supply chain footprint and build onto existing capabilities. Next year’s focus will need to be centred on building resilience and reliability.

With the UK legislating for a net-zero emissions goal by 2050, growing concerns about the climate crisis will undoubtedly cause a shift in consumer mindsets. In coming years, consumers will become more in tune with ethical operations, driven by a rising younger generation who value purpose and sustainability over speed. In fact, a recent study found that three-quarters of Gen Z consumers state that sustainability is more important to them than brand name when making purchase decisions.

Achieving net-zero goals and reducing their carbon footprint are front-of-mind for all companies, regardless of industry. It is, therefore, important to address growing sustainability concerns in the supply chain to save costs and drive performance and protect the planet for the next generation. In other words, society will be better off adopting a slower yet more thoughtful and sustainable supply chain.

Reinforced against volatility
We can no longer run tomorrow’s business on yesterday’s supply chain. Flexibility and agility are emerging as core competencies for high-performance organisations. And supply chain management has a significant influence on both. With our physical and digital worlds merging, supply chains must become more connected, intelligent, and efficient.

Successful supply chains will generate end-to-end transparency to enable sales organisations to understand and leverage supply chain volatility and constraints. During this journey of transformation, we may even find that customers, too, prefer reliability and precision over speed – more than we ever thought.

Dr Andreas Baader, European leader SCM SL Europe & managing partner, Genpact