The Dynamics of Supply Chain – Then and Now

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Just like how finance is the life blood of any business enterprise and Cash is the “KING”, supply chain management is an equally important component and rightly termed as business’s backbone. Supply chain is a complex domain covering procurement, inventory management, logistics, material handling, transportation, warehousing, distribution and many other areas of business both within the four walls of the organization and throughout the external supply chain.

For years, supply chain heads have been scratching their heads to reduce cost and ensure timely delivery of goods & services. However, now they are facing relatively complex issues like legal, sustainability concerns, tightening regulatory and ethical environment that act like a double-edged sword not only impacting the margins but also the brand & public image. The risks to organizations are not just from their internal or external suppliers but from failures anywhere in the entire supplier ecosystem including forward distribution or sourcing. It is of utmost importance for supply chain heads to not only have a complete understanding of their entire supply chain including lower tiers supplier base but also the regulatory environment in which their organization operates. In today’s globalised world with seamless boundaries, this is easier said than done.

The world is changing at a lightning speed and so is the need for organizations and their supply chains to evolve with a new mindset. I have listed down some of my observations on how one could address these newly evolving supply chain facets.

Risk management – The world is becoming interconnected and the risks due to supply chain vulnerability have become multifold. Organizations with robust systems to manage risks, internal and external, known and unknown, are the only ones who will succeed. While it is relatively less complex to anticipate and address known risks but extremely challenging and critical is to be resilient to unknown risks in the supply chain. The best strategy is to work on reducing their probability and the speed of response when they occur. Organizations should create a culture of risk awareness where cross-functional teams work together to anticipate risk and resolve to mitigate the impact of it rather than working in their functional silos pointing fingers at each other.

Sustainability – With millennials getting into the workforce in organizations and regulatory environment being tightened, focus is shifting from exploiting resources to recyclability and reuse. Sustainability concerns will no longer be just a jargon used by organizations in corporate boardrooms, but concrete actions are needed, else organizations may cease to exist with time. This creates an absolute need for supply chain leaders to review their supply chain strategies and devise actions keeping in mind long term sustainability. This will require grooming and nurturing of both the existing workforce which has been accustomed to different ways of working as well as the millennials who see things from a completely newer perspective.

Supply chain leaders to think like business leaders – Supply chain leaders will need to broaden their perspective which takes into account all aspects of business and costs associated with the supply chain decisions keeping in mind the sustainability concerns and corporate social responsibilities. This involves both financial and time investment. Organizations need to promote and reward entrepreneurship where employees are encouraged to take risks to solve a problem in the best interests of the organization.

Use of technology – Technology has changed the way we do business today and in supply chain organizations could use it for sourcing, real-time updates for both incoming and outgoing material, analytical capabilities and data management. Technologies like Artificial intelligence, Robotics, RFID and Blockchain to name a few are being used to develop best in class supply chain solutions. Customer today can track his order placed online to the last minute and gets real-time updates at each step. Few companies have started using drones off late to do perpetual counts. A proper cost and benefit analysis has to be done before choosing the right technique with the ultimate objective being to reduce costs and increase efficiency.

Looking beyond boundaries –While developing supply chain solutions, one has to look beyond own industry and at times beyond geographies and be ready to adopt best practices. The newer organizations have expanded very fast using technology but will need to continue to innovate in the world which is changing even faster.

Customer focus –All businesses exist to serve customers. Customer has to be at the core of all solutions that are adopted since the ultimate goal is to deliver best value to the customer. Moreover, in today’s world of Digitization and Social Media, customer feedback is instant and any negative feedback can impact company’s brand image. With competition intensifying what really differentiates a reputed brand is how you are able to create customer delight for e.g., few companies have started using drones to deliver parts.

Recent trends in globalization –Emerging markets are now assuming a greater role in the global economy and their role will continue to expand in the next 10 years. This will change the traditional demand and supply imbalance prevalent earlier in some sectors. Recent trends where political leaders are focusing more on nationalism and protectionism, globalization is bound to change and there will be more region led growth going forward. Organizations may choose to maintain an optimal balance of local vs. overseas suppliers – one to keep such political authorities in good humor and second to avoid any sudden changes in the policy. In this new age world which is interconnected through digitization, businesses with strong supply chain and risk management framework will survive and grow at astonishing speeds.

To sum up, supply chain leaders will have to expand their roles and wear multiple hats to manage risks, innovate, work on a sustainable supply chain strategy and be the guardians of their corporate brand. Robust supply chain strategies will also have to be one of the key focuses for the CEOs to prepare their organization for the future.

Tomorrow’s world will not be defined by physical movement of goods, money and people but by the way the people and machines are connected. The objective of businesses will not just be to earn money since stakeholder definition is changing, and CEOs will have to look beyond board, shareholders, investors and employees and serve a larger purpose, which is to create a more sustainable future for coming generations.

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