Enabling supply chain resilience through digital transformation.
By: Mohamed Ali Hefnawy
Tags: Covid-19, Digital Transformation, Resilience, Organizational Culture, Supply Chain

Image by Wokandapix from Pixabay

As we are at the end of 2020, we can see how COVID-19 is impacting supply chains around us, starting from the demand of paper tissues in the beginning of lockdown across the globe to the current demand of vaccination and how to distribute the vaccination across the population in each country.

In 2011 an earthquake and tsunami had struck Japan, which has created massive disaster impacted human and environment in Japan and impacted the global supply chain. everyone knows about earthquakes in Japan and how they can introduce disruption to the business, but as Japan has a mature manufacturing system, they were able to measure the risk of business disruption and mitigate it.

In the current pandemic, we are experiencing a new kind of disruption due to the lockdown across the globe. airports are closed and airlines are grounded due to travel restrictions. Leisure facilitates and restaurants are closed due to social distance rules applied to mitigate the risk of COVID-19 in the mass gatherings.

many firms are thinking how supply chain will be mapped post-pandemic and how to consider resilience of supply chain.

Currently many companies link supply chain risk management with enterprise risk management (ERP) by integrating ISO 31000 with supply chain risk management and make sure they have a risk register for expected risk impacting supply chain. It looks a good strategy but unfortunately no one was ready to accept force majeure clause in his contracts!

Risk registers are considering risks with high-likelihood high-severity, but risks with low likelihood high-severity are not registered well in most of risk registers. as we did not experience a global pandemic for the last many decades.

Resilience is

an ability to recover from or adjust easily to misfortune or change

So, when we are talking supply chain resilience, we are not talking only about how to manage risk, but also how to overcome the severity of the risk and continue my business again. It is like standing up after falling.

So how digital transformation will help supply chain to become resilient? It is about the organizational change and introduction of the self-disruption culture in the organization. being innovative and data driven organization. considering innovation as part from the business strategy. Understating the cost of the added complexity to the system and how the drivers of the complexity are the drivers of profitability.

Image by Niek Verlaan from Pixabay

Leveraging data as an organizational asset and a source of differentiation will help organizations to know more about their supply chain behavior and detect disruption with signals coming from data models and demand forecasting models as well as from other procurement tools like third party risk management tools or TPRM tools to detect disruptions coming from external stakeholders. not only first tier suppliers but deeper to second, third, or even fourth tier supplier!

Supply chain managers should not consider technological bubbles as a silver bolt which will solve all their problems, but an advanced option to simplify and accelerate their daily business.

One challenge many organizations are facing is data silos, where planning is done in a silo, sourcing and logistics in another silo, and supplier risk management is in another silo, etc.. . And everyone is considering it is a normal practice to build silos in spreadsheets and exchange information through emails and during meetings. this challenge will fail any digital transformation as the culture of silo-builders should be changed to bridge-builders. Allowing corporates to integrate accurate data from Sales and Operation, Master Scheduling and Demand Planning to drive business and reduce complexity like bullwhip effect.

Using Machine Learning, Deep Learning and other sorts of Artificial intelligence will come to picture later adding accurate sales and demand forecasts with lower inventory holding cost.

Another element in the digital transformation is using e-procurement suites in strategic sourcing, supplier performance management, and e-invoicing as a faster substitute to manual processes which requires many data exchange in multiple formats.

Another element in the digital transformation is logistics transformation, using real time tracking and simulation of supply chain network to find out real time threats or challenges facing the people while moving goods.

Final thought about building resilient supply chain that investment in people and raising the bar for supply chain professional is a healthy strategy to have the internal capacity to absorb supply chain disruptions and build a reliable business.