Sungard Availability Services: How to make resilience a defining factor of digital supply chains
Organisations are built upon complex and diverse networks of interconnected players; no business is an Island. However, the technology that has enabled these players to work together can also make them vulnerable. On one hand the globalisation of information systems has provided the means for organisational growth and economic prosperity through the easy access of highly available information. On the other it has facilitated the democratisation of the cyber threat by making the skills and knowledge to exploit information systems widely available. Likewise, disruption, of any type, at one end of the chain can reverberate throughout the entire network. For example, the so-called ‘NotPetya’ attack originated from a single implementation targeted at Ukraine, but ultimately spread well beyond its borders along supply chains to affect numerous companies globally, causing hundreds of millions of dollars of damages.
But organisations do not have a monopoly on these communication structures and social media has enabled highly public two-way conversations between those at the root of the disruption and those impacted by it, providing a platform for the latter to voice their grievances. Unfortunately for organisations, this can have potentially devastating consequences for their relationships with stakeholders and the reputations on which they are built. Competition is fierce, and these stakeholders can, and will, take action to cut businesses out of their global supply chain if they are considered a risk.
Mitigating supply chain risk
Business Continuity teaches us to minimise our supply chain risk by having multiple suppliers for key products and services. It has also become common practice to try to further reduce risk by arms-length contracting and “incentivising” supplier performance with hefty fines for non-delivery. These are both excellent strategies if all you want to do is “survive” a disruption. However, the modern consumer, who has access to the global marketplace, is no longer satisfied to wait for an organisation to execute a heroic recovery and will vote with their feet at the first sign of trouble.
Organisations therefore need to be able to “thrive” despite uncertainty and disruption. To do this, they need friends.
Best practice for networked operations
There are three key ingredients to being able to thrive. First, businesses need to be adaptive, knowing when to change and optimising operations according to the outside environment. Leadership is also crucial – with leaders instilling in people the will to succeed during challenging times. The third and final area - one which is frequently neglected by organisations - is their network. Forging and maintaining effective relationships with stakeholders, customers and suppliers is a key component not simply to being able to maintain successful operations, but also to maintaining a competitive advantage and achieving profit and growth. This is where an IT can really help. We saw earlier that globalised IT systems facilitated growth and how it has been used against us to create a vulnerability. But if organisations have resilient IT both internally and with their partners, they can also use it to ensure that relationships do not crack under pressure.
Using IT resilience to promote trust agility and collaboration
How can organisations move from arms-length adversarial relationships to one where they are mutually supportive without placing themselves at undue risk? The first thing to do will be assess the value of each relationship. For example, if value is measured simply by the commercial contribution that each person makes, the relationship will only be safe when hard value is being provided.
In contrast, closely coupled networks - where parties help each other out when things go wrong - will be more resilient. Highly collaborative relationships where knowledge and insights are shared mean that people will think twice about dropping you like a stone when things go wrong.
Here are five ways organisations can use IT resilience to create collaborative relationships and boost resilience:
Aim for flexible business relationships - Flexible relationships facilitated by regular information exchanges are mutually beneficial and supportive rather than adversarial. The marker of a resilient organisation is one that is not totally averse to taking risks, and look instead at how the risks of the entire value chain can be best shared among its players
Build strong communications – Shared resilient IT will provide multiple channels through which you can have a constant dialogue with your suppliers, vendors and customers. It will also allow you to talk to them at the earliest stage possible when something goes wrong demonstrating foresight, agility and integrity which will help businesses to avoid grievances being shared on social media
Show commitment to the relationship – Work together to build resilient connections. Businesses that have a vested interest in working on joint future products and services signal to the rest of the network that they are investing for the future rather than just in it for the profit
Ensure that relationships are a strategic issue – IT resilience is often seen as a cost or an insurance for when something goes wrong. However, relationships can be existential. Therefore, if you want the attention of the board make corporate resilience your driver for IT resilience
Practice as a team – When multiple organisations respond together, things get complex. A football team wouldn’t enter into a tournament where the first time the players meet is on the pitch. Organisations should therefore use their IT infrastructure connection to wargame their responses to different scenarios and learn how each other responds before it has to be done for real
Weathering the storm
A simple software glitch somewhere in your supply chain is all it takes for you to experience disruption. While most organisations will invest time and money drawing up contingency plans to get the business back on its feet in as short a time as possible, attention must also be paid to the impact a disruption can have on the networks in which they are embedded. A robust and agile IT infrastructure can not only be used for transactional purposes between customer and supplier but can also be used to ensure that key relationships with other components of the supply chain are nurtured. A truly resilient organisation will invest in building strong relationships “while the sun shines” so they can draw on goodwill when it rains.
About Dr Sandra Bell
Dr Sandra ‘Sandy’ Bell is a risk and security professional with over 25 years’ experience of the design and management of business-friendly risk, continuity and security solutions for customers across Europe. Instrumental in the development of resilience standards in use today, other notable achievements include advising UK governments on National Security Strategy and successfully delivering comprehensive security solutions for three high-risk Olympic venues hosting Heads of State.
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.”