We’re currently witnessing a convergence of events unlike any since China opened its borders to trade in 1978. From U.S. tax reform and the U.S.-China trade dispute to Brexit and the rise in automation, this is a volatile moment for businesses. Supporting this, EY research conducted in 2019, finds that geopolitical instability is ranked the No. 2 external threat to supply chains.
As technology transforms industries, companies often hear they’re falling behind in innovation. But that equates innovation with technology, whereas there are other critical things that companies should consider as they reinvent their supply chain. Here are three critical things CIOs and other IT leaders should keep in mind.
Test with scale in mind: Many companies conduct pilot tests on emerging technologies, such as blockchain, additive manufacturing and Robotic Process Automation (RPA), without a solid plan for large-scale implementation. Oftentimes, this is because scaling issues are thought about after the pilot concludes, rather than being designed into the pilot program. Issues include workforce-scaling considerations, not just technology. For example, a test might indicate that Internet of Things (IoT) bandwidth required for “smart factory” communications may not be feasible within the company’s near-term infrastructure. Or there’s a significant amount of internal politics to overcome and change management required to roll out the solution across business silos.
When it comes to day-to-day business operations, none is more critical, nor complex, than your supply chain. Large-scale reinvention of the supply chain is like changing the tires on a moving car. So, companies must think about a longer-term investment portfolio and measure it appropriately. For example, autonomous technologies such as drones, driverless forklifts and trucks, or physical robots may require significant up-front capital with the financial payback stretching to three to five years or more. However, without long-term investment in an autonomous supply chain, your company may fall behind competitors who are actively pursuing these goals.
Think backwards from the future: There’s a danger in thinking forward from the present. It leads to incremental change in your supply chain. However, in an era when competition comes from unexpected places at a breakneck pace, you can’t afford to merely make “improvements.” The path forward is to create the disruption that forces others to keep up with you.
Companies should implement new technologies with long-term goals in mind. For example, infusing additive manufacturing into a supply chain may involve major capex today. But it could be worth it long-term if it helps reduce waste and increase responsiveness by enabling your company to print replacement parts on-site rather than wait days for shipments. Or, if you find your existing supply chain is too rigid and not agile enough to meet customer demands, imagine what it will look like in the future as you continue to pile on additional applications and processes. Thus, when you think of where you want your business to be five to 10 years out, design a supply chain with the future in mind, rather than one that merely improves incrementally on what you have today.
Focus on the business problem: It’s easy to lose sight of the business problem when surrounded by bright, shiny breakthrough technologies. But innovation works best when it has a definitive, mission-critical purpose. While there is no silver bullet when it comes to digitizing your business, making a sound business case is your best bet for assembling the right combination of digital technologies to carry you into the future.
For example, suppose your company wants to increase the accuracy of its demand-forecasting and/or reduce the gap between supply and demand lead times. With these objectives, there’s now a strategic rationale to apply machine learning and advanced analytics to your planning and forecast processes. Alternatively, robotics and additive manufacturing might be in play to add the agility needed to cut supply chain lead times.
To develop such differentiating solutions for competitive advantage, look beyond the leading practices in your sector. That’s likely to give you only a “me too” solution. Instead, consider approaches that no one else in your sector appears to be looking at. Look at the best thinking from the companies raising the bar for the entire business world. You will find that you are not only prepared for today’s challenges, but ready to take on whatever disruption comes your way in the future.
Glenn Steinberg is a Principal in EY’s Advisory Services business, a member of the firm’s Executive Leadership Team and serves as the Global and Americas Supply Chain Leader. He previously served the firm as the Americas Advisory Solutions Leader spanning the Performance Improvement, Risk and People Advisory Services businesses.