Why Supply Chain Transformation Needs a Process-Led Approach

Supply chain managers of today continue to be bombarded with all manner of disruptions, from economic uncertainty and geopolitical tension, to extreme weather and climate-related disasters. 

That’s without mentioning the intense and, at times, overwhelming pressure from various stakeholders to cut costs, meet sustainability targets and comply with increasingly-stringent regulations that differ on a region-by-region basis.

In its 7th annual political risk survey published earlier this year, Willis Towers Watson (WTW) found that more than two-thirds (69%) of large organisations were continuing to highlight supply chain disruption relating to geopolitics as a prominent ongoing concern. 

To combat this, consulting powerhouse Gartner spoke recently of the need for Chief Supply Chain Officers (CSCOs) to proactively embrace a geopolitically elastic supply chain strategy to support their organisations' growth objectives.

Meanwhile, Sphera Solutions’ inaugural Supply Chain Risk Report showed that warnings associated with natural hazard events, such as tornadoes (45%) and hailstorms (26%), rose sharply, while ESG-related risks went up by 6%. 

What’s clear is that widespread and thorough supply chain transformation, designed to mitigate against these risks, can no longer wait – the time is now.

Achieving balance 

Optimising the performance of a supply chain is all about balance.

Each contributing factor – sourcing, costs, cashflow, service level, inventory, distribution and more – plays a crucial role in ensuring operations run smoothly and efficiently, with disruption kept to a minimum. 

The truth is, companies and their CSCOs will never truly be able to eliminate the prospect of disruption, especially in today’s volatile world. What they can do, however, is ensure they have the necessary tools at their disposal to manage and reduce the risks being thrown their way. 

But there’s a problem. Conventional approaches to transformation are far too fragmented to achieve optimum balance because they overlook the everyday processes that make up supply chains. 

One potential solution is to take a process improvement-first approach. By doing so, businesses will be far better positioned to reduce errors, increase efficiency, save money and respond quickly to disruption or changing market dynamics.

Plugging the technology gap

Countless supply chain decision-makers are being forced to contend with a technology gap where traditional planning solutions and transactional systems are no longer sufficient. 

Traditional planning solutions in procurement and supply chain typically focus on long-term planning, forecasting and control of the flow of goods, services, information and finances, from suppliers all the way through to consumers. Such solutions have been the foundation of supply chain operations for several decades.

Transactional systems are critical for managing day-to-day operations and recording basic business transactions. These systems are responsible for tracking the aforementioned goods, information and money throughout the supply chain, enabling companies to execute processes efficiently. More specifically, they are concerned with capturing and processing data related to orders, shipments, receipts, inventory levels and payments.

However, a discernible disparity exists between current supply chain technology capabilities and the advanced tools and solutions required to meet modern demands. 

It’s important here to take into account the COVID-19 pandemic, which disrupted supply chains and saw traditional retail operations grind to a halt. As a result, countless companies – such as fast-fashion giant Zara – dramatically accelerated their investments in technology in a bid to cater to a digital-first customer base. In Zara’s case, online sales doubled and the business has continued to benefit from the continued rise of e-commerce. 

Despite the obvious benefits, not everyone has been so quick to respond – a worry considering research has found effective supply chain digital transformation can cut process costs in half and increase revenue by 20% (MIT Center for Transportation and Logistics).

Ultimately, supply chain teams need real-time visibility, data-driven decision-making, automation and scalability, which many current tools do not provide.

Addressing this technology gap in supply chains is crucial if supply chain managers are to react quickly and make informed decisions in real time – and if organisations are to stay competitive, resilient and agile in today’s fast-changing market landscape. In fact, PwC says it’s “never been more critical” given the slew of existing and proposed regulations surrounding supply chain traceability and non-financial reporting. Digital solutions are undoubtedly needed to meet these requirements quickly, accurately and efficiently.

To fill this damaging void and prevent it from having a detrimental impact on operations, they must look to adopt a process improvement-first approach, which can effectively plug the gap by ensuring tech solutions are aligned with the specific needs of an organisation's supply chain – rather than being driven solely by the availability of new technologies. 

Understanding and optimising existing processes before implementing technological solutions ensures that the relevant technology actually addresses inefficiencies and adds value to operations.

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