Tony Harris, Global Vice President, Business Network Solutions, SAP, discusses the need for organizations to move beyond the traditional, linear supply chain model, and instead turn to digital supply chain networks.
From national lockdowns that significantly decreased, and in some cases even temporarily stopped, the flow of raw materials and finished goods, to the recent ‘Pingdemic’ that led to staff shortages and business closures, it goes without saying that the pandemic has posed significant challenges for supply chains across the world. And that’s without taking into consideration the pressures that Brexit added to world trade.
However, the pandemic did not necessarily create new challenges for supply chains, as such, but rather it brought to light previously unseen vulnerabilities and magnified existing problems. For many organizations, this meant realizing they may not have had the ability to respond quickly to avoid supply chains working overtime or coming to a screeching halt. But, as a different world takes shape, it is vital that leaders look at longer-term strategies for supply chains and operating models in order to thrive in this uncertain climate.
The key to building a successful long-term strategy is investing in technology to embrace digital supply chains. By doing this, organizations can leverage the power of the cloud and tap into intelligent technologies that enable them to make business processes more transparent, thus allowing them also to make more informed decisions.
Moving to supply chain networks
To rebuild and restructure supply chains for a better future, organizations must move beyond the traditional linear supply chain model, and instead, look to digitalize processes and implement a dynamic, collaborative supply network.
Unlike linear supply chains, supply networks shift away from singular, point-to-point processes to a many-to-many structure that enables 360-degree visibility. Once an organization is connected to a network, it becomes both a buyer and a supplier and gains broad visibility into the interconnected operations of its trading partners. Beyond allowing companies to identify emerging trends or issues more easily, access to a network also enables collaboration with new partners, improved cash flow and new ways to drive product innovation. By connecting to a network that includes producers, vendors, distribution centres, warehouses, transportation companies and retailers, organizations can respond faster to demand and address unforeseen circumstances like the impact of Brexit and the continued uncertainties caused by the pandemic.
Future-proofing the supply chain
Digital procurement will also play a major role in organizations’ ability to withstand future disruptions, helping them pivot toward recovery when disruptions occur and creating a competitive advantage. By taking advantage of the latest digital tools, businesses can evaluate demand and supply in real-time and allow a rapid response in case of changes or problems.
Digital supply networks are built to anticipate disruptions and mitigate risks. They leverage technology and data analytics to provide a continuous flow of information, allowing business leaders to gain holistic insights into all business areas. Although this move will require fundamental changes to many aspects of an organization’s planning – from strategy to business processes, to IT – the ability to keep up with fast-moving market dynamics is essential in today’s ever-changing business environment.
A successful example of this is demonstrated by the Danish manufacturing company VELUX Group, which automated 64% of its 20,000 monthly order lines after digitally transforming supply chain operations and streamlining supplier collaboration. Now, the VELUX Group seamlessly conducts transactions with more than 200 vendors and enjoys improved processes, accelerated delivery dates and more time saved.
Strengthening healthcare supply chains
Let’s take a deeper look into one of the most critical vertical supply chains impacted by the pandemic: healthcare. SAP Ariba Discovery, a digital solution specifically designed to bring trading partners together at speed, found that, unsurprisingly, medical supplies were the top commodity posted by buyers in the UK for the majority of 2020.
As a result of a spike in demand for healthcare equipment, traditional linear supply chains simply could not support it. Trading partners in the chain were completely dependent upon the next, so as soon as one of those trading partners had a disruption, such as a supply shortage with delivery drivers unable to work, the supply chain came to a standstill. This is where agile, networked supply chains stepped in to save the day. In a networked environment, each buyer can pull from several sources of supply and is less dependent on a single supplier, enabling greater resilience.
For example, a U.S.-based construction supply company urgently needed 500 hospital beds for a new temporary hospital being built to treat Covid patients. However, its existing supplier had no stock, and so, the company posted its requirements on SAP Ariba Discovery and within 30 minutes a new source of supply was quickly identified in the network.
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Overall, the pandemic has demonstrated the need for linear models to be replaced by agile supply chain networks and for organizations to take advantage of the digital solutions that are now widely available. And, according to a recent survey by SAP and Oxford Economics, companies that have embraced new technologies realize better results. As such, business leaders need to prioritize and commit to restructuring business models to help prepare for future disruption and ensure continued growth.