2020 was one of the strangest and most disruptive years on record. As the saying goes, those who do not learn from history are bound to repeat it, and most would say they never want to experience 2020 again. But in addition to reviewing lessons learned from 2020’s challenges, we should also consider the ways in which this year brought insights, inspiration, and innovation to the fore as people learned live and work in new ways. This is especially true for supply chain leaders and professionals, who faced incredible disruptions and unique opportunities in 2020. Here is a recap of lessons learned and APQC research findings that supply chain leaders should leverage in 2021. (For more in-depth insights, check out this on-demand webinar and presentation slides.)
Reflections on an Unprecedented Year
In a poll during the December supply chain webinar, attendees picked the one word they would best use to describe 2020. The top response, selected by 41 percent, was “unprecedented.” Indeed, the COVID-19 pandemic truly was unprecedented in its scale. Unlike other major crises in recent memory, the pandemic was fully global and universal. Almost every country, industry, organization, and individual was impacted in some way.
2020 also brought unprecedented attention to supply chains. We started to hear the term “supply chain” in popular news media. Google Trends from the past three years show a dramatic uptick in worldwide searches for “supply chains” on March 15, 2020—just as the reality of the pandemic was beginning to hit—followed by another peak in April and a higher level of interest overall compared to the two years prior.
From the boardroom to the living room, people are waking up to the criticality of the work that supply chain professionals do every day. This newfound public interest in the discipline is exciting and a bit frightening, as increased attention means higher praise for future successes and more criticism of future missteps. In the absence of a crystal ball, the best way to prepare for the year ahead is to understand and reflect on the biggest lessons of the recent past. Here are our top lessons learned from 2020.
- We can reach warp speed. Organizations can change faster than many thought possible. For example, many companies’ three-year plans for digitalization quickly turned into three-month rapid rollouts.
- Inventory visibility is key. The pandemic highlighted the importance of inventory accuracy as consumers shifted from in-person shopping to curbside pickup and home delivery.
- Agility is built on relationships. If supply chain professionals expect to shift on a dime, they need to stay in close communication with internal and external stakeholders—and really listen to them. Deeper and more collaborative relationships with suppliers will be key to future success.
- Innovation isn’t a “nice to have.” Innovation can make the difference between surviving and thriving in the face of disruption.
- Bad actors don’t quit when there’s a crisis. In fact, many cyber criminals sought to capitalize on vulnerabilities exposed by the transition to remote work. Secure and seamless off-site access to enterprise systems can mitigate current and future cyber risks.
- We need to take an active approach to collaboration. When people transitioned to remote work, organizations needed to take a more proactive role in encouraging collaboration and relationship building.
- Some of our preconceptions about remote work were wrong. We were often surprised by which roles could and could not be done remotely. A lot of people want to keep working from home (at least some of the time), but not everyone.
- Measure, even if it hurts. We need to keep measuring, even when the results are disappointing or scary, to set a baseline for moving forward.
- Supply chains are shortening. The trend to localized supply chains continues as organizations seek increased reliability and reduced risk.
- Leverage tech for speed and transparency. To win the future, organization will need to leverage automation and technology for real-time data analysis and faster decision-making in supply chain.
To help your organization move forward during this global pandemic and disruption, here are selected key takeaways from APQC’s 2020 supply chain management research.
PRIORITIES AND TRENDS ACCELERATED
When APQC asked organizations about their supply chain challenges and priorities for 2020, the top three identified were digitalization, analytics, and cloud. When COVID-19 hit, these trends didn’t pause—rather, they accelerated. The transition to remote work made digitalization, analytics, and cloud more business-critical than ever before. In terms of performance, many organizations faced an uphill climb at the outset of 2020. About half of those we surveyed said they reached their 2019 business goals, while the other half missed some or all of their goals. Unfortunately, a large number of supply chain organizations were coming into 2020 already behind the curve. Most organizations made adopting new technology and process improvement a priority for the year. Fortunately, that didn’t change over the course of 2020, although the way in which organizations went about doing that work evolved. Leveraging technology and improving processes is necessary not just for turbulent times, but all the time. That’s a key activity that will continue.
Another trend that accelerated relates to supply chain planning. In the past, the biggest focus area in supply chain planning was driving down costs. Over time, though, organizations began to recognize the need to balance efficiency with other value drivers like flexibility and customer centricity. When the pandemic began, this became even clearer. We saw that organizations that were able to take into account the need to move quickly were more successful overall, even if their inventory costs were a little higher. There has been a shift in many organizations from just-in-time to just-in-case inventory management.
FOCUS ON COMMUNICATION AND RELATIONSHIPS
When APQC asked supply chain professionals about their communications approaches in our March 2020 quick poll, one in five said they had not communicated with customers/clients or suppliers about supply chain disruption. This is a huge missed opportunity. Organizations that had better relationships and more open communication with suppliers got their materials out before ports (and countries) closed due to the pandemic. Those that had early warning systems in place with their suppliers were able to react faster. There’s a very real cost associated with not moving quickly when there’s a disruption. When you have good relationships with your suppliers, it’s actually less expensive in the long run.
Throughout several research projects in and beyond supply chain, APQC found that communication and relationships are increasingly vital to success. In supply chain planning, we found that organizations are looking to improve collaboration around end-to-end processes, especially order-to-cash, to deliver more value to customers. In sourcing and procurement, we found that relationships with suppliers can make or break the organization, especially when crisis strikes. Notably, communication was also found to be one of the top capabilities in APQC’s cross-functional research on organizational resilience.
PRIME TIME FOR INNOVATION
When a disruption hits, there’s a temptation to pause innovation efforts—it just seems too risky to pursue when the bottom line is at stake. This way of thinking is misguided, though, because disruption is often the best moment to innovate. Crisis creates shifts in consumers’ needs and preferences, which in turn opens new opportunities for companies. On an APQC 2020 webinar, Scott Anthony recommended using the following questions to identify opportunities for your organization:
- How do new circumstances affect available solutions?
- What new barriers impact decision pathways and priorities?
- How do customers rearrange how they define quality?
- What new solutions get the job done in a sustainably better way?
You don’t need a big budget to take advantage of innovation opportunities. In fact, you can innovate by removing cost drivers such as inefficient processes and features that don’t add value to customers. In another APQC 2020 webinar, Steve Wunker discussed this approach he calls “costovation.” In supply chain, one example is collaborative logistics, wherein different companies share truckloads to lower their overall shipping costs. Another example is postponement, wherein the final assembly of a product is delayed until an order is actually received.
We asked attendees on our December 2020 webinar what word they would use to describe the successful supply chain of the future. The number-one response was “adaptable.” It’s impossible to predict exactly what 2021 will bring for supply chains, so professionals need to be flexible enough to navigate whatever challenges arise. Supply chain leaders can take these three steps to build agility in 2021.
- Strengthen relationships. Develop open, two-way communications with suppliers, internal stakeholders, and key customers to identify emerging threats and capitalize on emerging opportunities faster and to greater mutual benefit.
- Improve and automate. Look for opportunities to streamline, automate, and/or eliminate tedious tasks to free up time for relationship building and deep work.
- Grow your knowledge base. You can’t pull the right lever at the right time if you don’t know what levers are available, so continuously seek out new information.
APQC recognizes that much has changed over the course of this year. As such, we invite you to help shape the future of our supply chain research by taking our 2021 Supply Chain Management Challenges and Priorities Survey.