The supply chain management uncertainty in the post-COVID world shows no signs of letting up. With current conditions, it looks like there may never be a return to the pre-pandemic era of supply chain stability. Unless manufacturers change, they will find that their ability to forecast demand, and determine what to do to meet it, will be challenging. What is required is the modernization of supply chain systems and practices so that supply chains are more resilient and efficient.
Supply chain management (SCM) systems help businesses to manage the flow of goods and services right from the sourcing of raw materials, to delivering finished goods to the customer. SCM solutions provide oversight of materials and products, and their associated data, as they move through the supply chain from supplier to consumer. By gaining access to the data in these processes, businesses are better able to coordinate workflows, improve efficiencies, and ensure that customers get the product they ordered.
How Supply Chain Management is changing
Several surveys have reported how SCM in recent years has moved from being a cost center to one responsible for offering superior customer experience and delivering competitive advantage. Key requirements of the new SCM function are agility and resilience, using the power of digital technologies to enable them to do this.
According to a report, between 2020 and 2021 there was a dramatic growth in companies focusing on making their supply chains more resilient. Not surprising as this period was the high point of the pandemic. Primarily this meant increasing inventories as opposed to other strategies like nearshoring. It seems that manufacturers found it much quicker and cheaper to increase inventories than build regional factories.
Risk analysis is becoming an important part of SCM. The majority of businesses assess risk on their tier-one suppliers, but as has been noted elsewhere, very few companies look down the supply chain to third-tier suppliers where the supply shortages start.
In a survey on the use of software in supply chain planning, most of the organizations were found to be using manual or outdated methods. In fact, 73% of supply-chain functions were still using spreadsheets! The modernization of software is going to be needed if supply chain management is going to be a valuable business function. The same survey reported that 90 percent of respondents plan to implement a new solution in the next five years.
Benefits of a Supply Chain Management solution
A supply chain management solution can operate as a platform from which early-stage planning to final delivery can be tracked in real-time. It can also enable the new model of inventory management needed for a resilient supply chain – Just-in-Case (JIC). The JIC methodology requires that manufacturers establish optimal levels for different categories of inventory. This has to be balanced with the increased cost of holding inventory, as well as concerns about the size and associated constraints on warehousing operations.
The key to running JIC is supply chain visibility. Visibility is needed to forecast and respond to the peaks and troughs in customer demand. On the supply side, it means having real-time information about the location and state of materials ordered. Having full visibility across the supply chain, and within the value chain of the business, helps manufacturers to take back control of their supply chain operations.
Many businesses are not yet geared to engage in real-time communications with suppliers. It requires an increase in the degree of collaboration, and this can only be achieved with a digital solution. A supply chain portal is recommended in any multi-supplier environment. It provides a way to connect with suppliers electronically and streamlines and automates the process of quoting, purchasing and payment. A supply chain portal integrated with the rest of the business through an ERP system reduces manual intervention, for example, with ordering and in dealing with suppliers’ issues about invoice payments.
How to implement a Supply Chain Management solution
The challenges of implementing a new SCM solution are in the complexity of the processes and the cost of the project. Therefore it makes sense if the solution can be implemented in a modular fashion, rather than all-at-once. This will let the business select the part of the solution it wants to use first, typically based on a short time-to-value. Once proof of value is made, additional modules can be added.
Taking a modular approach can mean the full implementation of a new supply chain solution will take time. Adopting a well-defined, multi-phase road map allows the organization to track the progress of the overall project, and helps change management by allowing progress to happen in a step-wise manner.
Just adding new software to a company won’t fix broken processes. To get the most out of new systems, companies have to redefine how processes work. For example, looking at how low-level processes could be automated can free staff up to deal with more complex issues. More complex processes should be examined to see how new technology like artificial intelligence can be incorporated to help in areas where people often struggle, such as forecasting customer demand.
Other technology like a supply chain control tower can be implemented using dashboards to provide visibility into potential stockouts and address short-term demand-supply imbalances.
To ensure user adoption, an SCM solution these days must be able to support remote and mobile access. There is no need for supply chain professionals to be tied to an office desk in order to do their work.
Investment in SCM technology is needed
The COVID-19 crisis showed how fragile and rigid supply chains were. Many manufacturers have taken action in response to the challenges of the pandemic. But despite that, recent events have shown that supply chains remain vulnerable to disruption. Businesses need to continue innovation in the supply chain function, and to be prepared to invest in technology to support that innovation.