As one-third of 2020 is behind us, what’s next for supply chains? What are the keys to maintaining best practices in supply chains after a crisis? The answers are tied to foundational management practices: sound data management, strong process management, a focus on future-ready skills, and enhanced digitization. In short: an acceleration of trends already underway.
Many organizations are still hip-deep in dealing with the impact of the coronavirus/COVID-19 pandemic, with the impacts and degree of disruption varied by industry and business model. However, strong supply chains are vital to survival during the crisis and thriving after the crisis. While individual organizations may take different routes and while the crisis may exacerbate existing weaknesses in some organizations’ supply chains, the path forward to maintain best practices in the new/next normal/abnormal will have some similarities.
Sound Data Management
The number one enabler to making better data-driven decisions in many organizations is sound data management.
One regional supply chain master data manager APQC interviewed evaluated data quality, governance, and processes in his organization. “It all pointed to a lack of discipline, end-to-end process, and focus on data. Each department’s data responsibility was a small part of someone’s job. Regrettably, how that data impacted others upstream and downstream in the supply chain was not considered, nor was it understood.” His organization then created a supply chain data management program to standardize, align, and improve efficiency and quality in data management. (For more insights, read this APQC case study: Applying Supply Chain Data Management at a Large Healthcare Organization.)
Building a solid data management foundation is critical to enable advanced analytics. In APQC research into supply chain analytics, we found that almost 80 percent of organizations have seen their investment in supply chain analytics increase in the past three years. This is significant because supply chain leaders are turning to advanced analytics to help make business decisions specifically related to supply chain optimization, reducing cost, and improving customer satisfaction—and the insights from the analytics are only as strong as the data upon which they are based.
Strong Process Management
Process management is the bedrock that organizations can rely on not only in good times, but also in in times of crises and turmoil. Managing by process promotes standardization and efficiency in all areas of the business, and this is especially true of supply chain. In procurement, for example, organizations that have documented procurement processes (and consequences for noncompliance) have lower costs and are more efficient.
Building and maintaining strong supply chain processes can help create greater agility and a supply chain that can better respond to unplanned or anticipated demand. To weather this crisis, process management provides a vehicle for assessing risk in two primary dimensions: impact (e.g., duration, consequence, existing and required redundancy levels, and potential cost) and likelihood (e.g., frequency, predictability, forewarning and onset). APQC has tools to help organizations analyze process risk.
One key process to focus on for the longer term is supplier risk management. It’s important to understand who your organization’s suppliers are, as well as your suppliers’ suppliers and beyond. Ensuring a mature process for business continuity plans can help with risk mitigation and continuously improving your processes. One additional recommended practice is having a risk governance team with measures and progress reporting in place.
Here is a success story of an organization that built agile and resilient supply chain and strategic sourcing capabilities: The Inside Story of AGCO’s Response To COVID-19: A Very Agile Supply Chain.
Focus on Future-Ready Skills
In March 2020 research on disruptions in supply chains, APQC found that labor shortages (which include a lack of appropriately skilled talent) ranked as the fourth largest area of disruption and are anticipated to impact 57 percent of respondents in the next 12 months. Modern supply chains are increasingly digital, interconnected webs of supply and demand with many global players, and the skills needed for success in the future are not necessarily those of the past. As automation increasingly takes on tactical, repetitive tasks, the skills needed in various supply chain roles have shifted to more social skills (i.e., “soft” skills involved in collaboration and managing change) and deep work skills (i.e., skills indicative of being able to focus without distraction).
A best practice is to invest in employees development; but the key to success is knowing where and on what types of skills to focus. APQC has been examining new skillsets needed for demand planning. In this role, for example, the ability to effectively convey demand planning projections and recommend improvements is part content (i.e., analytical capabilities and business acumen) and part delivery (i.e., soft skills).
APQC has also examined the 10 most important skills for future-ready procurement professionals. The top three skills are: business ethics, communication, and stakeholder management. These skills reflect the evolving approach toward procurement with more sophisticated, collaborative, win-win sourcing business models and increasingly abandoning approaches like price squeezing and shifting risk solely onto suppliers. This two part series talks more about the problem and solution for closing the skills gap in procurement.
Here is a case story of an organization that has focused on helping procurement professionals grow and advance their careers: Developing the Future Skillsets of Procurement Professionals at Lululemon Athletica.
The coronavirus/COVID-19 pandemic has become a proving ground for accelerating the digital supply chain transformation trend that was already underway. Investing in supply chain digitization can enable greater agility and build greater resiliency. For example, there are systems available to help with supply chain risk identification and mitigation. And while APQC does not endorse any particular system, it is important to find one that continuously monitors for global supply chain disruptions and potential impact to your organization. APQC found that one-third of participants in our research are not yet using an electronic system that provides a risk profile of their suppliers, materials, supplier manufacturing sites, categories, and products. This gap can leave their organizations vulnerable and slower to react to unforeseen disruptions.
One very important point is that digital transformation in supply chain requires clear definition and strategy for it to be a best practice. It also needs to be undertaken with the mindset that change management is different for digital transformation. Here is a real-world example of an organization with experience successfully managing a digital transition: Building a Better Supply Chain: Digital Strategy for the Port of Antwerp.
Supply chains will face new disruptions and crises in the future, after the coronavirus/COVID-19 pandemic has become history. Therefore, it's important to implement and refine foundational management practices for future supply chain success: sound data management, strong process management, a focus on future-ready skills, and enhanced digitization.