The Coronavirus disease (COVID-19) crisis has, among other things, exposed many vulnerabilities when it comes to how we work and conduct our everyday affairs, one of them being the effectiveness of the supply chain.
According to a study from Resilience 360 and Business Continuity Institute (BCI), 73% of companies surveyed experienced supply chain disruption during the pandemic. And, the news is everywhere. There is increasing demand for consumer packaged goods such as cleaning products as panicked consumers buy in bulk. Yet, because of forced plant shutdowns due to infected workers or a shortage of workers because of new family obligations, it’s been impossible to keep up with rising demand.
Putting the spotlight on supply chain risk
Adding to a U.S. manufacturing slow-down, the current crisis has exposed vulnerabilities when it comes to sourcing raw materials for everyday consumer goods, as well as critical drugs, electronics components and parts for automobiles. Part of the problem has been the over-reliance on offshore partners in places like China and India. While the cost of doing business in those regions has been notoriously lower, when supply chain disconnect occurs, it often hits companies harder given the distance, varying regulations and regional outbreaks that are hard to predict. U.S. dependence on overseas partners for critical supplies is not new because of COVID-19, but it certainly has put a spotlight on it.
Another risk is in single sourcing in exchange for lower rates. For example, Apple may offer to consume 85% of a supplier’s business in exchange for a set fee. The problem is, when the supplier runs into an unexpected issue, like COVID-19, the buyer is not able to fulfill demand.
One way companies can ensure that the business does not come to a screeching halt when suppliers shut down or are unable to transport materials for a variety of reasons is by broadening the supplier base. Minimizing risk by using multiple suppliers that may not be experiencing the same issues that might be cropping up in other regions.
Supply chain digital transformation takes a bold approach
The key to addressing these supply chain challenges now and into the future lies in digital transformation. Yet, many companies have started to rest on their laurels, thinking that software upgrades or some level of application modernization make them digitally-driven companies, but real change comes from true digital transformation, the type that connects the entire supply chain, boldly disrupts ways of working and changes business outcomes.
So, what are the types of digitally transforming technologies that can address the current supply chain challenges? Below are four of them:
· Cloud transformation. As the pandemic has shown, when people are unable to go to the office, it’s important to have access to business-critical systems regardless of where they are located. Further, cloud-based services can connect everyone in the supply chain, providing a more strategic approach for inventory deployment. This helps with planning and management of the supply chain, allowing all parties to access up-to-date content to make informed decisions with the right information.
· Predictive analytics. Out of the many benefits of artificial intelligence (AI), the ability to analyze large datasets and uncover trends may be the most promising when it comes to managing a supply chain. In an age when just-in-time (JIT) manufacturing has driven companies to produce just what is needed to meet demand without creating a surplus, it’s been more important than ever to anticipate demand. AI’s ability to use data, such as consumer spend during prior crises, population growth or the goods most in demand during holidays, can help ensure that supply chains are equipped to handle the deluge without losing money in unused surplus.
· Computer vision. When moving cargo across the world, computer vision, which leverages AI to identify and classify objects, can help determine the best routes for transportation, congested areas that need to be avoided and pallets in a warehouse. Machine vision can provide complete verification accuracy for receiving, shipping and loading of pallets to enable complete and correct fulfilment throughout production, distribution and retail operations.
· Augmented reality. While still a nascent field, augmented reality (AR) uses technology to super-impose computer-generated sensory input like sound, videos and images, over a person's real-world view. It’s beginning to be used to help train warehouse workers on what items to pick, how many items to pick, where to pack them or how to navigate a facility. In addition, managers who may not be able to be on-site because of the pandemic, can use AR to get real-time visibility into a plant to know that processes are running as planned.
While digital technologies can help companies overcome many supply chain challenges there are some key steps that can be taken to ensure their smooth roll-out. Consider the following:
· Identify the problem. Determine the manual processes that are affecting the problem and how they can be automated. This is essential to uncovering the right technology for the job. Working with an objective service provider can often help you identify the problem and explain the technology options -- as well as the datasets –that can address them.
· Employ a design-thinking mindset. What’s helpful in identifying a manual process that needs fixing is by going directly to the source – the end-users most affected by it. Taking a design thinking approach means speaking directly with the end-users to hear about their frustrations, wants and needs and building out the digital transformation solution accordingly.
· Push partners to digitalize too. Most digital transformations will not be effective without everyone onboard. Make adopting certain technologies, such as e-invoicing, automated asset tracking or cloud-based logistics management a prerequisite to working with you.
· Don’t try boil the ocean. When setting out on the digital transformation journey, it’s important to start small, identifying one thing that can have a major impact and slowly roll it out to assess challenges and make necessary changes. For example, when transitioning to the cloud, move only a few solutions initially, while maintaining on-site apps and then migrate additional apps incrementally.
Today more than ever, trust, transparency and communication between suppliers and buyers and everyone across the supply chain will hold the key to ensuring smooth operations that meet surges of demand. While tech innovation has been gradually occurring across the supply chain, the pandemic has truly been the call to action for true digital transformation that addresses these needs and disrupts old ways of thinking to meet a changing and unpredictable world.