Deloitte: embracing change in the supply chain space
With digitisation having an ever-increasing effe...
Change. It’s a word that’s been frequently used in the supply chain space over the past few years.
With digitisation having an ever-increasing effect on how businesses conduct operations, it is more important than ever before to evolve with the latest trends. Empowering companies to do just that is Corinne Goldberg, Manager at Deloitte LLP. Deloitte is considered one of the world’s “Big Four” professional services networks alongside PwC, EY and KPMG and serves four out of five Fortune Global 500 companies. Goldberg is a technology implementation enthusiast with cross-industry experience. As part of Goldberg’s role, she advises global organisations on the design and delivery of best-in-class risk management programmes through technology adoption, supporting businesses to streamline efficiency, reduce costs, and mitigate exposure to supply chain risk. In an exclusive interview with Supply Chain Digital, Goldberg discusses the influence new technology is having on the supply chain industry.
What are the biggest challenges companies face to manage their supply chain effectively?
Although organisations are aware of the importance of maintaining visibility over their supply chain, the reality is that there tends to be limited transparency due to the complex and disparate network of partners that perform a variety of activities on behalf of an organisation. Businesses that operate in this environment adopt a reactive approach to managing risk, which exposes a business to vulnerabilities including regulatory non-compliance, reputational damage, and operational disruption. Without adequate visibility over a supply chain, an organisation is unable to build resilience by putting in place appropriate controls and governance to manage and monitor its network of partners. Furthermore, many organisations lack customised technology platforms that would enable a deliberate and structured approach to assessing the risk profile of their supply chain partners and tracking control gaps over the contracting lifecycle. These limitations create challenges for organisations to validate that they are working with the right ecosystem of partners and can proactively identify and manage risk.
With digital transformation having such a major impact on the supply chain industry, how vital have technologies such as AI become to businesses?
The introduction of AI-enabled technology has changed the landscape for organisations to manage, monitor and track the movement of goods and services in a supply chain. In today’s globalised and interconnected marketplace, many organisations operate a complex supply chain that requires engagement with hundreds of outsourced providers to bring goods or services to consumers. This dynamic presents challenges for organisations to effectively monitor their extended enterprise. Prior to the development of AI-enabled technologies, organisations struggled to develop a sophisticated mechanism to detect patterns and leverage enriched data sources to derive actionable insights about their supply chain network. With AI-enabled technology, organisations can develop deeper and more predictive insights about their business partners to inform their sourcing strategy and risk management activities. This ability generates unprecedented opportunities for organisations to optimise their approach to supply chain management in ways that were not possible before.
Although AI and other technologies can be an important tool for companies, do you envisage any risks arising through their introduction into business operations?
Disruptive technologies generate value for businesses in many important ways. B2B technology platforms enable an organisation to streamline activities and enhance collaboration through the automation of routine tasks, the digitisation of manual processes and the consolidation and centralisation of information. As a result, organisations are becoming more efficient, transparent and collaborative. This shift is enabling a realignment of resources to prioritise the customer experience in ways that were not possible before. But despite the positive benefits of technology adoption, organisations should be mindful of risk. Technology products can be cumbersome to integrate into an organisation’s operations if their purpose and use is not well-understood. For many organisations, AI-enabled technology presents a learning curve as effective adoption requires alignment and training across multiple business areas, including deeper linkages with data scientists and technologists. Furthermore, integration of AI presents ethical challenges for organisations with respect to ensuring ethical compliance, mitigating bias when developing algorithms and creating standards to ensure trustworthy AI programmes.
What considerations need to be taken into account when introducing a new technology into an organisation’s routine business processes?
Effective technology adoption requires a comprehensive understanding of an organisation’s pain points in order to introduce a technology solution that is fit for purpose. This understanding can be achieved by identifying an organisation’s existing level of maturity with respect to technology adoption. Understanding the current maturity is vital to designing an appropriate technology-enabled future state operating model. Furthermore, a robust change management programme should also be considered to facilitate seamless adoption through education and training. Without a robust change management programme in place to facilitate organisation-wide adoption, usage can be fragmented and disparate, making technology a hindrance rather than an enabler. Lack of alignment on adoption across technical and non-technical teams can create friction and confusion. A targeted change management programme should be established to ensure that technology is understood across the organisation and that the buy-in is received from key stakeholders to facilitate adoption.
What do you envision the future of the supply chain industry to look like?
As technology products continue to become more sophisticated and new use cases are developed to address gaps in supply chain management, I’m excited to see the plethora of tools that organisations will have at their disposal to modernise operations and increase their understanding of the extended enterprise. I’m looking forward to seeing technology products that leverage blockchain to enable product tracking from the source to the consumer, as they will continue to add value by bringing increased transparency to the manufacturing and distribution process, providing both organisations and consumers with greater assurance over aspects such as product quality. AI capabilities will provide more precise, predictive capabilities to enable organisations to optimise supply chain spend and detect risk earlier in the contracting lifecycle. There is lots of innovation in this space that has tremendous potential to transform the way organisations manage their supply chain network.
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NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”