Supply Chain Evolution: From Disruption to Resiliency

The need to integrate manufacturing and engineering into supply chain planning and the five evolution levels companies need to consider. 

TAKEAWAYS:
● True supply chain innovation and transformation come from integrating all key stakeholders and requires a platform approach.
● Invest in people and processes to reach new levels of efficiency and leverage technology to help provide the structure and tools to enable them.
● It is a long journey. Define your end-vision and map out the evolution to achieve incremental benefits to help fund the transformation at each stage.

Introduction

Most companies now consider disruption to be a constant rather than an exception in business operations. This drives increasing challenges for companies in today’s ever-changing business environment. To overcome them, companies have a bewildering array of technologies available, but they should also integrate more stakeholders into the planning process to develop holistic and feasible strategies.

Companies will need to adapt and evolve in order to be resilient against future disruptions. However, adapting to this can be challenging, as there are many philosophies, solutions, and processes available to effect change. Initially, companies should understand some of the fundamentals needed to reach supply chain agility, visibility, and resiliency, and then ask what is needed to meet requirements such as stakeholder integration, defined workflows for managing supply chain risks, access to data, key technology capabilities, and a common operational framework.

Figure1: Fundamental building blocks for Supply Chain Resiliency

Five Stages of Supply Chain Evolution

Achieving supply chain resiliency is not a short-term endeavor. For most, it will be a journey of progressive evolution, capabilities and results. This evolution can be broken down into key milestone stages that help define important steps and how to focus on process and technology changes.

Figure:2 Key stages of supply chain evolution

Early Stage Evolution (Stages 1-2)

Companies in the early stages probably still rely on manual processes, spreadsheets, or homegrown applications, and their focus is usually entirely on internal operations. The opportunities at this stage are to enable new levels of automation and more robust processes. This will help stakeholders manage the data and workflows needed to stop reacting and start making more proactive and collaborative decisions. There are also opportunities to introduce the first levels of optimization to help develop better forecasting and planning of operational models.

Mid-Stage Evolution (Stage 3: The Tipping Point)

The fundamental change in focus at the mid-stage is to stop thinking of the supply chain as an isolated and internal operation. Most supply chains are heavily dependent on additional stakeholders inside the organization.

• Operational divisions support the business model, so additional stakeholders need to be included in the decision-making process. Finance is an especially important role to include in the process as they represent the fundamental business metrics and goals for success.
• Supply chain planning is generally strategic in nature, but tactical execution can influence performance and long-term goals. For manufacturers, production operations can both present opportunities in developing strategic plans and disrupt plans already in place. Including manufacturing execution and scheduling as part of the planning process can help achieve strategic goals.

There are many challenges related to collaboration and the management of new types of data and information, but achieving this level of maturity means companies have developed a robust Sales & Operations Planning (S&OP) process and have started to enable the first elements of Integrated Business Planning (IBP).

Late Stage Evolution (Stages 4-5)

Previous stages enabled a maturity level of all internal processes and planning. However, since supply chain operations are often outsourced or dependent on third parties, it is important to consider external stakeholders as part of the collaborative process too. In addition, the growing scope and complexity of the planning process requires new levels of automation beyond just facilitating workflow and data management.

• External stakeholders: Whether it is alternative supply sources, contract manufacturers or logistics partners, it is impossible to make confident supply chain decisions without being able to model the details of the extended value network.
• Autonomous supply chains: It is likely that the workforce managing the supply chain process is becoming busier and/or more constrained. With the explosion of the volume of data and variables now being considered, optimization should now be applied to resolve supply and demand changes automatically wherever possible (e.g., within certain thresholds of acceptable outcomes). This way, supply chain professionals can manage “by exception” and spend their time on value-added activities.

In addition to including external stakeholders, supply chain organizations need to recognize the critical dependencies of other internal divisions on overall success. Some of the greatest opportunities (or risk mitigation) come from considering manufacturing and product design and engineering as critical stakeholders in the planning process.

Integrating Manufacturing & Engineering

Design, engineering and manufacturing processes have a significant impact on overall supply chain efficiency and effectiveness. For example, a design change can lead to better supply chain planning by reducing the number of components or materials, which can lower costs and improve delivery times. Similarly, changes in manufacturing plans can lead to better supply chain planning by increasing production efficiency and reducing inventory levels.