Supply Chain Resilience: Three Lessons from the Leaders
After almost three exhausting years of back-to-back supply chain disruptions, it would be nice to think that someday we’ll return to a “normal” state where demand patterns were easily predictable, supply conditions were consistent and consumer expectations were stable. But the truth is that supply chains were never as certain or reliable as we imagined. The COVID-19 pandemic, the Russia-Ukraine conflict, materials shortages, port closures, inflation and other disruptions have only revealed the underlying fragilities of our modern global supply chains — spanning thousands of miles and involving dozens, or even hundreds, of participants — that were always there.
If there is any upside to the extreme disruptions of the past couple of years, it’s that today we have a very different, more realistic, perspective on supply chain management. We know that it’s impossible to eliminate disruption. Instead, we must build more resilient supply chains that are capable of sensing, and autonomously responding to, disruptive events at the earliest possible opportunity.
Of course, the essential question is: How do we get there? In partnership with Blue Yonder, Reuters Events has published a new white paper, “Supply Chain Resilience: Planning and Disruption Management in an Ever-Changing Landscape,” that focuses on this issue. In creating the white paper, Reuters Events talked to leading companies – including Arla Food, AstraZeneca, Colgate-Palmolive, Estee Lauder, and Fender – about how they’re building resilience into their global operations.
Luciano Sieber, Vice President of End-to-End Supply Chain for North America at Colgate-Palmolive, sums up the need to recognize and master volatility: “Resilience has a clear definition at Colgate: thriving in a world of uncertainty.” Sieber notes that resilience has become one of the pillars of the company’s strategy.
Sieber and the other executives interviewed by Reuters Events revealed three keys to increasing supply chain resilience.
It All Begins with Visibility
There’s a well-known adage, “You can’t manage what you can’t see.” And that certainly applies to supply chains. One of the key themes we heard over and over is that the most resilient companies have created a means to sense not only current disruptions, but also potential risks and vulnerabilities, at the earliest chance. That means having a view of the entire, highly complex global network, no matter how many tiers of suppliers and other trading partners might be involved. Across industries, executives agree that extended visibility is a top priority.
Linzell Harris, Senior Vice President of Global Supply Chain and Strategy at AstraZeneca, describes end-to-end visibility as “10 times more important” in today’s volatile supply chain landscape. “Visibility is not just end-to-end as we know it, but an extension of the supplier’s suppliers. We have to consider the logistics carriers and the networks, brokers and internal distribution. The scope of end-to-end has expanded, and visibility of that is truly critical,” says Harris.
Rogerio Pezutto, Vice President for North America Sales and Operations/Integrated Business Planning at Estee Lauder, concurs. “End-to-end supply chain visibility is vital for disruption management,” he states. “We need to partner with consumers and suppliers – we can’t rely solely on solutions from within.”
“End-to-end visibility is essential for managing buffers and flow,” explains Ed Magee, Executive Vice President of Operations at Fender Musical Instruments. “We don’t want to see surprises all the time – we need internal and external visibility to be reliable.”
The Importance of Near Real-Time Planning
Achieving near real-time visibility, across the complex supply chain and all its participants, is critical – but it’s only the beginning. Supply chain executives stress that near real-time awareness is only impactful if it’s matched by near real-time responsiveness.
The executives who talked to Reuters Events agree that traditional planning cycles and processes no longer work in today’s world of volatility, uncertainty, complexity, and ambiguity (VUCA). Instead, their companies are leveraging much shorter and more agile planning cycles that incorporate near-live feedback from both upstream and downstream.
Harris at AstraZeneca says about how planning is changing for them, “From an operational management view, we have focused on a high level. Our priorities would have been on a three or six-month basis, but now we’re managing on a daily basis.”
At Estee Lauder, Pezutto emphasizes that near real-time demand inputs, in the form of customer orders, are now driving supply chain planning. “The pandemic has accelerated our need to synchronize the supply chain and put the customer first. One change we’ve implemented is incorporating customer orders into the supply chain process. As a result, we’ve seen a 10% increase in service metrics.”
Sieber’s team at Colgate-Palmolive takes a proactive approach to planning, regularly running exercises to prepare for many different scenarios as disruptions emerge. “On an operational level, we look at what we would do in each scenario, like the [Russia-Ukraine] conflict, the situation with lockdowns in China – we review the risks every week constantly and develop action plans. Then we formulate actions to prevent these scenarios from impacting us. This could be activating alternative sources, increasing inventory for contingency, or finding extra labor,” he notes.
Digitalization Is No Longer Optional
The third lesson Reuters Events gathered from its interviews with these masters of resilience? Both near real-time visibility and near real-time responsiveness are enabled by a digital transformation of the end-to-end supply chain. Digitalization is no longer optional; it’s now an absolute imperative. Every company Reuters Events spoke with is investing heavily in control tower solutions, as well as advanced planning solutions, enabled by artificial intelligence (AI) and machine learning (ML), that support near real-time responsiveness.
David Boulanger, executive vice president and chief supply chain officer at Arla Foods, says, “We had already started investing into planning before the pandemic, but today we’re seeing a lot more control towers in place. This helps people have more control of their suppliers and manage things in a more agile fashion. There’s a huge investment increase in this area.”
Digital control towers not only scan the broad, end-to-end supply chain continuously, gathering near real-time data – but they share that data across functions and feed it into cognitive business planning solutions. These next-generation planning engines leverage AI and ML to look at the implications for every part of the supply chain, from procurement to delivery, and often autonomously resolve issues before they impact cost and service outcomes.
Colgate-Palmolive’s Sieber emphasizes that traditional, reactive planning tools simply aren’t up to the challenges of today’s VUCA environment. “I would say the best practice for integrated demand and supply planning is to use tools that allow you to look forward. From my perspective, past data is interesting, but if you take the pandemic, it can be irrelevant,” he points out. “Signals are distorted and it’s hard to make decisions based on that. We should use end-to-end tools to look ahead and anticipate the effects of events.”
Pezutto from Estee Lauder notes, “More and more, supply chain professionals need to be IT professionals. They need to understand data, systems and how they interact. We are trying to hire people with that skillset.”
For Harris at AstraZeneca, it’s not a case of whether the company needs to transform, but how fast they can move. He says, “We’re making strategic investments in advanced planning systems and moving forward with them at lightning speed.”
All the executives interviewed by Reuters Events agree that advanced digital capabilities represent the only practical way to monitor end-to-end conditions continuously, sense impending disruptions and re-plan with agility to keep the supply chain on track. Across industries, companies that fail to invest in digital transformation will fall behind.