Florent Bouguin, Chief Technology Officer at Optel Group.
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The global supply chain crisis is showing no signs of abating any time soon. Already under the strain of unprecedented demand and congested logistics, disruptions are rising even more due to China’s zero-tolerance policies to curb its current Covid-19 flare-up, trade wars and the Russian war in Ukraine. According to Bloomberg, nearly $22 trillion in trade of global goods is stuck in a supply chain quagmire. And according to industry pundits, the situation is about to get worse before it gets better.
Buffeted by staggering inflation rates, fuel costs and productivity-crippling labor shortages, businesses worldwide are navigating persistent unpredictability throughout the entire value chain. Boosting supply chain resilience is inevitably the new imperative.
Reshoring production, sourcing from geographically dispersed partners, adopting just-in-time practices and consolidated procurement are just some of the strategies companies are leveraging to mitigate supply chain issues. Regardless of the supplier-risk initiatives put in place, visibility into supply chains will be the only way businesses can achieve end-to-end resilience. Increasing transparency across the supply chain and accessing real-time data to make better decisions are no longer nice-to-haves. They must become “the new supply chain normal.”
Traditionally, supply chains were digitalized in part thanks to investments in enterprise resource management (ERP) systems. However, because so many companies outsource much of their production—and even supply chain planning—data became siloed in a variety of different software that didn’t necessarily “speak” to each other. Visibility across all stakeholders was clearly not in real-time. Bottlenecks or impending supply shortages could not be effectively anticipated because decisions were based on dated data.
This is not to say that ERP systems are not of tremendous value to companies. Quite the contrary. But a layer must be added to the technology stack for supply chain visibility to actually work.
Intelligent, end-to-end traceability platforms are one of several ways to help businesses struggling to reign in their supply chain problems. By connecting to the various systems and applications that make up even the most complex supply chains, these platforms provide real-time data on the location of every material and product—all the way to end-of-life disposal—while also helping to meet environmental, social and corporate governance (ESG) targets.
The importance of real-time and complete supply chain visibility, according to McKinsey, is that one long-term disruption can cost a company 30% to 50% of its annual EBIDTA. A 30-day disruption can cost 3% to 5% of its EBIDTA.
To achieve long-term supply chain resiliency, the first step is to map out the structural risks throughout the supply chain and determine the appropriate proactive measures to be put in place. These can include:
• Diversifying manufacturing and/or sourcing so that they are not dependent on one single supplier, region or country. Nearshoring and multi-sourcing may also help mitigate risks from both an operational and financial standpoint.
• Ensuring the right level of buffer capacity. This can mean ordering excess contingency stock to address surges in demand or even identifying opportunities with underutilized production facilities. Businesses should also evaluate strategic reserves to protect not only the overall business but also upcoming launches, parts for high-value features/products, etc.
• Harmonizing production. Common platforms, development processes and components are key for supply chain resilience as it simplifies procurement, even among multiple suppliers, and can even generate cost savings for high-volume orders.
Today’s volatile supply chain landscape is in desperate need of more resiliency for manufacturers across the globe. Adopting holistic production and procurement strategies and considering modern technologies are extremely beneficial ways to ensure supply chain resilience as well as ESG performance.
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