Supply Chains May Be Stalled - But Can Still Deliver Opportunity

Companies are beginning to reconfigure their supply chain model to match consumer expectations, wants and needs, and guard themselves against future disruptions.

At the root of the supply chain crisis is surging demand for goods among consumers who have emerged from lockdown and are sitting on $5 trillion savings they are eager to unlock. A global spending boom straining networks beyond capacity, with extra demand translating into an estimated 119 million more shipping containers between January and August.

Given this unique moment in time, it’s hardly surprising that goods are stuck at ports, with continuing delays and rising inflation fueling fears among supply chain executives that there is no quick fix. A recent Accenture survey of global C-suite leaders revealed that executives worry the pandemic fallout on the supply chain could last for years -- as confirmed by an all-time record of over 3,000 mentions of “supply chain disruption” on earnings calls in a single week last month.

However, there is opportunity amid disruption. Most executives believe customers’ growing expectations for fulfillment will prompt companies to restructure supply chains, shift production closer to demand, and embrace automation. This could potentially pay off: Meeting customer expectations can drive new value deriving from greater certainty, better experiences, more sustainable operations, and consistent quality. Supply chains may be stalled but can still deliver opportunity.

From Crisis to Certainty

Accenture’s C-suite survey of 866 companies in six countries also highlights fears that the economic impact of the crisis could drag on: Most respondents think it will last over a year, while 33% of executives say it could drag on for three.

Yet, the underpinning concern is uncertainty; many companies are currently unable to follow the movement of goods or know what is at risk of going wrong. And their responses are being shaped by the way COVID-19 has not only made supply chains a strategic priority but also accelerated technology trends fueled by customer expectations.

In the short term, 43% of executives are ordering supplies earlier and making contingency plans to ease shocks, 35% are increasing inventory, and 37% have identified new suppliers. However, in the longer-term supply chains are being reinvented to guarantee resilience and equip businesses to cope with the unexpected: 43% of executives are already doing this.

Key to resilience are powerful digital tools that enable organizations to integrate diverse data across every function -- often in real-time. Companies succeeding will gain a unified view of demand and will be able to continually balance inventory while being ready for any disruption.

Think about how hard it is for supermarkets to order the right inventory. One large grocery retailer transformed its ability to predict demand by using an AI-based system that orchestrates human plus machine collaboration.

Similarly, Accenture and MIT have designed a stress test based on a supply chain “digital twin”, enabling users to sidestep spikes in demand, supplier shutdowns, material shortages, or port disruptions. Such technology has long given pioneers like Amazon an edge, but shipping giants are also building their own software and AI firms are creating bespoke tools to order.

Seamless and Sustainable

Combining analytics with the cloud has radical implications, offering huge potential to automate at scale and unprecedented possibilities to manage service levels and costs, reinforce resilience, and take responsibility for environmental and social priorities. This will generate better customer, stakeholder and worker experiences and enable seamless, coordinated operations like never before.

Our survey indicates that a large majority of business leaders foresee (79%) a technological transformation to enhance real-time supply chain visibility. This will in turn unlock new value in a host of ways, not least allowing companies to sharpen their focus on consumer behavior. For instance, a consumer goods giant saved $1 billion by moving to a data-driven digital procurement model, recouping costs within two years, and a global fashion retailer saw customer retention soar, market share increase by 28%, and operating profits double.

Furthermore, sustainability priorities mean customers and stakeholders now expect companies to eliminate excess inventory, slash waste or make and ship only what customers want. As a solution, one manufacturer is creating a user-centric, demand-driven “made-to-sell” approach to production informed by real-time insights that has super-charged efficiency by 20% and cut inventory by 30%.

Moving production closer to consumption is far greener, slashing a supply chain’s carbon footprint, and nearly three-quarters (73%) of company leaders foresee this happening. A great example of how it can be done is being pioneered by grocery stores partnering with vertical farms to grow produce at the point of sale, while others are repurposing space into local fulfillment centers.

Indeed, evidence suggests we can expect “think local” to become the mantra of production and fulfillment as many companies scale back global supply chains for regional networks. But these changes also have implications for the materials and parts that manufacturers use, with leaders redesigning products to avoid vulnerable sources and ensure consistent quality.

Adapt to Survive

The pandemic has confronted supply chain leaders with their greatest ever stress test, challenging them to refashion operations so they are relevant, resilient, and responsible. Global supply chains have confronted a perfect storm of challenges, but the devil is not just in the detail -- the fundamental problem is the model itself, which has evolved to optimize just-in-time efficiency without room for error.

For a moderate investment, the fusion of data, analytics, and automation in smart operations can not only lower costs and raise revenue – but also increase customer retention. Digitalization can transform customer experiences while offering new transparency -- like Amazon’s line of sight into product delivery times.

As Albert Einstein famously said, ‘In the midst of every crisis lies great opportunity.’ We stand on the brink of a supply chain revolution set to tap new seams of value, efficiency and sustainability.

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Sara Peters, Editor-in-Chief, InformationWeek / Network Computing
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Sara Peters, Editor-in-Chief, InformationWeek / Network Computing
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John Edwards, Technology Journalist & Author