How supply chain leaders can prepare for an uncertain future
In the immediate aftermath of the virus hitting, supply chain leaders were focused on adjustment and survival. Now, with a “new normal” emerging, the question on most supply chain leaders’ minds are, what’s next, and how do we prepare for it?
Traditional supply chain processes are in question
Traditional business models are being challenged and some – perhaps many – may be rendered obsolete in the wake of the pandemic. One clear example is the as-a-service model, which penetrated the supply chain function in recent years. With people working from home, pay-per-use has lost favor to ownership, meaning the transformation journey and the supply chain that underpins it are now in question.
The change in working practices brought on by the pandemic has similar implications for the supply chain. Lockdowns have taken the technology to facilitate online meetings and to enable teams to collaborate on a shared screen into the mainstream. When businesses start to return to normal, many employees are going to want to keep this approach in place – at least for some of the time. This means re-assessing how employees work and how much automation and digitalization is needed to support these practices.
Fulfillment will also feel the repercussions of the pandemic. With business and leisure air travel decreasing, last mile delivery is being challenged. , carried in the holds of commercial passenger flights. Will fulfillment increasingly depend on dedicated cargo flights, or will goods be shipped more frequently by land and sea? Perhaps, supply chains may even shorten, as organizations choose suppliers who are closer to home.
Preparing for an uncertain future
With so many questions unanswered, it can be difficult for supply chain leaders to know what steps to take next. To do nothing means being unprepared, and to do too much means banking on fluctuations that may not happen.
The key, then, is not to prepare for an unknown future, but to prepare your enterprise to be ready to tackle whatever may come by fostering supply chain resilience and agility. There are four approaches your organization can take:
- Develop or enhance monitoring capabilities: Weather disruption, blockages and strikes can be proactively managed and sometimes anticipated by creating best-in-class digital planning capabilities. Implementing control tower solutions across your supply chain delivers real-time visibility so that you can react to changes as they occur. These monitoring capabilities will be a huge competitive advantage as we enter the new normal, embedding flexibility and agility into the supply chain.
- Leverage and master supply chain data: Bottlenecks in supply chain processes directly affect the agility of your operations and, in the long run, impact resilience. Company silos and inefficient supply chain master data management disrupt operations and tie up valuable resources. By using intelligent automation, data can be managed centrally, optimizing operations across all major supply chain disciplines.
- Optimize the supplier landscape: Supplier risks like bankruptcy or compliance issues are more potent than ever. However, there are ways to manage these changes proactively to avoid bearing the brunt of a domino effect. One method is using blockchain to create instantaneous information-sharing across all partners, acting as a security buffer against these occurrences. This includes certifying institutions and providing transparency to all actors.
- Create buffers to foster agility: Changes in regulations can be addressed quickly by having scalable, agile teams ready to handle the operational impact of any expected or unexpected amendments. It’s more important than ever to have these teams on standby, so that organizations are prepared to react to any changes in the global landscape.
If the pandemic has shown us anything it is that we can never know what is going to come next; however, this does not mean that prosperity has to suffer. By focusing on creating agility and resilience, built on solid data practices, supply chain leaders can create an organization that is able to adapt to changing conditions and differentiate itself in the market.
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.”