Historically, supply chains of organizations faced only localized or regional disruptions, but the ongoing pandemic posed not only the most global but also the most profound challenge to supply chain management (SCM) as we know it.
This is backed by research. An Infosys study found that “the impact that Covid-19 has had on many supply chains in our global economy cannot be overstated”, while a McKinsey & Co study found that “73 percent of organizations encountered problems in their supplier base and 75 percent faced problems with production and distribution.”
A Changing Environment
The pandemic disrupted plenty – shortages, disrupted logistics and transportation, lockdowns, social distancing, and the fear it set in sparked the search for alternative, diversified sources of supplies of raw materials and intermediate goods, manufacturing locations, and even economic nationalism. All this, added to relentless competitive pressure, created instability, and exposed vulnerabilities in supply chains like never.
Such a scenario explicitly mandates that organizations constantly relook at and rework their SCM dynamically to address a rising number of imponderables as well. So much uncertainty, accompanied by constant change and an explosion in data generation, means that a streamlined SCM is getting to be the default, not the optimal scenario. Besides, while SCM can no longer afford to work in batch mode, it is set to always be a work in progress.
Perhaps the most palpable change brought by the pandemic on SCM is that it is no more a back-end operation. From being a mere operational necessity, it has evolved to become a strategic, cross-functional exercise that incorporates every detail of organizational activity and weighs heavily on business continuity.
It means that organizations will become even more dependent on digital technology delivered over the cloud for operational efficiencies to stimulate growth. In this new avatar, it is not enough for technology to be reliable alone – which it must be - or merely something that links the many departments of an organization, its suppliers, and customers. The pandemic is ensuring the primacy of technology which in turn needs to recognize the primacy of data.
Thankfully, organizations were already going global, becoming digital and moving to the cloud even before the pandemic loomed; now technology must go beyond ensuring efficiency and automation to enable informed decision-making that improves productivity measurably.
A car manufacturer, for example, cannot any longer be satisfied with the knowledge of when and how many batteries or tyres, or to be more topical, semiconductors will be supplied. It now needs to know if the suppliers to the battery, tyre, or semiconductor makers will deliver and ready alternative sources to tap into if needed – not the kind of knowledge a car manufacturer would previously encumber itself with.
Cultural factors, like the rise in economic nationalism, once hardly impinged on SCM but now seem poised to do so by forcing organizations to look away from traditional to alternative locations for raw material, components, semi-finished goods, or even customers. And as organizations look to new sources and locations to reduce risk, they may have little choice but to rework their SCM architecture and processes.
Another new reality SCM must cope with is to map more risks as well, giving visibility an entirely new meaning in these changed circumstances. And along with more visibility and built-in resilience, supply chains need to incorporate the rising demand for more redundancy, automation, cognition, simulation, and prediction – a list easy to arrive at but hard to implement. All this implies a more unified perspective for SCM but one with a more granular view as well in this ‘new’ or ‘next’ normal the pandemic has brought about.
The Cloud and SCM
Moving to the cloud is now a no-brainer with speed, scalability, and lower costs adding to its wholesome appeal. Also, new, and emerging technologies such as data analytics, the internet of things (IoT), blockchain, artificial intelligence (AI), and machine learning (ML)to mitigate risk, disclose actionable insights, and make informed decisions are being cloud-enabled. These technologies are so powerful that their use is becoming the norm in SCM.
The more organizations go global, the more their supply chains face disruption, but the global pandemic unleashed asymmetric disruption. There is help in the form of cloud SCM apps, their utility is greatly accentuated by the fact that they are available in a software-as-a-service model and help optimize SCM by being more predictive, prescriptive, and insight-driven.
These apps, with some specific functions such as transport or analytics or procurement, can also be deployed swiftly. They are driving supply chain improvement and helping gain competitive ground; to ignore them is to undercut SCM, something organizations can ill afford to do as this function increasingly move centre stage.