The impact of volatility in supply chains
The Bank of America estimates that mentions of the supply chain in the quarterly reports of companies that are listed in the stock market have increased by 412% since Q3 2020, demonstrating how concerning the vulnerabilities of the global supply chain are. With disruptions continuing beyond the unprecedented events of the 2020 pandemic, businesses of all sizes need a supply chain strategy in order to build the resilience to be able to keep fulfilling customer needs to a high standard.
Disruptions such as the war in Ukraine, increasing acquisition costs of materials and packing (found to be on average a 16% to 24% increase) and constantly moving customer demands, the unwavering volatility of the supply chain is not an issue that will disappear any time soon. So, what defense do businesses have against the uncertainty of supply chains? The key is fostering agility and the ability to monitor and respond to real-time changes. This can only be achieved by advanced tools processing and utilizing data, a solution we have been implementing for clients at a bespoke level here at NTT DATA.
Why volatility in the supply chain needs addressing
Beyond the usual ebb and flow of a supply chain, businesses have had to navigate mass disruptions, making the need to be agile even more pressing. The ramifications are apparent as we found that 84% of the companies surveyed reported that aspects related to logistics, its impact on the business and the solutions that ensure the service and cost objectives are discussed in their Management meetings.
The COVID-19 pandemic created a massive hurdle for businesses to overcome due to a major shift in working conditions, border control and consumer needs. While the need for some supplies disappeared (for example, in the halting of the hospitality industry due to lockdowns in many countries), the need for other supplies (such as face masks and medical equipment) skyrocketed.
The scarcity of raw material and the war in Ukraine continues to cause disruption in the supply chain as usual ways of working can’t be upheld and demands for supplies can’t be met. Retail, construction and motor are some of the most affected industries currently following the impact of the COVID-19 pandemic, scarcity and increased cost of resources, and issues in production and transportation. The time to introduce solutions for supply-chain-reliant businesses is now.
How to prepare for the unpredictable
The fragility of the global supply chain has been caused by a long-term singular focus on making the process cost-efficient. With volatility continuing to challenge businesses, that focus has to shift to creating and maintaining an agile supply chain.
What is meant by supply chain agility is the ability to react to changes in the short term instead of having to recover in the long run. If businesses can keep up with the volatility of the supply chain, the impact of disruption will be reduced.
As supply chain issues are already a topic of discussion, moves are being made to implement agility already. We found that more than 75% of companies are investing or will invest in specific control tower capabilities. This investment includes changing procedures, ensuring end-to-end visibility of the supply chain, increasing analytics capabilities and preparing to deal with volatility.
Investing in visibility and alerts, known as Control Tower technology, is a good start. However, previous technological capabilities have not been able to cover the whole supply chain, only the stages of most concern such as customer order management and monitoring deliveries in real-time. The businesses of today need more to flex in response to changes with minimal disruption.
Why a Control Tower is the best solution
For full agility that enables businesses to meet consumer needs, foster loyalty and deliver outstanding customer service within an unpredictable environment, the advanced capabilities of a Control Tower such as the one developed by SAP, are required. This solution is particularly comprehensive and provides end-to-end visibility which means businesses have the full picture of the supply chain and are able to monitor it in real time.
With issues being immediately reported, Control Towers allow responses to occur quickly enough to minimize disruption while taking into account the rest of the supply chain. Instead of setbacks causing weeks or months of delay and a long recovery period, rerouting and immediate problem-solving keeps the system moving.
A Control Tower uses data to its full potential and compares scenarios and runs simulations based on changes to find the best alternative for continuing progress. This prescriptive analysis ensures accurate and automated self-correction. Issues are identified, analyzed and solved all in one solution.
The tools and integrations of a Control Tower extend beyond real-time reporting of a 360-degree view of the supply chain. Collaboration is streamlined with communication between partners improved so discussions can be held between all involved parties before a decision is made on how to move forward. Alerts and case management capabilities ensure the details are dealt with and exceptions don’t go unnoticed.
The combination of data analysis (both predictive and prescriptive), artificial intelligence, machine learning and the Internet of Things make Control Towers incredibly powerful. Businesses can use it to foster agility and build resilience in their supply chain, avoiding the dire consequences of previous disruptions in recent years.
The global supply chain has opened opportunities for businesses and consumers alike. However, its vulnerabilities can lead to a costly breakdown in processes. Businesses are able to combat this by proactively mitigating issues using intelligent technology able to track, manage and self-correct in the ever-changing landscape of a multi-partner supply chain.
How will you defend your business against supply chain volatility?