The Newest Normal: Why Our Supply Chain Reality is Forever Altered
Given today’s realities, learn why the supply chain is never going back to normal, what retailers can do to adjust, and why agility is the “cherry on top” of your supply chain.
Lloyd Adams and Robin Barrett Wilson
A family walks into an ice cream shop.
Mom wants chocolate ice cream, with whipped cream on top. Dad wants vanilla ice cream, with hot fudge. Their child wants (of course) a mix of both flavors, with rainbow sprinkles on top. For the shop owner, fulfilling the family’s requests is a simple matter of supply. If the proper customizations are available, they can make the tasty treats.
Can you say the same about your business’ supply chain? Is it clear and easy to follow? Do you have a full view of your partners and suppliers — and know what they can deliver? And are you able to pivot quickly if necessary?
Because for all the questions and complications that may arise, the end equation is a simple one: Zero rainbow sprinkles equals one very unhappy child.
Accepting Our Reality
Don’t get us wrong, we know the challenges inherent in supply and demand for modern businesses. Today’s leaders have been served a nasty cocktail — as online shopping continues to grow, customer demands continue to increase, and supply chain strains effected by COVID-19 continue to persist.
For instance, look at Sony and the PlayStation 5. About a year ago, Robin Wilsonwrote a blog that mentioned the challenges surrounding supply of the new video game console. In short, finding one to buy for Christmas was nearly impossible. Even today, though, not much has changed. Some are now saying the supply issues may last another year yet. “We’ve built more PlayStations faster than we ever have before, which makes me happy,” said Sony CEO Jim Ryan earlier this summer, “But, on the other hand, we’re some time from being able to meet all the demand that’s out there, which makes me feel bad.” There’s no simpler way to put it than that.
The fact of that matter is that disruption is the new reality for global supply chains, and that’s not changing. As a species, we’re now facing catastrophic environmental changes and all-too-regular weather disasters, polarized societies and widespread geopolitical tensions, and, oh right, a deadly pandemic. All that and more is only going to make regular business operations more and more challenging as time goes on. So, supply chain experts should start by accepting that there will be no “return to normal.” Then, ask yourself these questions:
How can you prepare for an endless stream of seemingly unpredictable boat-rocking events?
What digital tools and contingency plans are necessary to succeed in such a reality?
What does being “agile” mean in this environment, and how can your company get there?
These are big questions, and the answers may be different for every retail company. But one thing’s for sure, all the answers start in the same place.
Investing … in More Ways Than One
A recent survey of 70 U.S. companies found that more than 90% of them planned to make changes to their supply chain networks. But only about 40% expected to increase their overall supply chain investment.
This is certainly a step in the right direction. But in order to forge global networks with strong connections and to build flexible plants that can shift at a moment’s notice, modern businesses must embrace digital tools and artificial intelligence technologies — those that will help them to automate key functions and to build redundant and resilient processes that can withstand any sudden changes.
But we’re not just talking about monetary investment. The reality of disruption mandates that top supply chain managers also be integrally involved in the strategic decision-making process. Speed, agility and resilience aren’t possible without collaboration, transparency and unity among those at the executive level.
All in all, it’s about investing in an entirely new model — from soup to nuts. Successful retailers and consumer goods companies must work to make the most of modern tools — and to trade the old model and all its shortcomings (like a narrow focus on cost efficiency, overly concentrated supply with one or two large sources and limited buffer capacity) for one with better visibility, pliability and resilience.
Optimizing Data, Prioritizing Communication
Ultimately, it all comes down to data. To survive today, businesses must know what’s happening from end to end. And not just in the supply chain — businesses must have end-to-end visibility into every step, from marketing to planning to sourcing to supply chain to customer experience and more. The data you choose to look at is important, too. Your tools must enable you to look at shorter timeframes, more focused e-commerce data and even website analytics. The picture you paint must encapsulate every possible scenario, inform your sales forecasting, and help understand overall demand better.
This means embracing a predictive and intelligent solution. One that can analyze, optimize, prepare and execute on your plans, no matter how they shift. Because, in the end, what it all comes down to is the customer. Regardless of your supply chain challenges, they’ll want to know everything they can. Where is my product? When will it come? Can I choose the day? Can I make it an online order with local pick-up?
That’s why knowing everything that’s happening and being able to communicate it is absolutely vital. A next-generation digitized core and fully integrated e-commerce strategy is far from a nice-to-have now — it’s a prerequisite. Sure, no one can predict everything that’s going to happen. But your digital tools can ensure you’re able to best react.
And ensure you’re easily able to pull together an ice cream with rainbow sprinkles. With a cherry on top.
Lloyd Adams is senior vice president and managing director of the East Region for SAP North America.
Robin Barrett Wilson is a retail industry executive advisor at SAP, working to help prospective and current customers meet the expectations of today’s consumer, deliver value, and achieve business results.