Will Digital Transformation accelerate in Supply Chains because of Covid19?
We keep reading that the pandemic has accelerated the pace of Digital Transformation. While it may be the case for some other areas, it is not so for Supply Chain. With Supply Chains in mayhem, companies have actually temporarily stopped Digital transformation initiatives, so that they can direct their focus to fight the current fire and focus on the post pandemic recovery as well.
However, once the storm passes, I expect a big push from Supply Chain executives to accelerate implementation of Digital tools in their Supply Chain Digital tools ecosystems. A criteria that will now be forever embedded in their minds when they discuss these tools will be- how can this tool help us manage such mega disruptions better ?
Post pandemic steps: The three Rs
In one of my posts on linkedIn earlier this month (link here: Three Rs )I suggested that once they are out of this deep quagmire, companies need to engage in three Rs to get back to making their Supply Chains robust. Those three Rs are:
The three Rs have been summarized in the illustration below.
In this post, I will illustrate using an example, how technology and analytics come into play in the Review and Redesign stage.
Note that technology and analytics are just one aspect of designing resilient Supply Chains. This post only touches upon the technology and analytics aspect. Other strategic indicators of a resilient Supply Chain are not within the scope of this article.
Recover Stage: Keep notes from your recovery handy
We are not going to go deeper into “Recovery” aspect but there is one critical output from recovery process that we will need. The recovery process, in my mind, should be methodical for companies since the key insights that will be gained from the recovery process will act as inputs for building a Supply Chain that can help you manage crisis like this pandemic better. If anyone tells you that they can help you build a Supply Chain that will be completely resilient to mega disruptions like this, you need to become extra cautious.
When you make your notes, you can use the following format (partial example) to organize the learnings by functional and structural attributes.
Review Stage: You learning document should map every area of your Suppy Chain
To initiate the journey of planning how to build a resilient Supply Chain, your first key step should be to map your end to end Supply Chain and combine that will the key learning notes from the recovery mentioned above. An example mapping is shown in the illustration below. We will use this ACME Inc. example to walk through the process. (Slides for these illustrations can be downloaded from here: Resiliency)
The illustration below shows the high level steps that need to be followed in the Redesign stage to map the role analytics and technology will play
Focus on one area at a time with end to end chain in perspective
Once you have the view of the end to end Supply Chain, you can start reviewing the redesign opportunities in one area at a time. The previous exercise of creating the whole end to end view shown above will be useful to help you keep the end to end impact in perspective while you plan redesign initiatives in a particular area of the Supply Chain. We will take the example of Inbound Supply Chain to illustrate how opportunities need to be identified. The challenges encountered notes from the recovery phase will be the starting point- as shown in the illustration below. (Slides for these illustrations can be downloaded from here: Resiliency)
In this illustration, we focus on the Inbound Supply Chain. Based on the analysis done during recovery, ACME’s Supply Chain experienced three disruptions:
- Manufacturing Disruption: Drivers were factory closures or Labor shortages
- Transportation disruption: Drivers were driver shortage due to lockdown
- Inventory shortage: Drivers were Supply disruption due to other tow types of disruption and conventional lean safety stock planning.
Identify suitable analytics and technology lever for each area
Using the mapping structure (functional and structural) suggested earlier to capture data/information for recovery, we can then start capturing how analytics and technology need to be leveraged to address each tupe of disruption, in order to avoid or minimize the impact of such disruptions in the future.
Using the format suggested earlier (for use in documentation during the recovery phase), we will capture what type of technology and analytical approaches can be leveraged to redesign a Supply Chain to make it more resilient. For Manufacturing disruption, the structural and functional aspects are shown below.
Structural attributes levers:
Supply Chain Network Redesign: Leveraging Linear programming Mathematical optimization tools to design Supply Chains that diversify supplier footprint currently concentrated in one location (among other aspects)
Smart Factories: By collaborating with key strategic suppliers, setup Smart factories with flexible Labor force, thereby creating a factory that functions like Manufacturing on demand platform. The smart factory setup will allow you to “Observe” and track supplier’s manufacturing capabilities through your Supply Chain observatory or control tower.
Functional attributes levers:
Frequent (if not real time) data feed from Supplier factories: If a Smart factory can not be setup (if the supplier is not eligible to be a strategic partner), setup a pipeline to keep an eye on the manufacturing schedule and output data from the supplier.
Supply Management Dashboard: Design automated dashboards and develop metrics that help keep track of Supply risks. Based on the manufacturing output of your suppliers and you set numbers on variable throughputs, your metrics should be able to flag major disruptions much earlier.
Supply Disruption predictive tools: This is essentially taking the metrics formulation from the step above a bit further. Armed with few years of historical manufacturing data from the suppliers and feed from the real time/current data, an algorithm can “sense” if something is starting to break (throughput declining, fewer workers/depleting Inventory at supplier’s etc.)
Identify relevant technology aspects
For each of the technology and Analytics lever identified in the previous step, list out the exact Analytical tool or technology that will be leveraged. Then evaluate aspects like (indicative, not an exhaustive list):
- What exact tool is needed?
- Do you have this capability already ?
- Do you want to build this capability internally or outsource the analysis (only applicable to strategic analysis tools like Network design)
- If capability needs to be built internally, what aspects of people, processes and technologies will be involved?
- How will you evaluate the efficacy of this investment ?
- Which team will the concerned resources be part of ? How will they interface with various functions?
Integrate these different technologies into one single Digital Supply Chain ecosystem
Once you have done this exercise for all the areas and your entire Supply Chain is covered, the most critical aspect is to undestand how you will create an ecosystem of all these systems. I am a strong propenet of the idea that all Supply Chain planning tools need to “talk” to each other. A decade ago, it would have ben chalenging to achieve but not now.
The true benefit of having multiple best in class planning tools is achieved only when you integrate them in a tight ecosystem.
As you may have figured, this is just a teaser, to give you a sense of how to proceed. Even for a generic Supply Chain like ACME Inc., I can write 100+ pages detailing all the Analytical and Digital tools that will help ACME develop a resilient AND modern Digital age Supply Chain.
The key however is to understad the process so that you can undertake such an initiative yourself once the storm passes.