How Cross-Company Collaboration Fuels Supply Chain Change
How Cross-Company Collaboration Fuels Supply Chain Change
Supply Chain Digital May 2020
By Claire Milner
“For twenty years or more, organisations have concentrated on a cascaded decision-making process, with each specific function focused on optimising its own particular view of the supply chain, often to the detriment of other departments or units within the business. Departmental decisions taken would often impact the whole organisation in ways that were poorly understood or not fully apparent at the time, and driving efficiencies in one area regularly resulted in a lack of product availability, or too much product in the wrong place.
In this age of digital transformation, organisations are increasingly seeking out new approaches that allow them to remove the time and latency between different processes and decision points, enabling people across the wider business ecosystem to collaborate on an always-on, synchronised supply chain.
The birth of supply chain digitisation
Siloed decision-making has always been at the heart of organisational misalignment. As an example, individual cost-related decisions can have a direct effect on an organisation’s overall production volume and distribution, but without visibility over the whole system, decision-makers can unintentionally cause challenges for the whole business – with the consequences only becoming apparent over time.
In an increasingly digitised world, it’s essential for these disparate functions to align. If the teams selling the product are not in line with those producing or suppling or the product, the resulting misalignment can create significant organisational issues and tensions.
With growing consumer demand for speed and personalisation, alongside factors such as trade volatility, tariffs and regulatory changes, it’s clear that legacy supply chain systems are no longer fit for purpose. Customers are increasingly expecting flexible delivery options, personalised products and services and increased visibility, but to keep up with these trends, companies need to evolve their supply chains to match these expectations while maintaining cost-effectiveness. As such, the age of digitisation has sparked an agile transformation for supply chains – with a marked growth in the agility of supply-related decision-making, as well as an improved ability to mitigate risk and capitalise on digital opportunities.
Digital supply chain tools such as platform-based models can help create interconnected and transparent supply chain ecosystems – keeping solutions, people, data and machines connected digitally to facilitate easier management and create value throughout the supply chain. Research from McKinsey shows companies that focus heavily on digitising their supply chains can expect to boost their annual growth of earnings by 3.2 percent – the largest increase from digitising any business area – there is a clear financial benefit to this approach.
Shifting the mindset for engagement at all levels
Though it’s vital to get the buy-in of supply chain professionals, shifting the mindset of the wider business through effective change management is central to success. Overall, transforming an organisational mentality is about taking every employee on a journey; communicating the individual value of the changes for them, as well as what it means for the business going forwards. Great technology is only as good as the people using it. If employees aren’t convinced that new solutions will benefit them or their roles, siloed thinking and use of traditional tools such as Excel will continue, even if there are better technologies available.
Digital transformation starts with attitude transformation, and it starts at the top. Driving supply chain transformation with board-level endorsement is critical to getting the rest of the company to collaborate and change their mindset. Without that, supply chain managers will encounter resistance to change, which in turn will restrict the opportunity to achieve transformational success.
Alongside executive advocation, aligning KPIs and metrics across different functions can help every team see how their actions affect each other and the overall supply chain. However, this visibility can only be achieved if everyone in the organisation is held accountable to a single vision and corresponding KPIs. Equipping employees with training opportunities and new data and technology tools that enable them to gather insights and then share them across the organisation can also help facilitate adherence to a shared mission.
Transforming the supply chain
With outdated technologies, such as email and Excel, still present in supply chain planning, agility is fundamental to future success. By planning what to produce and ship, how much, when and where, companies are empowered to be as efficient with their resources as possible. And by utilising the latest technologies such as machine learning and artificial intelligence alongside current processes, existing practices can be easily adapted to help businesses achieve digital transformation; reducing the time and minimising the latency between different processes and decision points, and enabling every member of the supply chain to collaborate in synchronicity.
This collaboration capability allows easy understanding of a supply chain’s overall performance, allowing users to synchronise all aspects of their supply chain, and as a result, see and interpret the impact of a change across the whole chain. The result is dynamic supply and demand balancing. However, the effectiveness of supply chain collaboration relies upon two factors: the level to which it integrates internal and external operations, and the level to which the efforts are aligned to the supply chain settings in terms of geography, demand, and product characteristics. As such, success relies on an organisation’s specific circumstances, and identifying what they need to do to fully benefit from their collaborative efforts.
Connecting the dots with concurrent planning
Legacy supply chain planning is based on a culture of assessing individual chain links in isolation, rather than looking at them as a fully connected chain. However, this is fraught with risk: if one link breaks, the chain will likely be affected – but the other links will be unaware. Concurrent planning offers a real benefit to business, with unparalleled responsiveness, the ability to quickly react to new opportunities and mitigate new problems.
By working to continually balance the end-to-end supply chain, concurrent planning can align supply, demand, capacity and inventory, as well as synchronising sales and operations planning and integrated business planning. This facilitates the ability for everyone to share information at the same time; and with only one data set across the ecosystem, the whole chain is in sync at any given time, with immediate access to the people, information and results they need. Most importantly, this approach means that all businesses across the supply chain can work to resolve issues immediately – intercepting and dealing with problems as they arise, rather than having to manage the fallout afterwards – and allowing for smarter decisions to be made based on insights from the whole supply chain. With disruptions large and small prevalent on a day-to-day basis across the globe and across every supply chain, such as those caused by COVID-19, this connectivity, agility and speed has never been more important.
Looking to the future
As organisations increasingly embrace the need for digital transformation, changes in supply chain management are only set to continue. Tools such as machine learning are allowing businesses to glean insights from an ever-growing number of data sources, with newer and smarter ways to capitalise on the opportunities they provide. By incorporating data in a way that fast-tracks supply chain transformation and facilitates faster, more intelligent decision-making, organisations will future-proof themselves in the market, giving themselves a competitive edge against new and powerful disruptive forces.”