7 effective supply chain strategies you can implement
Whether it is the pandemic, increased consumer demand, unprecedented weather changes leading to maritime disasters, or global port congestions, supply chains have had their fair share of disruptions.
While these disruptions have detrimental impacts on the global supply chain and many companies were brought to the brink of devastation, the disruption also highlighted those in the supply chain that have got things right. Businesses that have proactively implemented supply chain solutions have weathered the storm much more effectively than those that have taken a reactive approach. With impending challenges still on the horizon, it’s worth exploring which processes supply chain winners are implementing today.
Effective habits of supply chain winners
The best companies have transformed their supply chains with time, investment, and sustained top-management attention.
1. Flexibility in operations
Organisations that struggled during the pandemic were those with the inability to react to sudden, large-scale disruptions. Conversely, companies that adopted more flexibility in their approach were able to better adapt to the ever-evolving situation. How? By embracing digital solutions that result in a more resilient, adaptable supply chain. The Internet of Things (IoT), blockchain, big data, artificial intelligence (AI) and machine learning (ML) are just some of the technologies providing real-time data that can be used to create more flexibility.
2. Regionalising supply chains
Different companies had different challenges in managing their supply chains. These differences were attributed to the type of industries, and their unique challenges were due to the industries being labour intensive, asset intensive, or due to lack of local product availability. As per a McKinsey 2021 Supply Chain Survey, the healthcare industry were winners in maintaining resilience in their supply chain operations thanks to their ability to regionalise their supply chains and move production closer to end markets. The survey revealed that 60% of healthcare respondents regionalized their supply chains and 33% moved their production closer to end markets.
The pandemic isn’t the only major threat to the supply chain. Over the years, natural disasters have highlighted the risk of single-source practices. The 2011 tsunami and resultant nuclear plant disaster in Japan impacted the supply of microcontrollers in the automotive industry. However, companies with robust sourcing capabilities fared better than those reliant on one supplier. There are many procurement automation software options available to help managers implement a successful multi-sourcing strategy.
Effective supply chain leaders realize that collaboration is critical for taking supply chains performance to the next level. According to McKinsey, ‘…companies that collaborate effectively across the supply chain have enjoyed dramatic reductions in inventories and costs, together with improvements in speed, service levels, and customer satisfaction’. For effective collaboration, supply chain leaders can start by selecting partners based on capability rather than size, manage ongoing performance, and invest time and effort in relationship management.
5. Streamlining operations
The pandemic prompted a surge in demand for consumer goods, such as household essentials, PPE, and more. This created sizeable opportunities for shipping companies in terms of their container cost profits. A Wall Street Journal article indicated the average global price to ship a 40-foot container increased more than four times between 2020 and 2021. The winners in this case were the shipping companies who managed to streamline their operations through effective schedule management, successfully meeting this surge in demand.
6. Embracing sustainability
Effective supply chains are those that have embraced sustainability across operations. Beyond the ‘green’ element of sustainability, supply chain winners are maintaining a consistent level of production no matter what global pressures arise. To achieve sustainability, supply chains need to standardise processes, perform thorough risk management, and draw on best practice from past experience.
7. Early adoption of technology
Companies that had already embraced a digitalised supply chain have fared much better throughout the pandemic than those who’ve dragged their feet. An example of early adopter is Procter & Gamble, an American multinational consumer goods corporation, which uses digital supply chain platforms for demand planning. With traditional planning using old data that doesn’t anticipate sudden changes, data-driven technology helped them navigate changing demands before, during, and after the pandemic. Rival consumer packaged goods (CPG) brands struggled to maintain margins amid the supply chain disruption, while P&G delivered record-high sales and profits in 2021.
The impact of Covid-19 has shown that early adopters of technological innovation have proven to be much more resilient and profitable over time than those who are still considering the option. The longer these organisations wait, the wider the gap becomes and the more difficult it is to remain competitive in the supply chain.
Many of the habits of effective supply chain leaders include the implementation of automated supply chain solutions. While the temptation is often to take a step back from digital transformations when the economy is down, the costs of doing business will inevitably escalate. Through implementing the proven practices listed above, you too can reap the benefits of being a supply chain winner.