In terms of future operating models, supply chains have been severely disrupted over the past months. Globalization has made our supply chains complicated and optimized for cost and speed, not necessarily built for resilience in a worldwide pandemic. The complexity of these supply chains exponentially increases risk.
To put this into context, Michael Essig, a supply chain management professor at Munich's Bundeswehr University, has worked out that a multinational company, such as Volkswagen, is estimated to have around 1.15 million suppliers. This highlights how difficult it is for enterprises to have full visibility of their global supply chains.
The pandemic has shown up weak links in these supply chains. The transformation has become a priority. According to the World Economic Forum, diverse sourcing and digitization will be paramount to creating smarter, stronger supply chains and ensuring lasting recovery when we finally see the end of this global health emergency.
With such complex supply chains, it is difficult to take control of them without further increasing complexity. The Cynefin model can help leaders put the unpredictability that goes with such an unprecedented health crisis as COVID-19 into context when it comes to their supply chains.
This methodology maps business challenges in four quadrants: chaotic, complex, complicated and simple. The most efficient way to move between these quadrants is via technologies that can provide insight in terms of IoT, data analytics and sensors, for example. This ultimately means deploying an end-to-end, fully integrated digital solution into the supply chain.
Striking a balance between globalized and local sourcing
Globalized supply chains come with many benefits, including lower costs and more choice, but the global crisis has shown how links in the chain can easily weaken or snap. According to the Institute for Supply Management, the slow pace of deliveries in supply chains, for example, is hobbling economic recovery.
The majority of customers we have spoken to recognize that they will need to remodel their supply chain strategies. Some approaches, such as diversifying manufacturing to mitigate risks, go against the ethos of lean manufacturing but will be essential to build more robust and resilient supply chains.
Companies will need to look to multisourcing, nearshoring and more strategic partnerships with contract manufacturers, while smaller enterprises will consider collaborative co-operative purchasing, for example.
All of these are reliant on the ability to connect the whole supply chain effectively. Companies ahead of the network transformation curve have undoubtedly fared better. Application Programming Interfaces (APIs), for example, allow quick and efficient setup of connectivity, enabling trading partners to onboard quickly and to check the status of orders in real time via cloud platforms. One FMCG, with whom we have been working closely, has already deployed an agile approach to network transformation. This enabled us to rapidly increase network and remote access capacity across its global operations, ensuring their supply chain has remained operational.
Building flexibility, security and agility into the supply chain are essential to make these new models work. If the vision of Industry 4.0 is to be reached, a new supply network that embraces these key components is imperative. This includes smart procurement, integrated planning, autonomous logistics, advanced analytics and forecasts.
Transforming the supply chain is pivotal
Greater transparency and insight is essential in remodeling supply chain processes. Digitalization is essential to drive growth, mitigate risks and optimize costs. Yet half of the organizations have still not actively started to build a roadmap for supply chain digital transformation, according to Gartner.
In addition, the analyst firm maintains that supply chain technology projects often go way over budget, and software tools are underutilized.
The biggest hurdle for many enterprises is creating a transformation strategy that understands the different skills that a digitized supply chain needs, such as data-driven insights for smart decision making. Without the right talents, technologies and advanced processes in place, the digitized supply chain will not live up to enterprises' expectations.
This is where Orange Business Services skills come in. We have the consultants in terms of Digital Business Consulting, the IoT capabilities even in the most rugged environments, and over 2,000 data scientists and experts to digitize global supply chains from end to end. These data scientists work closely with our customers in innovation and co-innovation frameworks, encompassing real-time communications, analytics and reporting that can simplify operations and enhance their efficiency. This helps to create an agile and secure supplier network that is adaptable and resilient to events that are unplanned.
One of our customers, SHV Energy, a leading global supplier of off-grid energy, has chosen our IoT connectivity services to help manage its supply chain and ensure a consistent supply to its users. It has deployed smart telemetry and meters to improve infrastructure management and supply security while enhancing customer satisfaction. By better routing its trucks, it will also reduce fuel costs and cut carbon emissions.
Investing in the future
Digitizing the supply chain is now high on the boardroom agenda, but embarking on a supply chain transformation is not a quick fix. It is a long-term investment. One that requires a well thought out strategy based on where your organization sits on the digitized supply chain maturity scale. To get the maximum benefits, it will not only require resources, it also demands cross-functional collaboration, adaptability and a change in the cultural mindset.
Most importantly, as Gartner points out, it is important not to see supply chain technology implementation as another IT project. Technology should instead be seen as an enabler and aligned with short- and long-term business outcomes.
Kristof Symons is an Executive Board Member at Orange Business Services and leads the International Business Division. He previously held positions in Professional and Integration Services, Large Outsourcing and Multisourcing Customers and Transformation programs. In his private life, Kristof enjoys reading about future innovation and human psychology. He also practices martial arts and leads a martial arts club in Belgium.