Logility VPs Dario Fischli and Jonathan Jackman recently hosted a webcast on overcoming ever-increasing business disruptions today while building a sustainable supply chain for tomorrow. It turns out these initiatives are two sides of the same coin.
Indeed, today’s supply chain disruptions are occurring more frequently, narrowing the window of opportunity for business leaders to respond effectively. The hosts covered the critical ingredients needed to enable resilience and agility in your sustainable supply chain, as well as the importance of responding at “the pace of disruption.”
Fischli and Jackman provided straightforward advice on topics such as:
- Addressing demand and supply variability and countering supply chain disruptions
- Making honest and verifiable sustainability claims to your entire network
- Aligning your business with consumer demand for more transparent practices—showing respect for people and the environment
- Setting clear expectations and fostering better communication and collaboration with suppliers
- Making data-driven sourcing decisions to enable corporate social responsibility (CSR).
“We can clearly see that the external events and shocks that have been weighing heavily on organizations and required certain actions to mitigate them have increased massively,” says Fischli. Events such as the Suez Canal debacle and the ongoing chip shortage caused by the stay-at-home shift are creating disruptive ‘waves’ that have many ripple effects across industries and geographies.
The Pace of Change Has Accelerated
At Logility, we believe that more frequent and pervasive “trigger events” are not overlapping one-offs, but instead represent the new normal. In October 2020, Computer Weekly claimed that the pace of change has accelerated. In particular, the pandemic created a new sense of urgency around digital transformation. Eliminating inefficient, manual processes became a matter of survival.
And not all companies survived. Company lifespan is indeed shrinking. A recent McKinsey study found that, in 1958, the average lifespan of an S&P 500 company was 61 years. It’s now less than 18 years. Of course there are various causal factors at play, but among them are missed opportunities due to supply chain fragility and under-investment in modern technologies.
Sobering yes, but Logility customers are well-equipped to manage two persistent threats: demand variability and supply variability.
The COVID lockdown created unprecedented demand swings; note the startling changes in categories like sugar and new car sales, for example. A similar phenomenon happened from a supply variability perspective where shortages in materials and labor created bottlenecks and unfilled orders, dubbed by some experts as “the revenge of the old economy.”
Unfortunately, many businesses still suffer from a disconnect between data and decisions. In a real-time audience poll that ran during the webcast, 50% of respondents said their companies can’t leverage data to answer critical business questions.
What You Need to Address Variability
To address all aspects of supply chain variability, Fischli offered the following capabilities as primary needs. These include the ability to:
- Translate demand variability into inventory strategies – improve visibility and leverage multiple scenarios based on inventory form and function
- Ensure S&OP decisions are faithfully translated into execution plans by using interactive dashboards that reveal gaps and threats
- Create a ‘digital twin’ of your entire supply chain
- Shift finished goods inventories across multiple locations based on scenario planning results.
Who has actually put these practices in place? “Kraft Heinz, a global leader in the food and beverage market, ran into trouble during the pandemic given that some of the service levels they promised couldn’t be met. The company shifted its focus from top-down cost control to a service level and inventory optimization stance. Consolidating data across silos helped them make sense of their information and led to a more effective S&OP discipline,” says Fischli.
“You ought to be focusing on real-life constraints,” suggests Fischli. “When you model and build scenarios, make sure your scenarios reflect these constraints. In addition, have a data layer that is reliable and that employees find trustworthy.”
Enabling Supply Chain Sustainability
“How can companies not just survive, but actually thrive in this new normal that’s surrounded by uncertainty, reluctance and delays?” asks Logility VP Jonathan Jackman. He noted that a variety of stakeholders – governments, industry organizations, consumers, investors – have increased the pressure on businesses more recently to move beyond feel-good slogans and build genuinely sustainable networks. “Consumers are clearly changing their behavior based on what they see from a brand’s impact on the environment and also based on whether the brand can offer transparency into what it’s doing in the supply chain.”
So what does it take to create a resilient, sustainable supply chain? These capabilities are key:
- Supply chain traceability – multi-level, tracking chain of custody up and down the entire network, and documenting every transaction
- Corporate social responsibility – simplifying data collection, creating and monitoring corrective action plans, enforcing adherence to standards, being ready to invest in your suppliers’ success
- Resilient planning – using a digital twin to map your complete network n-tiers up and down, and simulating future events. This essentially brings operational and sustainability goals together in a single model
- Multi-enterprise collaboration – improving planning processes and benefitting from increased visibility thanks to a single, integrated platform
- Supply chain data management (SCDM) – using technology to normalize and digest data so more time is spent on decision-making versus wrangling data.
“Today’s technology allows us to digest and normalize vast amounts of data and reduce decision latency. We can compress the decision cycle much quicker than we could do in the past. We can then automate the decision, and by completing the action we become much more efficient and effective in getting to the business value,” notes Jackman.