The 21st century’s global economy is a complex and vast web of interconnected supply chains. Fueled by the rapid advancement of digital technologies, this highly competitive and fast-moving business environment has enabled many organizations to expand their operations and achieve unprecedented success. The COVID-19 pandemic brought this upward trajectory to an almost immediate halt; measures to mitigate the spread of the virus, such as national lockdowns, resulted in massive global supply chain disruptions. The crucial takeaway for supply chain managers, particularly as their organizations prepare for a post-pandemic world, is the urgent need to safeguard their businesses’ sustainability by mitigating the impact of future volatility.
Supply chain disruptions are not new phenomena. They occurred before the pandemic and will continue to happen, with varying degrees of predictability, once the virus is no longer a threat to our lives and livelihoods. Well-documented geopolitical events such as Brexit and the US-China trade wars, unexpected natural disasters linked to climate change, as well as the potential for future pandemics, can and will cause further supply chain disruptions. Fortunately, digitized supply chains empowered with advanced technologies can help organizations mitigate the impact of uncertainty by adequately assessing – and preparing for – future risks.
Download the insight Of black swans, confirmation bias, and the O-ring theory: Why cynics can help you build supply chain resilience to find out more about managing disruption and mitigating risk.
Digitization is key to withstanding supply chain disruptions
Not only has the COVID-19 pandemic exposed weaknesses in global supply chains, it has increased the power of consumer influence and highlighted the prevalence of outdated IT infrastructures. Supply chains dependent on outdated production systems are not built for agility or visibility, and thus they are unable to respond to crises – or even a sudden change in customer demand – effectively. Simply put, these supply chains aren’t smart or fast enough to withstand ongoing supply chain disruptions in a global economy.
In a recent TRACC Community webinar, Tony Riachi: VP of Supply Chain, CCi Americas, discussed the importance of advanced supply chain planning capabilities to deal with supply chain disruptions in all forms, effectively and efficiently. These advanced supply chain planning capabilities include smart management tools that can sense disruption and deliver “what if” analyses based on data-driven scenario planning. Such smart supply chain management tools are powered by new digital technologies such as the Internet of Things (IoT), cloud computing, 5G, artificial intelligence (AI), automation and 3D-printing. Thus, to harness the insights of smart tools in their supply chain risk mitigation strategies, organizations need to digitize their entire operations.
How digitization improves supply chain resilience
The process of digitization evolves an organization’s technological capabilities. This digital advancement enables the supply chain to leverage new technologies for improved resilience and increased value creation. Essentially, digitization can help mitigate supply chain disruptions by providing a strong and sustainable foundation for operational excellence.
Here are three crucial benefits of organizational digitization and how they can help future-proof supply chains:
1. End-to-end visibility
A traditional organization is typically characterized by an IT function that sits apart. The power of digitization is that it dismantles all operational silos, including IT, to embed advanced capabilities throughout an organization. This holistic redesign means that information is shared across departments and functions, aligning people, technologies and processes to achieve end-to-end visibility.
A digitally integrated and enabled organization is also able to align its internal systems, such as the supply chain, with its external networks, such as customers’ demands. This integration and synchronization of functions and focus areas transforms an outdated supply chain into an evolved demand-driven value network (DDVN) that delivers sustainable value for the organization, its employees and its customers.
In a DDVN, streamlined processes are based on known quantities and capacity, ensuring that customers’ needs are met on-time, every time. An organization that has evolved its entire operations, including its supply chain, into a DDVN is able to shift its production strategies swiftly and in tune with market demands. This informed agility strengthens an organization’s ability to pre-empt and respond to supply chain disruptions as and when they happen.
2. Data-driven intelligence
A key indicator of a digitized organization is how it gathers, shares and uses its data for optimized decision-making and problem-solving. A digitally empowered organization is able to employ advanced technologies to collect data in real time, feed it through analytical models and make valuable insights accessible across its extended supply chain. Intelligent, actionable and shareable data helps organizations mitigate the impact of supply chain disruptions by empowering their employees with knowledge.
When data is put at the center of an organization, it creates an operational culture that shares information and solves problems together. This enhanced collaboration among employees is key to safeguarding an organization’s competitive position, enabling it to make more strategic business decisions as well as improving its tactical responses to shifts in the market.
3. Enhanced employee engagement
A technologically enabled, digitally driven organization understands the importance of its people in maintaining operational excellence during periods of stability and volatility. The digitization process itself is characterized by change; employees have to adapt to new ways of working and adopt digital tools in fulfilling their roles. Thus, a successfully digitized organization is one that has united its human workforce in pursuit of sustainable, integrative improvement. This cultural foundation provides a strong defense against supply chain disruptions; the organization operates as one and can respond to changes in the market without hesitation.
Cultural characteristics of a digitized organization include a positive leadership that motivates and supports its teams to achieve their goals, individual accountability, data-driven KPIs, knowledge-sharing networks, incentives and training programs. Key to creating a united, digitally fluent organizational culture is providing employees with the digital skills they need to perform optimally in their roles. Empowered, accountable and digitally capable employees help steer an organization’s success through challenging times. For example, the COVID-19 crisis quickly shut down physical offices to stem the spread of infection. Digitized organizations had the technology and the skills to adjust to a remote-working environment and continue operating effectively.
A smart supply chain is stronger
The COVID-19 crisis has humbled many organizations, exposing their fragilities and challenging their traditional systems of production. Supply chain disruptions have affected businesses, communities and local economies around the world. It has not been easy. However, periods of upheaval also present organizations with opportunities to address their weaknesses with innovative thinking, operational redesign and bold action.
To future-proof supply chain organizations, business leaders and supply chain managers need to first accept that volatility is par for the course. The next step is to build resilience into their organizations’ architectures by redesigning their processes and functions to withstand disruptive events and enjoy the benefits of global interdependence.
Supply chain organizations seeking sustainability need to harness the powers of advanced supply chain planning capabilities to pre-empt risks, mitigate impact and respond fast. Digitization enables the adoption of new technologies and skills to drive these advanced tools. A digitized organization can also protect its supply chain through integration, making it leaner, smarter, more agile and better prepared for the inevitability of future disruptions.