Digital supply chains provide end-to-end visibility for up-to-the-minute analytics
As health concerns have shifted consumer focus from buying services to buying goods over the past several months, demand has continued to outstrip supply, with online shopping on a tear.
The pandemic has also concurrently revealed long-standing vulnerabilities in traditionally structured global supply chains—highlighted by unpredictable demand patterns, material shortages and storage and transportation snarls, which have been further exacerbated by labor shortages.
As the demand for goods and services stabilizes, with employees returning to the workforce in larger numbers, supply chain congestion will see some relief, starting in early spring. However, inherent structural issues will continue until the supply chain infrastructure and workforce adapt to these changes in the economy, including omnichannel growth and shifting import patterns. Meanwhile, the $1.2 trillion federal infrastructure package, which includes $17 billion for port infrastructure, also offers hope.
Adapting for disruption
Some companies are taking measures to adapt, chartering shipping vessels and adding air shipments to deal with demand. Additionally, they are simplifying product portfolios and building up inventory when manufacturing or storage capacity allows.
As they work to squeeze every last efficiency and resilience from their supply chains, PwC analysis found that many are taking some combination of these steps:
- Prioritizing the supply chain as a resiliency-growth-enabler investment rather than a cost center
- Diversifying suppliers and manufacturing across geographies to bolster inventory
- Gaining greater end-to-end supply chain visibility
- Analyzing data to drive more responsive supply chains
Companies that succeed this season likely are investing time in scenario planning and creating end-to-end visibility, as well as making an effort to understand how customers plan and buy and calculating expected volumes. They are deploying data for increased agility—so they can switch shipping between locations while shifting resources between different areas of the supply chain or warehouse.
As the pandemic began to expose supply chain gaps in 2020, PwC analysis found that companies had already begun planning to diversify away from China to Mexico and Southeast Asia. Projections are encouraging: Moving production from China to Mexico or another Asian low-cost country could build resilience, enhance the customer experience and cut operating costs by some 25%.
One immediate impact of the pandemic on the supply chain universe is speed. Gone is the era of taking two weeks to compile data on a particular challenge, then coming up with a solution. In the new supply chain landscape, analysis and decision-making need to occur in a matter of days—or perhaps hours.
That concern is driving the need for automation and digitization. Using robotic process automation, machine learning and artificial intelligence, among other tech innovations, supply chain executives can increase capacity and improve performance by deploying fewer resource hours from an increasingly scarce pool.
Designing and implementing a connected, autonomous supply chain also addresses the labor crunch—and creates more desirable, meaningful jobs—while lifting the burden of non-value-added or routine activities off employees.
Delivering the customer fulfillment experience
Concepts of supply chain value are evolving as well. The historical equation of balancing cost and service—which drove supply chain metrics for several decades—is moving to a more holistic approach, with companies now analyzing the overall customer fulfillment experience.
This shift reflects a deeper understanding that the supply chain, often the last function to interact with the consumer, is critical to the overall customer experience. Consumer-facing companies are realizing how essential it is to cement the trust that keeps customers coming back year after year.
Structuring for flow
These changes signal a reimagining of the organizational structure. A business that focuses on function in a traditional linear structure is ill-equipped to resolve disruptions in real time. However, companies that evolve to focus on end-to-end product management and fulfillment can more easily respond to the challenges that surface along increasingly complex supply chains.
A flow coordinator is a good example of how businesses are collapsing the functions of a traditional structure. This role encompasses merchandising, demand planning, supply management, logistics, warehousing and last-mile responsibilities. A flow coordinator’s ultimate objective is broad: To create the best possible customer experience by optimizing fulfillment to satisfy demand.
Some companies are even building digital situation rooms in which cross-functional teams can interact with a common set of data, workflow and communication methods to collaborate on system challenges.
Investing in tomorrow
Some companies might hesitate to invest in the supply chain during this period of ongoing disruption; however, PwC analysis illustrates that a differentiated supply chain can deliver an estimated 43% increase in revenue over the long term. In addition, greater efficiency can lead to a 10% decrease in operating expenses at both the store and supply chain levels, yielding multibillion-dollar savings.
Innovative thinkers understand that the future may ultimately hinge on investing in visibility. That includes harvesting data across the supply chain—from suppliers, and sometimes suppliers’ suppliers, all the way to consumers in their homes.
Companies that extract the most data from every resource—products, manufacturing lines, shipping vehicles such as trucks and boats, workers, warehouse capacity and customer demand—are able to analyze that data to prepare for contingencies. They can proactively understand their risk, sustainability impact and operating performance, which empowers decision-makers to respond to challenges and bottlenecks more nimbly—while transforming supply chains into intelligent digital ecosystems.