How technology can help redraw the supply chain map
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Supply chains face a rethink. Geopolitical fissures have disabled the just-in-time model, unwinding decades of globalisation. The danger of overreliance on one large manufacturing base, China, has been exposed by the pandemic. Early on in the Covid outbreak, Fortune observed that 94 per cent of Fortune 1000 companies had experienced supply chain disruption.
Added to this, many companies in the UK have been hamstrung by Brexit. Multinationals had the resources to prepare for Britain’s departure from the EU and, in critical sectors such as pharmaceuticals, many received government help to increase inventories and set up alternative sourcing. Small and medium businesses without financial clout, however, have been severely affected.
Other countries did not have the UK’s additional impediment but they still experienced shipment delays. The August 2022 Global Supply Chain Pressure Index, collated by the Federal Reserve Bank of New York, showed that while delivery times had reduced in the previous four months, pressure was still high. This left the chain vulnerable to disruption or even to fluctuations in seasonal demand.
Against these stresses, consumers continue to expect greater choice delivered quickly, cheaply and, increasingly, more sustainably. Even as disruptions continued, global trade for 2021 reached a record high in value, according to the UN Conference on Trade and Development. Suppliers should aim to meet the challenges that accompany this demand. To do so effectively, factors such as resilience, reliability and flexibility of the supply chain should be treated as more important than cost and efficiency.
Visibility is the key
Visibility is the keyVisibility can help to solve problems. An accurate overview of the chain will mean that disruptions can be identified and dealt with. This will give a degree of resilience, says ManMohan Sodhi, professor of operations and supply chain management at Bayes Business School London. At the consumer end of the chain, traceability can fulfil shoppers’ demands for sustainability.
Most companies recognise the need for better visibility but only a few can achieve it. In 2020, SupplyChainBrain, the supply chain management information resource, said most enterprises could view just 20 per cent of their chains — it recommends 70 to 90 per cent visibility. SupplyChainBrain says digitisation is “no longer optional” if we are to avoid severe business consequences.
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For the best results, supply chains should be digitally integrated from the most upstream commodity and component supplier to the final customer. Manual inputs would be turned into digital data that is consolidated, legible and visible throughout the system.
The costs of not embracing digitisation are considerable, according to a study in 2021. It said the average annual cost to an organisation of manually entering data averaged $1mn in the organisations it polled, while more than $600,000 was spent in manual entry of supplier invoices.
The importance of a digital supply chain strategy is well understood but, due to the complexity, most companies struggle with implementation.
Transmetrics, an AI logistics software provider, says the logistics sector is notorious for its heavy use of manual processes and large volume of disparate data that can be costly to centralise. The result is that holistic digital integration is extremely challenging.
Supply chains are also disrupted by technology silos between and within companies, as well as the lack of standardisation in data — a barrier that organisations including GS1, the champion of the barcode, are working to dismantle.
Adopting technological solutions
Adopting technological solutionsMany companies are eager to deploy technology-enabled solutions. A survey conducted in 2022 by SAP, the software solution provider, found that within the next year or two, 70 per cent of UK businesses plan to adopt the latest technology to try to overcome supply chain challenges.
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Originally posted on: https://www.ft.com/content/3db177f2-d187-4632-b94d-268f9d2598eb