Transforming from a supply chain to a supply network
In today’s digital world, the traditional supply chain is changing.
What was once a rigid, linear flow, the supply chain of today is not a chain at all but rather a flexible, agile value network designed to deliver instant choice and hyper-personalisation across a variety of fulfilment channels and an expanding range of digital enablers. The traditional model of delivering large volumes of the same product to retailers and distributors has become a thing of the past.
Modern consumers expect to personalize products and make purchases across different channels. At the same time, organisations must balance the need to serve a variety of customers and consumers with optimized business operations. They must work to create profitable businesses, even as the demand for personalisation, speed, and direct access grows. As a result, today’s supply chain is instead a supply network, designed to deliver instant choice and hyper-personalisation across several fulfilment channels and an expanding range of digital enablers.
Shifting from a traditional supply chain to a supply network creates room for growth, optimizes operations and improves service while reducing costs and working capital. At the same time, this new model introduces greater levels of complexity as organisations must now manage the flow of materials, products, and data between and amongst a growing number of ecosystem partners, all of which must be coordinated to maintain stability in the network. The challenge for consumer-products organisations is not to simply produce goods quickly and cost effectively, but to anticipate any number of demand and supply variables that could impact the balance in the supply value network (including shortages of raw materials, changes in demand and rising fuel costs), and proactively address them.
A successful supply network leverages data-driven intelligent automation applications like artificial intelligence (AI) and machine learning (ML) to enable ongoing planning capabilities and automated responses to pre-determined scenarios. These capabilities lead to shorter planning cycles and the ability to respond more quickly to demand and supply dynamics; more importantly, the system can be trained to distinguish between inconsequential shifts and situations that require re-planning.
Developing an autonomous planning capability and self-driving supply network should be an important long-term goal for every consumer-products organisation. To realize this vision, businesses must focus on establishing the following foundations:
Enabling a supply network requires organisations to create and standardize robust data collection and analysis capabilities that can inform planning systems. Many of today’s supply chains are largely analogue, so even applying near real-time insights often require manual human intervention; in a data-driven world, this is unacceptable. Every aspect of the supply network must be integrated and a great deal of insights-based decision making can be automated, ultimately improving overall speed and effectiveness while driving down costs and reducing errors. Developing this capability depends on the ability of the organisation to bring data to the center of each business function, so companies must be more deliberate in organizing themselves in a way that embraces data-enabled technology.
Another crucial aspect of modernizing the supply network is to enable a 360-degree view, including internal operations. This forward-looking function is both predictive and proactive, helping organisations anticipate issues and opportunities while also generating ways to respond to them. As part of this process some organisations may need to digitise operations, equipping the entirety of the supplier ecosystem with sensors that provide near real-time feedback to the planning systems on issues like production capacity and material availability.
Organisations should consider moving to an environment where planning is completed in a touchless, autonomous way, installing concurrent planning systems, linking demand and supply systems into a single view and bringing these functions together. Defining and mapping set rules into these systems will allow recurring and routine tasks to be automated according to program settings and planned scenarios, creating further efficiency across the ecosystem.
While humans will maintain oversight of this system, tedious and recurring tasks can be handled entirely by machines, freeing up the workforce to focus on higher-value tasks like customer service or sales.
The cultural aspect of organisational change can never be understated. The implementation of a supply network will have a direct impact on the day-to-day activities of highly skilled people within an organisation and will disrupt virtually every function within the business. Evolution by its very nature is intended to enable higher levels of performance. In much the same way, a supply network will not simply eliminate tasks but also create new, more valuable forms of work. It is crucial that leadership communicates this point and initiates a corresponding reallocation strategy so that the workforce remains engaged, positive and invested in business goals.
The creation of a supply network can be a significant departure from existing planning processes and systems. It requires fundamental changes to virtually every aspect of an organisation’s planning procedure, from strategy and process design to technology and human capital. However, the benefits are profound, especially when it comes to monitoring fast-moving market dynamics, anticipating changes to supply and differentiating between an event of little consequence and one in need of a quick response.
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