Supply Chain Disruption: Course Correction needed to overcome itBusiness | January 05, 2022 | By
Sourcing strategically with quantified risks and ensuring fail-safe mechanisms is part of the job for procurement and supply chain professionals. But, this pandemic, geopolitical and economic issues, and climate change have taken that KPI to a whole new level. We have seen so much drama unfold that we can produce several blockbuster and apocalyptic movies out of them. It was a roller-coaster ride over the past 18 months in the procurement and supply chain space.
For a tightrope walker, it is difficult to juggle multiple items and walk without falling. The same is with procurement and sourcing professionals, juggling several issues. Imagine, when the pandemic intersects with the political and economic issues, which intersects with the supply and labor shortage which intersects with the trade regulations and climate changes, and so forth. So many issues to juggle with already, that even a relatively small disruption, such as a factory fire in one end of the globe, which hardly would have been noticed earlier brings additional imbalance now.
Understanding the problem helps in getting better solutions
The chaos so far has shown us that we can no longer think about the supply network in the way we used to. The pandemic has highlighted how interconnected and destabilized the global supply chains are, with disruptions in one area creating a ripple effect on all parts of the chain.
There are two areas where disruptions will affect or have affected the product life-cycle. The first is in New Product Development(NPD). For example, when there is a new EV in the development with a higher range and better battery efficiency. Imagine, to manufacture this EV, components like Lithium-ion batteries, specially designed chassis, etc need to come from different places. They are then manufactured and assembled in the factory and shipped to customers. Because of the disruptions, the supply chain breaks upstream of the supply network, and like a bullwhip effect, spirals downstream. Thus, the NPD strategy of the organization for the short, medium, and long term is affected.
The second delay is when ordering a product directly from the market. Shipments of electronic items are getting delayed due to the chip shortage and, so are automotive deliveries. What happens here is, you cannot come up with a successful product, and second, even if you have a successful product, you cannot produce more since the materials are stuck in the supply network.
Winning with digital transformation
By now, we all are aware of what digital transformation is. It brings visibility and options to manage things. In a traditional sense, understanding statuses in any manufacturing organization is time-consuming. With the right tool, the time taken is nil since we can quickly know the status of materials, shortages, payments, shipments, etc.
For example, when manufacturing the new component for improving fuel efficiency in an automobile, we can know the status of the material. Whether it is still in production, or shipments delayed due to materials stuck in ports, or stuck when in transit due to vehicle issues, etc. All of this information is available on-demand, provided with the availability of the right tools. Having the right tool for visibility itself is a big step in digital transformation and building resilience for future supply disruptions.
Actions speak louder than words
Having the right platform in place gives the users opportunities to build actions based on these data points and the ability to manage things in a single dashboard. Today, even though it is digital, organizations use emails as parcel services for sending document attachments. It takes time and resources to understand and put that data into action. Even after understanding, there is no platform to implement these actions, and again it is manual work. For example, even though a purchase order(PO) gets released through ERP, the time and effort taken to decide the supplier by collating the data manually should also be available digitally for ease of consumption, comparison, and retrieval. It is not mere data entry but the immediate availability of data under actions like PO release by whom and when and to which vendor. Thus, without any manual intervention, RFx will be sent to vendors at the right time. And, this is the first step to digital transformation. The next step is to leverage the power of AI and ML, where the work/activity/process should be in a place where you can read from and make strategic decisions.