May 17, 2020

Supply chain transformation: having the competitive edge

Mikko Kärkkäinen
Group CEO
RELEX Solutions
Supply Chain Transformation
3 min
Supply chain transformation: having the competitive edge

Supply chain management was once a relative backwater, but in recent years it has moved decisively center stage. A well-managed supply chain operation...

Supply chain management was once a relative backwater, but in recent years it has moved decisively center stage. A well-managed supply chain operation is, increasingly, a critical factor, even the critical factor, in a business’s success.

The transformation process is primarily about aligning the supply chain with your overarching business goals for maximum efficiency. And in practice it’s not so much about materials flows as changing responsibilities within the organization, and that requires a step-by-step, strategic approach.

Transforming a supply chain operation and bringing it up to date generally involves not just the introduction of powerful new technology but a fundamental review of processes and organization.

What do you want to achieve?

There is no single ‘right’ approach, but what is common to almost every successful transformation is that it seeks to align the supply chain with the company’s overall goals. For many businesses, finding the right supply chain system plays an essential part in identifying the steps they need to take to optimize their supply chain so that it better serves their business needs. If you are thinking of sourcing supply chain technology, especially a supply chain management system that encompasses demand planning and analytics, take some time to assess the available options.

So what do you want to achieve? It could be more streamlined processes, better availability, lower inventory levels, less spoilage, less manual work, better forecasting of campaigns and promotions, better ramp downs and, ultimately, higher sales and higher profits. But it helps to identify one or two KPIs that are the most important and, by which, success can be measured. Those KPIs tend to reflect a company’s overarching business strategy.

Why now?

Firstly, you could be saving money, and quickly. In any move to optimize supply chain operations, there are almost always a number of ‘low hanging fruits’ – issues that are relatively straightforward to fix and can, if resolved, produce measurable results, fast. You can save money and give a transformation project real momentum by identifying quick wins.

Secondly, whether or not you optimize your supply chain, there’s every chance your competitors have or will. The big retailers, and in particular the giants of e-tail, are revolutionizing supply chain and standards of fulfillment. Consumer expectations are constantly being driven higher. The purchases they make are increasingly affected by availability, price, assortment and speed of delivery. If you can improve any or all of these, it can help you keep or gain a competitive edge.

How to approach it

In order to transform its supply chain, a business should have a clear commercial vision. Whether it’s a niche retailer, a discounter, all about quality, service or availability, whether it aims for depth or breadth of assortment, sets trends or responds to them, it should decide on its goals and orientate its supply chain operations around them.

By asking questions about strategic positioning, such as where the retailer’s competitive edge is and how that is formed, it leads to a second set of goal-related questions about sourcing; ‘What do we want to provide our customers?’ ‘Do we need stock to last the whole season or longer?’ ‘Do we go for low cost - long lead time, local and short lead but at higher cost?’ or a mix, etc. These questions lead to any number of category management, buying, merchandising and campaign-related supply decisions.

Then comes the transformation to pull the whole Supply Chain into alignment with those goals. Ultimately it’s the decision making or planning responsibilities that are being transformed.

When implementing a supply chain solution, people tend to look for better control, better transparency, and a greater ability to influence the actual supply chain. There needs to be well defined planning processes to get the full benefits of the transformation. If those aren’t in place they need to be created and implemented.

For more information, see RELEX's Supply Chain Transformation: The Complete Guide

By Mikko Kärkkäinen, Group CEO, RELEX Solutions

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Jun 11, 2021

NTT DATA Services, Remodelling Supply Chains for Resilience

6 min
Joey Dean, Managing Director of healthcare consulting at NTT DATA Services, shares remodelling strategies for more resilient supply chains

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.

The Challenges

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.”


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