For many decades we have understood disruption from technology and feared the changes disruption requires of us. For only a couple of years, however, have we understood that disruptions today, happen faster and faster, and from places, we never even knew existed. The question is: what are we disrupting for?
Supply Chain volatility has increased
It is obvious to everyone. The Supply Chain is changing. Changes that have the potential to change the entire business. The technological advances that we have seen over the past several decades have finally driven us to a tipping point. We are now on the precipice of a fourth industrial revolution that will truly transform business and all stakeholder relationships. The push toward the fourth industrial revolution has accelerated over the past two years. Not only are technological advances occurring at a fast and furious rate, but the level of volatility in the Supply Chain has also increased.
Persistent challenges from increasing customer demands, disruptive competitors, and economic fluctuations make the optimization of Supply Chain designs harder. Various megatrends mean that Supply Chain complexity and risk are growing. Decision-making speed and quality need to increase to enable faster recovery from disruptions. At the same time, there is a need to handle real-time data and complex business requirements across multiple networks – and balance risks and trade-offs.
Need for new capabilities across all timeframes
In the face of these raised levels of volatility, we have no choice option but to lead transformative changes to reach a Supply Chain Future-Fit stage. Simply going through the motions of change is no longer an option. Companies that make changes simply to make them – without having the desired endpoint in mind or following a systematic process will never achieve success.
The only way forward is to change most if not all the settings in the company at both the human and technical levels. Achieving a highly resilient company that can grow and prosper in todays’ uncertain environment will require new advanced capabilities across both the strategic (two to five years), tactical (one to 24 months), and operational (one to 30 days out) timeframes.
Reimagining the Supply Chain is key
The challenge is to achieve the ideals of fully integrated, efficient, and effective Supply Chains capable of creating and sustaining competitive advantages. Downward cost pressures must be balanced as well as the need to manage effective ways to manage the demands of market-driven service requirements. At the same time, there is a need for a resilient and transparent Supply Chain.
It could potentially mean reimagining and reconfiguring the network in terms of capacity, sourcing mix and location, manufacturing capacity, and location. It could potentially also mean adding to their classical S&OP processes a tactical scenario testing capability to be used during times of serious disruption. In other words, when conventional forecasting processes become unworkable and unreliable, it will allow the company to become more agile and resilient. Supported by end-to-end visibility and the ability to make decisions fast. Fast decision-making enhances the resilience of the entire company.
Technologies such as AI are transforming how decisions are made. More people no matter what their roles are can now have real-time access to the information and perspectives that they need to do their job. As a result, individuals and teams will be better able to manage themselves, work together, and the types of decisions without the involvement of management. Companies will not need to organize themselves in the traditional way. I.e., there is no need to ensure that decisions are aligned around its goals because that happens automatically.
The Supply Chain to be seen as a living system
Digitization is re-shaping the Future-Fit Supply Chain. It changes the culture to one which is more adaptive, resilient, innovative, and customer-centric. In other words, an organization that functions as a living system – not just a mechanical one. What’s standing in the way?
According to an article written by John Gattorna and Pat Mclagan in Supply Chain Quarterly, under the title: Supply Chain, the platform for driving true business transformation, three powerful mindsets continue to sustain the norms and behaviors that drive old cultures. Command and control relationships, silo identities, and the application of engineering approach. These powerful mindsets work against creating an environment that fosters initiative-taking, creativity, cooperation, and rapid problem-solving. These mindsets belong to the early 1900’s when the goals were efficiency and control, and people were viewed as machines whose behavior had to be controlled.
Supply Chain executives must change their mindsets
Supply Chains are in a powerful position to drive this deep transformation in both the hard (structural and technical) as well as the soft (human and cultural) dimensions of the business. This is because they are the focal point for the artificial intelligence/digital/internet of things disruption. They contain and control the main activities that add value for the customers, and account for about 80% of the business costs and associated risks.
The challenge is often that Supply Chains are marginalized, lacking representation in the c-suite. Supply Chain leaders must become active change agents for both their end-to-end value streams and the overall business that supports them. Supply Chain leaders will need to develop new decision-making capabilities, transform their Supply Chain organizational structures, and get rid of old, non-productive mindsets. Most importantly though they must make sure to understand what they are disrupting for.
With inspiration from: Supply Chains, the platform for driving true business transformation brought in Supply Chain Quarterly Q4, 2021. Page 44 and onwards.