Chain reaction: why flexibility is a must when pandemic-proofing your supply chain

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Supply chain and procurement professionals are well accustomed to performing miracles in difficult circumstances, but the global COVID-19 pandemic has changed everything. The lockdown has put tremendous pressure on supply chains, exposing fault lines and revealing what is truly needed to keep a global economy functioning. While demand for some products has surged, leaving suppliers scrambling, for others it has evaporated completely. The impact ripples out in every direction.

Supply chain and procurement teams have been faced with a delicate but decisive balancing act. They must plot a route through the immediate and future challenges that draws on meaningful insight based on high quality data. This will enable them to build flexibility into their cost base and transform costs – rather than simply cut them – in order to come back fighting when the time is right. Those who have already started to invest in new technologies to drive insight and action in the supply chain have a head start over the competition.

Overcoming today’s obstacles

Since the start of the lockdown, teams have been working around the clock to maintain a stable supply of their most critical items, as well as to dramatically scale back indirect consumption and mitigate short-term costs. It’s a fine balance: a shortage of materials is an obvious problem, but oversupply can also be a costly burden. They need to gain full visibility in order to understand how not just their tier-one, but also their tier-two and tier-three supply chains have been affected by COVID-19, and adjust their plans accordingly.

Meanwhile, organisations are managing sickness, childcare and other family challenges within their supply chain and procurement teams, as employees adjust to working from home. Planning ahead is a challenge – but it has to be done.

Navigating tomorrow

Moving beyond the initial shock, most organisations are beginning to grapple with the near future. They are transforming their direct and indirect supply chains to build adequate flexibility and capacity.

When it comes to the direct supply chain, relationships are key; buyers must make it their goal to become priority customers. The same goes for the indirect supply chain such as marketing, facilities and catering. Many will want to keep costs as low as possible in the short term, but still have options later. Smart organisations are transforming their supplier relationships so that they can flex spending up and down where necessary, but maintain the ability to bounce back at a pace that balances costs with revenue.

Organisations are also starting to use intelligent workflows to drive a firmer link between consumer demand and their supply chain. IBM is working with a confectionary business, for example, bringing together COVID-19 health and social information to forecast consumption of different pack sizes in relation to school closures so that it can adjust stock and hence supply accordingly. Working in an agile way, the client has been able to adapt its technology in a matter of weeks.

Adapting to the future

For some industries the bounce-back has begun; for many, it is a long way off. Amidst all they are doing to adapt today, supply chain and procurement teams must take a step back and plan the future. At the heart of this planning, organisations must build an automated and adaptive supply chain.

Organisations that have invested in new supply chain systems, and that already have artificial intelligence (AI) and automation capabilities built into their operating models, have been able to pivot and acclimatise to the recent fluctuations much more successfully. But many still plan according to historical data and seasonal patterns, often with poor or incomplete data. These organisations must modernise their approach now. Never before has it been so important to be able to draw on real-time data to anticipate and respond to buyer behaviour.

Now is the time for the kind of next-generation hyper-digitisation that, for many organisations, has been an often-slipping item on their IT roadmap. A serious technology programme that enables adaptive, real-time supply chain management is no longer a nice-to-have. It’s essential to the ability to not only survive, but also to remain competitive in the future.

This means automated, end-to-end integration into customers’ planning. It means resolution rooms that give real-time visibility into how to resolve present and predicted problems. It means routine transactions being carried out automatically, freeing up and augmenting people to focus on more strategic roles. It means a more sophisticated level of supplier and customer management. It means greater flexibility and efficiency so that when difficulties arise, the business can adapt seamlessly. It means less risk and more profit.

On the data

In this context, the goal of AI is effectiveness: eliminating the routine and injecting insight to make supply chain and procurement experts perform at their very best, at scale. And the goal of automation is efficiency: doing the same work for less, also at scale. Few would dispute the appeal of this approach. But investing in these technologies is just the start. Both rely on having high-quality data to work with.

Only when they have a consistent view of precisely what they’re buying, in what volumes, from whom, and why – across the full ecosystem, will organisations reap the results of intelligent workflows powered by AI and automation. This must be augmented by insight into what affects customer demand and supply. If we understand what is happening now, we can better prepare for the future.

Supply chain and procurement teams must take an agile but scaled approach, developing data transformation plans and providing tools and arranging squads of people to manage data. Successful organisations will be those that not only solve the technology at scale and cleanse their data initially, but also get the people and data policies in place to support the new technology in the longer term.

While once departmental politics put the brakes on the kind of rapid digital transformation that is now needed, decision-making hierarchies have crumbled. This makes it possible to experiment and build solutions quickly. But this must come with the confidence that these solutions can be delivered at scale, across all business units, markets and region.

Organisations are required to think like a start-up and scale like an enterprise – and good-quality data is the key. Yes, it’s possible to build an analytics solution in just days that consumes social data to deliver hyper-local information – but the organisation must ensure that this change is permanently embedded into its DNA.

Building up to bounce back

IBM speaks from experience, as a business that has an advanced and evolved cognitive supply chain. It also has world-leading data, cloud and blockchain capabilities, and an experience-led methodology that values outcomes over technology. This combination of experience and expertise means we are perfectly positioned to help clients transform their supply chains to be more dynamic, responsive and interconnected.

So much is uncertain about the future, but we know this. The world is not going to return to “normal” overnight. Supply chain and procurement leaders must build their digital strategy for the next 18 months immediately and make its delivery a priority for the business. When COVID-19 is a distant memory, organisations that invested in smart technology and built intelligent workflows to digitise their supply chain will be more agile and better able to sense and respond to demand signals.

However your business is experiencing the pandemic, IBM can help you make sense of the present and navigate the future. You can also learn more about IBMs approach to building resiliency through AI and automation.