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Baking adaptability into the supply chain

The coronavirus crisis has highlighted the importance of data and automation in supporting an agile supply chain.

Optimising a supply chain can sometimes feel like driving a supertanker. No matter how quickly you become aware of changing market conditions or near-future opportunities, the sheer number of stakeholders involved may mean it takes you weeks, months or even years to adapt to them. In other words, while it might be easy to see the iceberg coming, steering out of the way is a painfully slow process.

It does not have to be like this, though. The best supply chain firms are masters of data and automation, and this allows them to build agile, adaptable supply chains that are able to react quickly to changing conditions.

A key insight underpinning the development and implementation of these advanced supply chains is the idea of non-linearity. Instead of seeing a supply chain as a conveyer belt, in which goods are passed from manufacturers to consumers, building an effective supply chain requires one to also conceptualise the movement of data between key stakeholders, and use them to directly inform manufacturing and distribution decisions at a granular level.

Linear versus non-linear supply chains

The concept of a “non-linear supply chain” might seem complicated at first glance, especially given that some large companies still manage their supply chains through some combination of technology like email, phone, or fax.

But the concept is straightforward. Most supply chains work in a linear fashion, in that goods pass through a series of stages: commissioning; design; manufacturing; distribution; and delivery.

Even the most advanced supply chains, of course, must also complete these processes. However, in the vast majority of cases this model suffers from a number of key disadvantages and inefficiencies.

At the broadest level, there is little (or no) visibility of any of these stages from those working in other parts of the supply chain. Designers, for instance, generally have little insight into how distribution networks work, and delivery mechanisms rarely have input into commissioning structures.

This kind of interconnectivity is what is meant by “non-linear” supply chains. In these models, goods still move through the stages above, but there is another commodity that is able to move between them in either direction: data.

Information flows

Data is the basis of efficient, contemporary supply chains. The “traditional” approach to supply chain optimisation has been to reduce the resources devoted to manufacturing physical goods and moving them from place to place.

While this remains the core function of any supply chain, managers should also recognise that a modern supply chain consists of far more than physical goods. For a while now, we’ve been living in a digital world. Like it or not, that changes everything.

In even the simplest supply chain there is an exchange of money, time, and information, and these flows are far less linear than the flow of physical goods. Facilitating these flows, and particularly the way in which information is disseminated among partners in a supply chain, is now a key concern in optimising.

One of the key reasons why supply chains are so slow to adapt to changing market conditions has been a focus on cyber security, which creates a reluctance to share information among delivery agents, manufacturers, designers, and more. This reluctance is not unwarranted when one considers the ever-increasing number of data theft incidents.

Those charged with supplying goods to the final customers often hold a vast amount of information on consumer preferences that simply is not available to other stakeholders.

Supply chain visibility

This concern to make data on the various moving parts of the supply chain available to all key stakeholders is known as supply chain visibility, and has been a major focus of research and development funding for industry leaders over the past decade.

In theory, it should not be difficult to achieve supply chain visibility. It requires, however, two commitments from all of the organisations involved with a particular supply chain: one is to put in place the technological systems required to collect data; the other requires a willingness to share this data with others.

As Quantzig, a specialist in supply chain data visibility, said recently: “The customers of today have more choices than ever before. This provides them the motivation to demand more. Modern customers expect shorter cycle times and will be less tolerant of mistakes and late deliveries.”

This gives rise to a need for firms to be able to respond – at both an operational and managerial level – to rapidly changing market conditions, and to ensure that this agility exists throughout their supply chains. To meet these demands, firms need a transparent, more effective supply chain and a better flow of data and information. A system that delivers a comprehensive view of the supply chain will help generate better consistency while classifying stock keeping units (SKUs), measuring units, and imposing timelines.

Transparency of this type can also have positive impacts on many other areas of business. The ability to quickly implement new ways of producing goods, for instance, can ensure that firms stay compliant with changing regulatory demands, because supply chain visibility tools help trace the continuously changing landscape of government regulations and compliance.

This is particularly useful for organisations that function on a global scale when it comes to handling the complexity of trade agreements and government tariffs. Additionally, companies can better predict and respond to new regulations in the industry and in terms of transportation used.

The value of digital supply networks

In practice, taking a non-linear approach to supply chain optimisation, and making all this data available to key stakeholders, means putting in place a digital supply network (DSN) that is able to collect and aggregate data from a variety of manufacturers and distributors. These systems facilitate the flow of data and information between all key stakeholders.

There are many advantages to DSN systems. As Deloitte recently explained, an integrated DSN hub can enable a digital organisation and support for the free flow of information across information clusters.

This hub, or digital stack, provides a single location to access near-real time DSN data from multiple sources – products, customers, suppliers, and aftermarket support – encapsulating multiple perspectives. The digital stack includes layers that synchronise and integrate this data to support and enable informed decision-making.

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In turn, DSNs can have effects throughout the production and distribution life cycle. This kind of system can dramatically reduce transaction costs for the exchange of goods across your supply chain.

Since everyone in this chain has more detailed information on exactly how their manufactured goods are performing – on both a technical and commercial level – each partner can take steps to optimise the cost-efficiency of their own systems.

Second, implementing this kind of non-linear data collection makes supply chains more agile, because it integrates the market intelligence of every organisation that is involved in the process. If a small tweak to a particular product is likely to make it exponentially more successful, this is liable to become apparent to distributors long before it occurs to designers. By building data transparency into each stage of a supply chain, this kind of insight can be instantly shared across it, and immediately made use of.

The bottom line

There are, of course, challenges to be met when it comes to implementing non-linear supply networks. An executive interviewed in Deloitte’s Digital supply network transformation study discussed the problems associated with implementing a DSN that has more than 1,500 suppliers, does the bulk of its business with only a fraction of those companies, and argues that a digital network in which all suppliers participated would provide far greater insight into inventory needs.

Ultimately, though, taking a non-linear approach to supply chains does not mean a complete redesign of your systems. Instead, it merely involves a recognition that the way in which information and resources are shared between partners is already non-linear. Embrace this fact.

Doing so has a number of key advantages. It allows for achieving greater supply chain resiliency. It also means that you can adapt your supply chain at almost a moment’s notice.

Most importantly, it reduces the amount of resources and capital you waste, which improves profitability, and that is almost never a bad thing.

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