Nov 09 2021

How to Fix the Supply Chain

Consumers and businesses alike are frustrated by long delays for a range of products. To solve the problem, two things need to happen.

During a recent visit to a cycling shop, I couldn’t help noticing a glaring lack of bicycles on the sales floor. When I mentioned it to a store employee, what followed was one of those “only during the pandemic” conversations: Everybody wants a bike, but shipping containers full of them are being held hostage in locked-down ports, and assembly lines are at a standstill because one supplier is out of bicycle bits and pieces.

Supply network turbulence has been with us for two years now and will stay with us well into 2022. From endpoint devices to computer chips, building materials and automobiles, most of us now have a personal story about how supply chain disruptions have hit home.

These disruptions have many causes, and obvious fixes are elusive. What is clear, though, is that businesses should be taking steps, individually and collaboratively, to restore reliability and responsiveness to their supply chains. As interconnected as supply chains are, the best way to view the problem and identify potential solutions is through a wide-angle lens, with the interests of the customer always at the center of the picture.

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Two Imperatives For a Reliable Supply Chain

From that wide-angle perspective, two imperatives come into focus. One is the need to understand and mitigate structural supply chain risks. This includes rebalancing supply sources and eliminating single points of failure so the production of key goods like semiconductors and the materials that compose them, for example, is more globally distributed and less prone to bottlenecks caused by a single plant closure or other disruption.

Businesses are harmed when a single critical supplier goes offline. That’s why it’s vital that they can receive supplies from a variety of manufacturers. The semiconductor shortage is a tricky problem because many device manufacturers are affected by it; whether supply-chain challenges impact one or several suppliers, businesses are best served when they can access technology from as many as possible. Governments can also play an important role by providing incentives for companies to move semiconductor fabrication plants to places that are less exposed to political, economic and climate risks.

The second imperative is to make supply chains more resilient. It’s time to stop optimizing for cost alone.

A supply chain that’s been optimized primarily for cost and efficiency, not for flexibility and transparency, can’t really be efficient if it doesn’t deliver products, provide insight about when inventory will arrive or readily shift to alternative pathways to get goods where they need to be. If the cost of losing customers and their business is factored into supply chain decisions, the overall equation may well change.

MORE ON SUPPLY CHAINS: What's needed to support omnichannel retail.

Technology, collaboration and a bit of mindset adjustment can transform these shortcomings into strengths. The process starts with realizing that no company can do business alone. A deep network of suppliers and other partners is critical to delivering goods according to customer expectations.

How Tech Can Help Stabilize the Supply Chain

Another key to resilient supply chains is synchronized planning and execution — and that’s where technology comes in. When planning is connected to shop floor operations and informed by modeling tools that rapidly simulate supply chain scenarios, adjusting and executing become second nature, even under extreme conditions. To get there, organizations need solutions such as Big Data analytics and real-time inventory management.

Industry 4.0 approaches — including a heavier reliance on data collected from across the enterprise by connected assets in the Industrial Internet of Things — improve real-time insight and automate processes, minimizing disruptions. Machine learning, for instance, can identify patterns in supply chain data and predict disruptions before they impact business.

Ultimately, when businesses and their supply chains act collaboratively and sustainably and demonstrate they can use data-derived insight to overcome disruption and consistently deliver the right goods to the right places at the right time, the bike store employee and I can talk about cool bikes again rather than the complex processes that bring them to the store.

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