Building resilience into a Supply Chain 4.0 strategy
Companies are looking to streamline and improve supply chains, but are also under pressure to manage supply chain disruption and meet corporate social responsibility requirements associated with their supply chains. All of this has only been heightened by COVID-19, but companies can build resilience into their supply chains by digitising their infrastructure with IoT.
Disruption is here to stay
Technology is rapidly changing every element of industry and enabling the agile adaptation of supply chains for challenge after challenge, from tsunamis to trade-wars and now a global pandemic. Today, disruption is the new normal, and it is affecting supply chains more frequently. The magnitude and frequency of this disruption has been escalating, partly due to the globalisation of supply chains, and new risks presented by geopolitical and climate change issues.
Disruption is here to stay, yet those that take advantage of disruption and changing demand are more likely to succeed. While manufacturers have suffered with supply chain disruption, online retailers such as Amazon have profited. The shift online has required many businesses to hastily adapt their business processes to ensure survival.
Prioritising supply chain investment
Supply chains have proven, especially with COVID-19, that if they are resilient and flexible, they can be instrumental if not vital to recovery. More than ever before, supply chains are on boardroom agendas due to their impact on global businesses and CSR. Traditional supply chain modelling and optimisation are changing and old assumptions, such as prioritising cost reduction, are becoming less important.
Companies are actively looking to mitigate risk. In the past suppliers were kept at arm’s length and supply chain improvements were deprioritised as they were not regarded as critical for the profit and growth. Today the focus is investment to mitigate risk and increase resilience for rapid recovery, and profit restoration. COVID-19 has been the catalyst to more businesses understanding the magnitude and importance of investing in a supply chain. Costs may increase, but so too can the chance of business survival.
Resilient supply chains not only recover from destruction, when done correctly, with the right level of investment, a robust plan and systems in place, supply chains become a source of competitive advantage and open up new and interesting marketplaces or valuable segments.
Agile, digital, connected, responsive and able to rapidly recover
When companies proactively invest in supply chain resilience, they typically manage to reduce risk exposure. However, investment in building resilience must be well planned, with resilient supply chains having five common characteristics, agility, digitization and connectivity, insight and the ability to rapidly recover.
An agile supply chain network has a flexible ecosystem of suppliers and partners where materials can be swapped, and a dual or triple sourcing strategy is adopted. There is evidence of a shift to this strategy as companies move manufacturing away from China. Companies moving capacity creates smaller more nimble manufacturing sites, which are more agile, and more able to adapt to challenges and change.
Industry 4.0 connectivity and digital transformation are creating agile operations that are more capable of responding to disruption and recovering from it. Warehouses and production lines can be fully automated, while autonomous vehicles can be used for short distance deliveries; these and other technologies, especially those based on digitisation & IoT, are providing supply chain flexibility.
This agility can help efforts to manage market volatility, especially in industries that track assets. These firms are moving towards more outsourcing or pooling, which releases capex and reduces the risk of volatility of demand.
Critical to building a resilient supply chain is the adoption of cloud-based supply chain applications, with plug-and-play interfaces for connectivity. Regardless of the manufacturer, if apps and devices are interoperable, they can be used widely to drive deeper data. Anything from raw materials through to finished product, and the vehicles that transport them, can be digitally tracked and traced, providing complete supply chain visibility of product and asset movement, to identify and respond to disruption faster.
Connectivity, or full visibility, is achieved in supply chains that are totally digitised, even operating a ‘control tower’ model, where companies have control centres to manage their supply chains. The set up resembles an airport control tower with screens flashing with continuous updates about raw and finished material, orders and production levels at manufacturing sites. Whether you own this control tower or a third party manages it for you, this model provides complete local visibility, even of global supply chains, resulting in faster reaction times when problems occur. This visibility is critical to ensure companies respond quickly to avoid being affected detrimentally. But with digitisation comes cyber risk too, so security needs to be firmly factored into a resilient supply chain strategy. The data derived from full digitisation has deep tactical and strategic value so defining a clear evaluation model is critical.
Using data analytics is critical to resilience, as it provides insight into the supply chain and enables teams to build forecasting, scenario planning and early warning systems. As the pandemic evolves, the use of continuous scenario simulation ensures that supply chains are clear on next steps in a number of different situations.
Finally, by empowering teams to problem solve wherever they are, we build company cultures that decentralise decision making. Teams on the ground decide how to deal with a situation while feeding data back into a central command, helping a business understand and manage crises quickly.
Ian Terblanche is Strategic Sales & Channel Director at Sigfox
Biden establishes Supply Chain Disruptions Task Force
The US government is to establish a new body with the express purpose of addressing imbalances and other supply chain concerns highlighted in a review of the sector, ordered by President Joe Biden shortly after his inauguration.
The Supply Chain Disruptions Task Force will “focus on areas where a mismatch between supply and demand has been evident,” the White House said. The division will be headed up by the Secretaries of Commerce, Transportation, and Agriculture, and will focus on housing construction, transportation, agriculture and food, and semiconductors - a drastic shortage of which has hit some of the US economy’s biggest industries in consumer technology and vehicle manufacturing.
“The Task Force will bring the full capacity of the federal government to address near-term supply/demand mismatches. It will convene stakeholders to diagnose problems and surface solutions - large and small, public or private - that could help alleviate bottlenecks and supply constraints,” the White House said.
In late February, President Biden ordered a 100 day review of the supply chain across the key areas of medicine, raw materials and agriculture, the findings of which were released this week. While the COVID-19 health crisis had a deleterious effect on the nation’s supply chain, the published assessment of findings says the root cause runs much deeper. The review concludes that “decades of underinvestment”, alongside public policy choices that favour quarterly results and short-term solutions, have left the system “fragile”.
In response, the administration aims to address four key issues head on, strengthening its position in health and medicine, sustainable and alternative energy, critical mineral mining and processing, and computer chips.
Support domestic production of critical medicines
- A syndicate of public and private entities will jointly work towards manufacturing and onshoring of essential medical suppliers, beginning with a list of 50-100 “critical drugs” defined by the Food and Drug Administration.
- The consortium will be led by the Department of Health and Human Services, which will commit an initial $60m towards the development of a “novel platform technologies to increase domestic manufacturing capacity for API”.
- The aim is to increase domestic production and reduce the reliance upon global supply chains, particularly with regards to medications in short supply.
Secure an end-to-end domestic supply chain for advanced batteries
- The Department of Energy will publish a ‘National Blueprint for Lithium Batteries’, beginning a 10 year plan to "develop a domestic lithium battery supply chain that combats the climate crisis by creating good-paying clean energy jobs across America”.
- The effort will leverage billions in funding “to finance key strategic areas of development and fill deficits in the domestic supply chain capacity”.
Invest in sustainable domestic and international production and processing of critical minerals
- An interdepartmental group will be established by the Department of Interior to identify sites where critical minerals can be produced and processed within US borders. It will collaborate with businesses, states, tribal nations and stockholders to “expand sustainable, responsible critical minerals production and processing in the United States”.
- The group will also identify where regulations may need to be updated to ensure new mining and processing “meets strong standards”.
Partner with industry, allies, and partners to address semiconductor shortages
- The Department of Commerce will increase its partnership with industry to support further investment in R&D and production of semiconductor chips. The White House says its aim will be to “facilitate information flow between semiconductor producers and suppliers and end-users”, improving transparency and data sharing.
- Enhanced relationships with foreign allies, including Japan and South Korea will also be strengthened with the express proposed of increasing chip output, promoting further investment in the sector and “to promote fair semiconductor chip allocations”.