How the Next Generation Supply Chain is emerging.

The next-generation supply chain needs not only digital solutions, but also change management and the will to transform.

Based on our recent diagnosis of several companies' supply chain organisations, our management consulting team has found that most companies have reasonably reliable supply chain functions. Of course, not all of them are state-of-the-art or represent the best-in-class benchmark, but they have a solid, satisfactory set-up in terms of processes, technologies, capabilities and resources. It is worth noting that it is not that easy to always be close to the latest trends and technologies. Nowadays, the environment is changing with extraordinary speed due to new regulations, consumer types, customer needs or the number of strong competitors. And these are just a few examples.

In order to belong to the industry best practice companies, organizations need to turn their supply chain function into a true competitive weapon. To use a nice, best-describing metaphor next generation supply chains need to be a kind of speed boat: fast, flexible, responsive, and as robust as possible to stand the long run. Big tanker ships are too stolid and often hinder themselves by their own complexity, long communication channels, multiple sub-groups and sometimes even get stuck when they try to turn. Best example is the huge container vessel Ever Given which has blocked the Suez Canal last year around March 2021.

But back to business: The list of typical issues and vulnerabilities is long and includes for example capacity constraints, margin pressure, application of latest digital technologies, the alignment of supply chain capabilities with strategic goals, third-party management or CDMO collaboration and many others.

However, the overall goals of each supply chain function are very concrete and encompass often the following four categories. 1.) Acceleration of revenue growth, 2.) Client maintenance and relationship building, 3.) Identification and unlock of savings, 4.) Minimization of risks and increase of reliability.

The four overall Goals of Supply Chain Organizations.

Supply chains organisation 2
Figure 1: Four overall Goals of Supply Chain Organizations.

Clearly defined goals are good as a first step, but do not bring benefits without further elaboration and subsequent implementation. The end-to-end process from suppliers at one end to customers at the other has many steps where errors, delays, mismatches, poor communication, missed opportunities and unnecessary costs can occur. Waiting is not an option here. Opportunities for improvement in all relevant departments must be identified, prioritised and initiated. From product development to regulatory approval to market launch. Each individual function has its own pain points waiting to be resolved or at least sufficiently mitigated.

Opportunities for Improvement across most Functions in the Supply Chain.

Supply chain improvement opportunities
Figure 2: Improvement opportunities for most functions within a supply chain
As one the most effective enablers digital technologies and solutions have been identified causing the difference between a reasonable working supply chain and a next generation supply chain organization – a supply chain 4.0. Examples for such digital levers are end-to-end transparency including real-time performance management, artificial intelligence and advanced analytics, automated process sequences and reporting as well as next generation employees.
Selected examples of digital Enablers and Improvement Levers.

Figure 3: Examples for digital Enablers and Levers in the Supply Chain.

Having a list of digital solutions is good to start with. Nevertheless, the most critical aspect on the one hand side and most powerful tool on the other is being ready for change. In a fast moving and highly dynamic world the only constant you can expect is change. Therefore, it is crucial not to be afraid of changes, modifications, ideas, or upcoming technologies. The attributes of a visionary supply chain 2030plus can be summarized as the following: lean, responsive, highly flexible but at the same time robust, digitally enabled and data driven. Furthermore, advanced analytics, trending and scenario visualization are going to be used as drivers for decision making. 

Selected statements of multiple key stakeholders across a range of supply chain organizations show the necessity for such a change and the willingness of the majority of people to invest time and effort on such a future-oriented and fully cross-functional project.

Selected Statements - From Pain Points to Possibilities for Improvement.

How the next generation supply chain is emerging.
Figure 4: Stakeholder Statements - from Pain Points to Opportunities for Improvement.

With reference to above-listed pain points or bottlenecks, the most frequently detected weaknesses of supply chain functions are within the following factors: Globalization, trend towards customization, political and economic uncertainty, disruptive business models, innovative technologies e.g., AI, 3D printing, robotics, Internet of Things and increasing customer requirements.

Within sales and supply chain organizations demand management has been identified as one of the most critical pain points in terms of transparency and performance. Demand planning usually happens on a local, country specific level to ensure proximity to the corresponding market. The sales and operations planning (S&OP) process steps hereby represents an important function that has got large impact on the overall business processes and subsequent value chain activities. As a second major topic of interest the necessity of upgrades within the supply chain planning IT systems have been detected.

A representative survey by Roland Berger GmbH on Supply Chain 4.0 – super charge your supply chain planning performance, in February 2018, delivers some very interesting insights.

The Companies' Supply Chain Performance and Setup.

Supply chain performance and setup
Figure 6: Standardization drives the Supply Chain Performance.

Standardization drives Supply Chain Performance.

Standardisation supply chain performance
Figure 6: Standardisation promotes supply chain performance.
Figure 6: Standardisation promotes supply chain performance.

In this context, and to improve the majority of supply chain organizations, the approach of having an integrated planning and execution instead of a strictly step-by-step process landscape can provide a range of benefits. At least five categories can be improved by a large extent.

The digitalised enabled Supply Chain Ecosystem versus traditional and linear Supply Chain Setups: Make the Difference through Digitization.

Digital supply chain 1
Figure 7: Digitally enabled Supply Chain Ecosystem vs. traditional, liner Supply Chains.

Considering all above-mentioned possibilities to transfer current, reasonably performing supply chains into a next generation digitally enabled supply function, one single hurdle will always be present. The willingness for change!

We’ve already wrote it multiple articles and the term “change management” seems already to be overused due to its strong presence in almost each single larger project, transformation, or important management meeting. But to be really honest, it will not work without a sustainable change management and transformation approach. People need to have charismatic role models, they need to believe in a company’s vision, mission, and strategy, in the “why” something needs to be changed and indeed, people need to support in getting trained throughout the journey. They must be equipped with the right tools, processes and have to learn how to use them. Finally, such a tough journey always must be promoted by quick wins and positive reinforcement. If all these important things are being underestimated, employees will either consider the change as a kind of threat or will not be committed or convinced any more during a certain point of time within the process.

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