Modernizing the SCM Model: Moving From Traditional to Dynamic and More Integrated

COVID-19 exposed the fragility of supply chains.

When the supply-demand economics became lopsided because of macro factors and demand for certain goods impacting other industries (e.g., consumer-driven semiconductor shortage affecting car manufacturers), the global supply chain wobbled under strain. 

Cracks began to show. A single stranded ship in the Suez Canal threatened a global supply chain. Lack of containers impacted global distributions, even though demands remained strong. Retooling the supply chain for vaccination impacted the distribution of other goods.

These supply chain shocks are not going to stop. The 2020 Gartner Supply Chain Distribution Management and Impact Survey noted that 97% of supply chains experienced a disruptive event in the last two years, with 52% considered high-impact events.

Many supply chain players who comfortably rode on rising global demand with rigid supply chains were caught out. “A lot of companies traditionally looked at the supply chain as securing demand. It saw many organizations working with specific suppliers. The supply chain became static; it wasn’t changing. COVID-19 increased the risks, and these players were unable to diversify,” says Ulas Bozkurt, practice manager at Cubewise.

To gain immediate visibility into these risks, companies had to analyze better and faster. “Companies needed to do more short-term planning. They needed to take control of their stock and inventory in a crisis but were unable to,” adds Mathilde Opsomer, senior consultant at Cubewise. 

How data is shaping the modern SCM

Amir, a product owner in the demand and supply management department at a global retailer, noted the challenges of recent years showed why supply chain players need to focus on customer experience.

“For example, we used to deliver our product in more than a week. Now, in most cases, it’s shipped within the same day or next. We try to differ from our competitors and create a premium digital experience,” he said.

This ability to be agile to consumer needs requires a more dynamic and integrated supply chain. It is where supply chain analytics is playing a significant role.

Bozkurt noted that supply chain players are looking to widen their supply chain. For example, many European companies looked for alternative supply bases, realizing that they need alternatives to be more dynamic.

This makes planning and management more complex. “Hence, the focus on analytics. It allows supply chain players to become more proactive instead of being reactive,” explains Opsomer.

For Amir, part of the complexity comes down to having a single version of the truth. “Different teams planning and analyzing data should drive the same results regardless of what sort of systems they use. It needs to be aligned and connected.”

Planning depends on data connectivity

Amir’s remarks echo the underlying strength of Cubewise’s Supply Focus. It promises to bring together leading technologies and industry best practices for end-to-end supply chain visibility. It uses IBM Planning Analytics powered by TM1 for planning and reporting.

This visibility becomes critical as supply chain companies work in a fast-moving environment where traditional rules of supply and demand sometimes do not apply. Instead of focusing on cost-effectiveness and leanness, companies need to build capacity for resilience and pivot if required.

“The keyword is ‘optimization.’ You need to optimize the whole process constantly. Not just once. It allows you, for example, to reuse obsolete stock,” explains Opsomer. 

But to connect data, you need supply chain players to share data. Amir observes that companies are beginning to see the value in sharing the data — as long as the ROI for them is clear. 

“It is not that companies do not want to share data. They will if the ROI is clear,” says Amir.

“If you provide value back upon sharing data, it will be beneficial for all parties. Our priority is now to focus on strategic partners to build better relationships and grow mutually. Less focus on selling to everyone,” he adds.

It is one reason why companies are focusing on solutions like Cubewise’s Supply Focus. It connects the different parts of the ecosystem which previously run discretely. It also allows for real-time planning, an essential requirement for companies looking to navigate the pandemic-driven complexity.

Attitude adjustment

While the tools and platforms are available to create a more dynamic and integrated SCM, it still requires people to be ready. And this is where a lot of companies are struggling.

“The supply chain 40 to 50 years ago was focused on projection. The capacity will be set, and the merchandise planner will sell. Now it is demand-driven,” Opsomer explains.

Amir highlights the need for an agile mindset to handle “demand-driven SCM.”

“The agile mindset is the most valuable thing that an executive can focus on. We struggled a lot with it even though we had agile coaches. But the coaches alone are not the only thing that made a difference. The transition of planners to an agile mindset takes time, and it’s not easy. We’re only halfway there,” says Amir.

Bozkurt adds that his company is focused on this area. “A lot of companies have ERP. But it is transactional. Planners need to be strategic, and so planning software needs to enable this by integrating data and offering end-to-end visibility.”

End game

This visibility will become more critical as companies aim toward what Gartner calls “fit” supply chains. These are dynamic and more integrated, with 33% citing high tech having such supply chains.

In a related report, Gartner notes that the fittest supply chains are those that pursue “purpose and partnerships that differentiate the fit from the fragile, such as sustainability and collaborative practices” — a point that Opsomer shared earlier in terms of reuse.

Companies like Cubewise are focused on enabling this. And Gartner highlights a hidden benefit: the ability for supply chain players to turn high-impact disruptions to their advantage.

“Position yourself to seize the opportunity that disruptions can bring by proactively identifying likely shifts and driving your high-impact events as positive forces for change, well-aligned to the business priorities and your risk-balanced operating model practices,” the research firm advises.

If you don’t, your rivals will.

Winston Thomas is the editor-in-chief of CDOTrends, DigitalWorkforceTrends, and DataOpsTrends. He is always curious about all things digital, including new digital business models, the widening impact of AI/ML, unproven singularity theories, proven data science success stories, lurking cybersecurity dangers, and reimagining the digital experience. You can reach him at [email protected].

Image credit: iStockphoto/ipopba