Key Supply Chain Issues, Explained
By SAP Insights
We’re living in a VUCA world – defined as one in which volatility, uncertainty, complexity, and ambiguity must figure into every business evaluation, risk assessment, and decision. Today in supply chain management, every question has multiple potential answers based on a shifting number of variables. It’s not that a global pandemic was never a risk, but now the possibility of flare-ups that could influence commerce is a prevalent presence. Climate has always been a factor in moving assets around the world; now climate change, and the challenge of running a more sustainable business, figures into strategies for getting Item A from Point B to Point C and then to Customer Location D.
In this spirit, SAP Insights has compiled a list of its top articles that relate to supply chain strategy. Here we catalog a range of approaches to help you think about a set of related topics: long-range strategy, sustainable business practices, and technologies that can elevate supply chain management.
Supply chain planning to anticipate major disruptions
The pandemic led to massive shutdowns, then slowdowns, in every industry that relied on the long, lean, and low-cost global supply chains that dominated the past 30 years. New supply chain rules put a priority on risk management, not just production line efficiency. The big takeaway: focus on total costs of product manufacturing, from raw materials to distribution to the end customer. In other words, when slowdowns are the new normal, it pays to map each node along the path. Today’s uncertainties make this a time for the supply chain to shine.
Traditional demand forecasting, which relies on historical data to less frequently plot supply chain strategies, fell short in the pandemic’s period of ongoing, rapid upheaval. While companies had weathered previous supply chain disruptions (a tsunami in Japan, floods in Thailand, a volcanic eruption in Iceland), those breakdowns were localized, temporary, and fixable. COVID-19 made clear that longer-lasting global supply chain hits require a different demand planning approach – one that is rooted in current realities and uses more agile and predictive modeling.
Businesses need to prepare for all manner of turbulence, such as extreme weather events, regulatory shifts, protectionist trade policies, and geopolitical turmoil. Companies that shift some aspects of their global supply chain closer to the markets where their customers are will be able to respond more quickly. Global supply chains won’t disappear, but companies can make it a priority to build a better balance between global and local to better prepare for unexpected risks.
How sustainable business practices inform supply sourcing and resource use
As the pressure to become more sustainable ramps up, delivery and logistics are obvious paths to implement green measures. A mix of technologies used in combination – solar panels on refrigerated trucks, paperless warehouses, real-time data and routing software to minimize fuel consumption on delivery routes – can make this element of the supply chain less carbon-intensive.
Manufacturers have been providing their products as pay-as-you-go services for decades. Now, with overconsumption of natural resources threatening the availability of supplies, there is a fresh argument for manufacturers to create circular models in which they make a product once and have it used many times by multiple customers. Unleashing new services is one of the most effective ways for manufacturers to reap the rewards of a circular economy.
Like the manufacturers that are pursuing service-first business models, a number of companies are taking the idea of reusing as much as possible, including in their supply chain operations, to reduce waste and make the best use of raw materials and assets. In circular business models, everything is reused. Technologies such as Internet of Things, cloud, blockchain, and analytics can enable this environmentally sustainable approach – and cut waste to near zero.
Rethinking the worth of everything, from underused and excess assets to waste products, can lead to sustainable innovations. This practice of finding new uses for resources and assets once seen as waste is called capacity capture. Examples include a brewery that uses spent grain to generate energy for its plant and a European automaker that reuses old car batteries as energy storage for wind or solar power.
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Advances in supply chain tech to move organizations forward
Digital twins – virtual replicas of physical objects – can identify ways to improve how a factory process works or when it’s time to fix a machine before it breaks down. Digitally enabling supply chains holds potential for creating more efficient, resilient, and sustainable global trade. A digital twin could spot and solve many “what-if” scenarios to enable better decision-making for highly complex supply chains – if business partners are willing to share intelligence and data.
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