Resilient supply chains: New normal for business success

Supply chain resilience has been a subject of keen interest for most organizations today. As the global pandemic continues to manifest itself into its potential size, it must be noted that the aftereffects of the same shall be seen for much longer than anticipated. On one hand, it is forcing organizations to embrace digital technologies and on the other, it has created severe cash-flow challenges.

Supply chain resilience is the capacity of the supply chains to resist disruption by safeguarding itself through avoidance or containment as well as to recover from such disruptions with minimum impact or even gain advantage from disruptions.

A highly resilient supply chain has a well-defined risk mitigation strategy and recovery capability for both internal and external risks. It is often misunderstood that organizations have to consider a trade-off between efficiency and resiliency when they plan their supply chains. However, in long-run, these two factors complement each other and provide significant cost savings while protecting top top-line erosion.

Supply chains, which form the core of all business and value creation operations in any organization- are perpetually vulnerable to risks and disruptions- both from internal or external factors. While most mature organizations already have robust risk mitigation strategies for supply chains risks, global pandemics like Covid-19, are one-off, black swan events that expose the vulnerability of the most robust and well-designed supply chains.

Global supply chains have never been under more stress and the current situation has exposed multiple challenges in the existing supply chains like visibility, trust & transparency and lack of diversification- vulnerabilities which have always been procrastinated by organizations. As a result, more than 90% of fortune 1000 companies have experienced severe supply chain disruptions due to Covid-19.

The following is a strategy that can help organizations plan for supply chain resilience in the long term while solving immediate and most pressing cash flow issues. As always, the superiority of the solution depends on the clarity of the problem and the same comes by performing a detailed study of the problems and classifying them based on their impact and duration.

It is important to note that, while the recovery scenarios would depend on the industry, the region of operations and other factors there is no better time than today, to re-assess the health of organization’s supply chain through short, medium and long terms strategies. That can help organizations to make their supply chains more robust and resilient.

"Fix-Improve-Re-invent" for supply chain resilience

An organization’s supply chain challenges due to COVID-19, as revealed during the impact assessment study may be bucketed into three broad categories based on their impact and duration: short, medium and long-term impacts.

A swift and immediate "FIX-IT" approach is recommended for short-term problems

Short-term problems are temporary and continue for a fixed period- (in current case: for the duration of the pandemic) and are therefore reversible. It could be one of your supplier being unable to uphold the delivery commitment, logistics or freight carrier being unable to deliver the products to you, unavailability of the workforce or government and regulatory changes as a response to the ongoing situation.

Due to diminishing demand and surge in logistics and transportation cost, most short-term supply chain challenges during Covid-19 were also accompanied by severe cash-flow challenges. Depending on the industry outlook and severity of the situation, the short term supply chain challenges may take 4 to 12 months for complete recovery.

The focus of solving problems with short term impact should be on ensuring business continuity. Data-driven decision making for fixing these problems can help reduce risks. Some examples being: Dashboards that use the existing supply chain data with an overlay of Covid-19 information can help build supply chain intelligence by identifying potential disruptions in the supply chain, finding alternate suppliers (local sourcing) and determining the potential delays for shipments due to lockdown.

Customized analytical models on the data can help perform scenario analysis for the impact on supply chain finance (inventory holding cost, logistics cost etc.) and augment the existing IT systems (like ERP, CRM etc.) to improve contingency planning for production, inventory holding, distribution etc. and thereby reduce the risk of stock-outs or over-production.

"Improve" the existing supply chains to tackle mid-term challenges

Medium-term problems are those that have been exposed by Covid-19 disruptions, but also have the potential to outlive the immediate supply chain disruptions due to the current pandemic. The duration of the impact of such issues may vary from 6 to 18 months depending on industry and region of operation.

Problems with medium-term impact are mostly driven from the demand side. Some examples of medium-term problems include an increase in supply chain inventory holding, “Just-in-Time” inventory models put under stricter scrutiny with increased inventory cushions etc.

Solving medium-term problems can help “IMPROVE” supply chain finances and cash flows. Such problems call for strategies that create more demand for the product and at the same time improve or digitize the existing supply chains to bring about efficiency and cost reduction.

Advanced analytical models that can help predict demand signals better, point automation (leveraging IoT and AI) to bring about autonomy in supply chains and reduce human effort and cost would help ease the impact are some examples of such solutions. The supply chain digitization brought about to address medium-term challenges should be strategic and well planned as they set the foundation to address the long-term impact and build resilience in the supply chains.

"Re-Invent" service delivery models to stay relevant and tackle long-term challenges

Finally, the problems with long-term impact are those that will form the basis of the “New-Normal”. These are the problems that bring about a long-term behavioral change in the supply chain and therefore should be approached with the mindset to “RE-INVENT” or completely transform the existing business models and service delivery models.

Such problems having a long term impact may be driven either from the supply or demand side and require organizations to re-invent their supply chains.

Organizations should focus on building resilience in the supply chain through trust and transparency, automating customer journeys, identifying new order fulfilment models like “Zero-Touch” service delivery etc. Long term supply chain resilience aim at making the supply chains more A.C.T.I.V.E (i.e. Automated, Connected, Transparent, Intelligent, Velocious and Efficient).

The A.C.T.I.V.E model to build supply chain resilience relies on re-inventing supply chains by solving problems at the convergence of multiple new-age and emerging technologies (like AI, IoT, DLT etc.). A.C.T.I.V.E supply chains are more than digital supply chains, they are cornerstones for ensuring high supply chain autonomy.

Focus on resilience: Supply chain for new times

Bosch’s Business continuity Dashboards offer a robust decision support system that uses data from the existing IT systems, like ERP, vendor portal etc. with an overlay of Covid-19 data to identify potential supply chain risks. The dashboard also allows identification of alternate suppliers from supplier networks to ensure business continuity.

Bosch’s block chain-based solutions like TrueFood+ (Farm-to-Form track & trace and provenance for food), AutoTrace (automotive track & trace) and PharmaTrace (Track & Trace for drugs and pharmaceutical products) can help organizations in their journey towards creating more A.C.T.I.V.E supply chains.

These solutions operate on the concept of “Economy of Things” and solve the supply chain problems at the convergence of IoT, AI and DLT thereby providing significant cost efficiencies through automation of shared business processes.

Way forward

Building supply chain resilience shall continue to remain as a core need for organizations to operate and ensure growth. There has been an undeniable push for resilience from the disruptions caused during the pandemic, but the impact for the same would be long-lived.

Those at the helm of driving digitization for large organizations should align the short and medium-term strategies and actions performed during these times with the long-term objectives and goal. The framework defined above can help organizations map their investments in supply chain modernization and ensure that every step (no matter how small) is taken in the direction of building supply chain resilience.

Businesses with global supply chains should focus on resilience even more because that is the only way they can future-proof themselves from such unprecedented events.

The actions of today can help create a strong foundation for building the supply chains of the future, where resilience to such unprecedented events is built into the business models more efficiently.

• Raghavendra Ramakrishna Kulkarni, GM, Innovation market strategies and Business Ecosystems, Robert Bosch GmbH.
• Chandan Trehan, Lead-Innovation market strategies and Business Ecosystems, Robert Bosch GmbH