Achieving supply chain resiliency: how to adapt to long-term global disruption
This is a guest blogpost by Mark Morley, Director, Strategic Product Marketing, OpenText
Disruption to global supply chains, particularly in the manufacturing sector, has taken many different forms over the years. Whether due to natural disasters, large-scale industrial action or widespread social unrest, each disruption has brought uncertainty around how suppliers will be impacted and how long the disruption will last.
All major forms of supply chain disruption – be they triggered by significant oil price moves, regulatory environment shocks such as Brexit or catastrophic climate events and earthquakes – have brought about the need for new levels of supply chain risk management. However, the global supply chain is facing a very different challenge today. The Coronavirus pandemic is not just a short-term crisis. We are facing many months and potentially years of disruption impacting companies all around the world, and we’re already witnessing turmoil on a scale never seen before. The old rules no longer apply. So how can organisations adapt to manage long-term global supply chain disruption?
The challenge ahead
We’re into uncharted territory. No one knows exactly what lies ahead as the COVID-19 pandemic could almost be described as causing the first truly global supply chain disruption of the modern era. The types of supply chain turbulence the world has experienced in the last few decades have tended to be more regional in nature. For instance, following the Fukushima earthquake and tsunami in 2011, agile businesses were able to pivot quickly and source alternative supply elsewhere. In contrast, a global pandemic is by its nature a global challenge. Bloomberg recently estimated that this particular outbreak could cost the global economy $2.7 trillion – close to the entire GDP of the UK. Dun & Bradstreet predict that nearly 5 million businesses globally could be impacted.
As each country implements different restrictions depending on the severity of virus transmission in their respective region, supply chain resilience is being tested in new ways. Deloitte recently referred to COVID-19 as a ‘black swan’ event. It will force companies to restructure supply chains and introduce more flexible IT infrastructures that facilitate new ways of working and support more agile supply chains. Instead of abandoning global supply chains though, it’s time to redesign and rebalance supply chains.
The reality is companies are unlikely to completely avoid supply chain disruption caused by the Coronavirus. All the traditional approaches to supply chain risk management still need to be deployed but it’s likely that the companies which think innovatively about their production and supply chain operations will weather the storm best. This means making changes to better map supply chains, understand risks and deploying systems that help them adapt and flex.
Adapting to the ‘new normal’
Many organisations have already demonstrated their ability to adjust to new challenges when required during this pandemic. For instance, distilleries across the UK switched production to make alcohol-based hand sanitizer to slow the rate of coronavirus transmission. The manufacturing sector in particular was able to pivot quickly in response to the UK government’s rallying call to assist with ventilator production. The VentilatorChallengeUK Consortium – comprised of UK industrial, technology and engineering businesses from across the aerospace, automotive and medical sectors – came together to meet the national requirement for more ventilators. In total, the 33-strong consortium led to over 5,500 people working across nine sites to produce between 100-200 combined units per day.
Beyond adapting production lines, the magnitude of the current global pandemic is forcing many manufacturers to adopt new ways of working that maximise productivity and flexibility through information management and digital technologies. The reality is business and supply chain resilience go hand-in-hand with digital transformation in the ‘new normal’ – for manufacturers and companies across other sectors.
Establishing supply chain resilience
Establishing supply chain resilience requires organisations to adopt more robust digital tools and make a fundamental change in their approach to business practices. Given today’s global levels of disruption, organisations must focus in on four key areas to achieve resilience within their supply chain.
Adopting technology which enables supply chain flexibility and keeps vital channels of information open and accessible anywhere around the world is key for business continuity. Companies that achieve this can better weather unforeseen events. In today’s market, cloud-based deployment and storage is essential here – enabling businesses to manage costs, resources and risk without sacrificing competitive advantage, customer satisfaction or product innovation. When a manufacturer shifts their data from on-premise storage to the cloud, they ensure that all business information becomes globally accessible. As the global supply chain has to adapt based on the level of restrictions in place in various countries at any time, this flexibility – made possible by the cloud – will be vital.
Another key to business continuity for manufacturers is maintaining collaborative relationships with external partners. Deploying a cloud-based platform allows them to improve the contact management relationship between trading partners if a global disruptive event occurs. With this technology, partners can continue to monitor and supervise the execution of dual sourcing strategies. It also means they can use the centralised management of all trading partner contact information to quickly establish the post-disruption condition of a supply chain – providing significant competitive advantage while also leading to more accurate risk assessment and prevention steps for future disruption.
Manufacturers seeking to adapt their operations and continuously provide products and services to their customers should shift towards technologies that provide visibility on data, giving them a better opportunity to speed up and improve decision-making processes. These companies can better communicate and secure expanded visibility into their multi-enterprise operations using integrated third-party data sources. By doing this, manufacturers will be able to self-monitor the functionality of critical components that could be impacted by unforeseen supply chain and operational disruptions.
Analytics, artificial intelligence, and machine learning technologies are invaluable during a period of disruption. A greater focus on data preparation and integration to bring together information from a wide range of sources is crucial. By capturing and analysing its entire data set, a manufacturer can derive insights which enable greater efficiency, improve operations, drive innovation, and open up more new business opportunities. For instance, the adoption of a cloud-based predictive analytics platform enables real time alerts when supply chain issues arise – such as a late delivery or a missed order – and ensure timely human intervention can correct these errors. It also allows for ‘what if’ scenarios to be played out to understand the impact of any disruption or change, such as introducing a new set of second source suppliers across a supply chain. Essentially, better information management layered with analytics and machine learning technology can provide the insights required to remain on top of potential issues and maintain workflows – both vital for the viability of a manufacturer’s operations within the larger supply chain system.
The global pandemic has put a bright spotlight on the challenges manufacturing companies face, as unstable global markets and shifting supplier relationships continue to disrupt operations. Any disruption can set a chain reaction of issues in motion, from shipment delays to limited visibility into delivery status and inventory levels. Digital transformation will be key to achieving supply chain resilience and adapting to long-term disruption. Companies that seize the opportunity and move to agile and flexible cloud-based architectures will be able to respond quickly to changes and continue to deliver, operate and excel despite the constant flux of global disruption ahead.