VIEWPOINT

2022

T H E S U S TA I N A B L E A N D
H I G H LY P R O D U C T I V E
S U P P LY C H A I N
Total synchronization of strategies andoperational capabilities from consumer
to supplier

AUTHORS
Bernd Schreiber
Lokesh Dadhich

Early on in the COVID-19 pandemic, people across theNaoya Furuta

globe were anxious about the supply of household

Dr. Kai-Oliver Zander

products and the long supermarket checkouts they
faced to buy much-needed groceries. In March
2021, a cargo ship blocked the Suez Canal for days,
sending global supply chains reeling. Today, extreme
resource scarcity exists in many different industries
around the world.

Patrick Dutz
Jens Kirchner

ARTHUR D. LITTLE

VIEWPOINT

At the same time, national and internationalsustainability laws and initiatives requirea fundamental shift within global supply
chains. It is clear that organizations require astrategic framework that supports decision
makers in creating supply chain value bysynchronizing supply chain layers beyond
short-term and reactive crisis management.

TR ADITIONAL MANAGEMENTFAIL S TO ADDRES S TODAY ’ S
CHALLENGES
The game-changing challenges global supply
chains face today are symptomatic of a central
challenge of today´s supply chain management:(often extreme) fluctuations in demand andsupply are a primary driver for supply chain
imbalances, especially in fragmented supplychains.
The reasons current supply chain management
organizations are unable to cope withthese fluctuations are multifaceted. On
the organizational supply side, fragmentedplanning, characterized by functional silos andasynchronous planning horizons, compromises
the overall supply chain in numerous ways,
such as by nondisclosure of fluctuatingproduction demands between the production
and procurement function. Organizations mustovercome low levels of cross-functionality and/or cross-site information transparency to findthe best possible supply plan and to allow for fast
adaption in extreme situations (e.g., pandemics
or natural disasters).
On the demand side, various types of demand
have emerged and intensified over the last coupleof years. Diverse, overarching super trends,
such as increasing environmental and social
sustainability awareness, have created major pull
factors toward sustainable and green products
and their components. Moreover, enhanced
regulation and consumer awareness haveforced supply chains to consider sustainability
and environmental aspects in sourcing,transportation, and production.

THE SUSTAINABLE AND HIGHLY PRODUCTIVE SUPPLY CHAIN

DIVERSE , OVER ARCHINGS U P E R T R E N D S H AV E
C R E AT E D M A J O R P U L L
FA C T O R S T O W A R D
S U S TA I N A B L E A N D
GREEN PRODUCTS AND
THEIR COMPONENTS

While planning cycles have traditionally relied onrobust demand forecasting, increasingly volatileand unpredictable consumer behavior has forced
supply chains to create inherent responsiveness.
From the strategic design onward, supply chainsmust consider the demand boost a simple social
media post can create in a totally unforeseenmanner. Thus, supply chain synchronization
requires a holistic approach incorporatingplanning for marketing, demand, network,production, and procurement. Moreover, extreme
supply chain imbalances are often exacerbated bytraditional supply chain management´s inability
and inflexibility to act and react to short-term
events.
In recent months, the COVID-19 pandemic showedthat the existing supply chain infrastructure isvulnerable to sudden disruptions. At the sametime, organizations have learned that wildfires,floods, and storms can cripple road, water, power,
and telecommunications infrastructure, causing
severe short-term supply bottlenecks as well.
These challenges have led to a rethinking in
supply chain planning toward more resilienceand combining supply chain synchronization andlean thinking. Various options exist to mitigate
and overcome these risks, such as moving
operations closer to the consumers, diversifying
the supplier base, introducing dynamic inventory
management, or building augmented and datadriven forecasting capabilities to increase supply
chain agility. Nowadays, with the support ofdigital solutions and technologies in the supply
chain, these options do not necessarily comewith a decrease in cost-efficiency or productivity.

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All in all, supply chain leaders must seek out

An area of growing importance in sustainable

a concept that can create a sustainable andsupply chain management is human rights,

highly productive supply chain with highwhich recently has shifted from being alevels of efficiency. In consideration of thisfactor (like fair trade or the UN Sustainableradical transformation pressure, supply chain

Development Goals) to a tool enabling

management must evolve into a truly strategic

national security policy. A recent example isbusiness function.

the US ban on imports from China of a key
material used in manufacturing solar panels

BE YOND DEMAND -AND SUPPLY BAL ANCING
As shown in Figure 1, the Arthur D. Little Total
Synchronized Supply Chain framework stands
for a strategic, holistic, and integrated end-toend coordination of the supply chain startingfrom the supply network across the internal
value network to the market network. The
approach integrates supply chain management
along five layers: target, planning, value chain,
information technology/operational technology(IT/OT), and people:

due to human rights abuse allegations in
Xinjiang.
Sustainable supply chain strategies
incorporate ambitious but realistic economicand ecological targets. These may include,for example, a reduction in the environmental
footprint of manufacturing sites and logistic
services or a strict prohibition of child laborbeyond organizational borders. Supply chain
targets serve as fundamental and guiding
principles for all supply chain–related
activities and decisions throughout thesupply, value, and market network beyond the

1. Target layer. The classic supply chainorganizational border. The aim is to create

management approach focuses firstan organizational push that aims for both(and sometimes only) on economic-driven

sustainable and highly productive targets

targets and KPIs, such as direct sourcing

at the same intensity and effort, addressing

costs or order fulfillment rates. As social,every aspect of a supply chain network.

economic, and political awareness toward
ecological and social purpose rises, supply
chain leaders are becoming increasingly
alerted to integrating sustainable andlifecycle-oriented profitability objectives.

Figure 1. Total Synchronized Supply Chain framework

Figure 1. Total Synchronized Supply Chain framework

CROSS-COMPANY SYNCHRONIZATION
Supply Network
TIER-N

TIER-1

Internal Value Network

Market Network

SYNCHRONIZATION ACROSS FUNCTIONS & HIERARCHIESCUSTOMER CONSUMERTARGET

Sustainability & profitability

PLANNING

Strategy, finance & operations

VALUE CHAIN
IT/OTPEOPLE

End-to-end value chain (develop-to-deliver)
Information & operational technology
People & capabilities

Source: Arthur D. Little

THE SUSTAINABLE AND HIGHLY PRODUCTIVE SUPPLY CHAIN

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2. Planning layer. Supply chains may become

This approach is based not only on an

confusingly complex, requiring supply chain

integrated process and activity flow, but also

managers to collaborate and interact withon a harmonized operating model and systema multitude of players in the supply andlandscape without unnecessary system andmarket network. This often leaves managers

operating frictions. As a result of modern

struggling to gather the correct information

value chain synchronization, enterprise-in time to make augmented and data-wide decisions are shared cross-functionally,

driven decisions that also consider definedleading to improved operations as well assustainable and highly productive targets.

more visibility and higher resilience.

While integration between strategic andoperational planning has grown over the
past years, a clear connection to companies’
financial planning is often lacking.

4. IT/OT layer. The complexity and volatilityof today’s supply chains requires thatorganizations be able to sense upcoming
disruptions as early as possible and respond		Forward-looking supply chain planning mustin real time. This can only be accomplished by

evolve into value-oriented planning rather

applying digital technologies (e.g., Internet

than pure volume-oriented forecasting.

of Things (IoT) and machine learning) to

Value-oriented planning enables decision

capture and analyze the enormous amountmakers to take actions based on the overallof data across the supply chain. Ensuring

impact of the short- and long-term financial

real-time access to data, such as production

impact for the larger business. Real-timeplans and production capacity information,

scenario planning that considers costs ofare the foundation for integrating a supply

additional services, complexity of operations

chain control tower into the typical systemalong the supply chain, and impact on thelandscape.

environmental footprint must be the basis
for educated decision making in planning.
A supply chain control tower is one enabler
for real-time augmented decision making,integrating internal and external data along
the value and information chain, fromsupplier to consumer.

The control tower provides real-time
information to the responsible supply
and production planners, enabling themto identify potential disruptions (e.g.,
supply and production capacity issues),
locate potential alternative production
capacities, and evaluate the financial

3. Value chain layer. Whereas the planning layer

impact of these scenarios. This is just one

addresses strategy, financial, and operations

example of how a synchronized IT/OT layer

planning, the value chain layer applies tocan drive end-to-end visibility and improve

the implementation and realization of plansvalue chain performance. Through targetedwithin the value chain. Traditional value chain

digitalization and a data-driven approach, themanagement is characterized by silo thinking

synchronization of supply chains is amplified

within organizational and functional borders.

across all layers.

An end-to-end approach aims to develop a
fully integrated and synchronized value chain
from product and service development to thedelivery of a product or service to customers
and consumers (“develop-to-deliver”).

5. People layer. A transformation of the supply
chain is not about automating old processes
but about imagining new ways of working
and finding innovative process-data-system
combinations to deliver the transformation.
The success of this approach requires people
with a blend of new, different, and traditional
skills and capabilities.

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New technologies and market requirements
are forcing supply chain organizations todevelop new capabilities, such as automatedand synchronized supply chain planning,

PRODUC TIVIT Y, FLE XIBILIT Y& SUS TAINABILIT Y ARE K E YBENEFIT S

multi-sourcing decision making, and utilizing

To begin to drive ambitions regarding

end-to-end supply chain transparency insustainability, an organization must find a

support of digital supply chain control towers.

balance and synchronization of economic andOrganizations can close the current skills

ecological targets at both the corporate andgap by acquiring external knowledge or bycross-functional planning levels.

developing skills internally. Bridging the skills
gap requires assessment of the complexity offuture tasks/skills as well as an evaluation ofcurrent organizational competencies.

HOW TO S TAR T THE
SYNCHRONIZ ATIONJOURNE Y
Whereas demand and supply cut through alllayers of the Total Synchronized Supply Chain
framework, the synchronization of economicand ecological targets also influences strategic,
financial, and operational steering decisions(e.g., whether to invest solely in efficient supply
chains or in sustainably effective ones as well).
Digitalization at all layers is key to provide
the fundamental IT architecture and data
flow for planning and operations. Recent caseexamples reveal that a strategic approach brings
significant and tangible value (see “Case 1” and“Case 2”). These examples provide insight into
how this approach can transform the supply
chain to increase productivity, flexibility, andsustainability.

At the corporate level, synchronization might
range from planning and developing a circular
economy approach toward the overall attestationand certification process of linear supply chains.
In circular economy approaches, organizations
must consider multiple planning elements,including the 4Rs (reduction, reusability,refurbishment, and recyclability) in productdesign and quantitative planning that considers
replenishment, sourcing, production, distribution,and reverse logistics. Despite its costs intransition and maintenance, sustainability canbe a driver of multiple mutual benefits, suchas revenue growth based on fulfillment ofcustomers’ demands, cost reduction in terms ofenergy and material savings, and risk reduction
associated with supplier quality.
At the cross-functional level, existing linear
supply chains might involve ecological andeconomic product design as well as sustainable
and environmentally friendly packaging. They
might also have to source sustainable products
and effective production by eliminating harmful
byproducts or waste. Finally, organizations might
aim to reach sustainable distribution targets thatinvolve environmentally friendly logistics andpreferred regional destinations.

THE SUSTAINABLE AND HIGHLY PRODUCTIVE SUPPLY CHAIN

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CASE 1: INTERNATIONALLE ADING PL AYER IN THE
FMC G INDUS TRY

CASE 2 : EUROPE AN
ELEC TRICIT Y T SO

Fast-moving-consumer-goods (FMCG) companies

triggers the synchronization need for all supply

have experienced rapid changes over the pastchain layers for German transmission system

decade. From focusing solely on identifying

operators (TSOs). Therefore, the target layer or,

the most logical and cheapest way to ship andmore specifically, the ecological target layer,

receive goods, today’s supply chain management

is the dominant synchronization layer, deeply

now deals with increased customer-centricity,anchoring the driving of the Energiewende inconstantly changing consumption behavior,

strategical targets.

and rapidly growing amounts of unstructured(external) data. In an increasingly competitiveenvironment due to shrinking trade margins anda high level of uncertainty, our client sought
to address these challenges by developing
and implementing an end-to-end supply andproduction-planning solution.

Germany’s Energiewende (or energy transition)

Moving further into the steering layer, theEnergiewende can be achieved only by expanding
the current transmission grid and, hence,poses an important operational target thatis complemented by the traditional endeavorof keeping the grid in a stable and efficient
operating state. This significantly affects theAs a first step, we supported the target picture

value chain of TSOs. For example, the asset

design of a future-ready synchronized supply

management and planning of new infrastructure

chain. We identified key optimization measuresprojects must increase the personnel capacities

across multiple synchronization layers in closeand planning output to cope with the increased

collaboration with a cross-functional client

project demand. The project planning must also

team. Some examples of these measures include

be synchronized with the procurement and supply

the design of an end-to-end supply chain

chain management to ensure that the supplier

planning process to enable integrated strategic,

network can deliver the materials and services inoperational, and financial steering across thetime and at sufficient quality for the upcoming

entire supply chain. Moreover, a harmonized IT

project demand that the project planninglandscape will ensure advanced planning andschedule imposes.

real-time transparency of the global supply
network without system breaks.

To sufficiently manage several simultaneous
large infrastructure projects and to utilize

These and other synchronization measures ofthe procured materials and services inthe to-be concept are currently being piloted

those projects, the project organization andin selected markets to validate and ensure

management structure must be rearranged

rollout readiness for the entire supply chain(e.g., with large projects functioning as their

management organization. Initial results show

own sub-business units). While maintaining

substantial improvements in planning efficiency,and operating the infrastructure may not be

quality, and service-level enhancement.

the most important objective during a phaseof significant grid expansion, these functions
must be prepared for the go-live of the new
infrastructure to achieve the operational targetof a stable grid transporting green energy fordistribution network operators and increasingly
sustainability-minded end customers.

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CONCLUSIONINSIGHT FOR
THE EXECUTIVE
When synchronizing supply chains, one must go
beyond demand-and-supply balancing. A supply
chain’s vulnerability to disruptions can be reduced byaddressing and linking multiple synchronization layers.
To drive exhaustive synchronization, each layer must
be assessed and synchronized beyond organizationalborders. Since all layers are interconnected, all layers
must be addressed in sync.
Overall, organizations should assess the following
three areas to initiate and support the journey toward a
total synchronized supply chain:1	Synchronization benefit assessment. Assessing
the current synchronization, integration, andeffectiveness levels of the supply chain, identifying
synchronization measures and their potential
benefits and impact.
2

Future-proof solution design. Developing afuture-ready synchronized supply chain target
picture (including to-be process, IT architecture,and operating model) to enable better, data-driven
decision making; a gap analysis will highlight key
synchronization actions to tackle.

3

Pilot and roll-out support. Ensuring proper
support of the new target concept, including
creating a true supply network, living the newoperating model, piloting innovative digitaltechnologies like the supply chain control tower,and so on.

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