Today’s post is part of our “Making a Difference: Supply Chains for a Better Tomorrow” series that focuses on the supply chain capabilities that will separate the leaders from the laggards in the years to come. This episode features John Richardson, Vice President of Supply Chain Analytics at Transportation Insight. In keeping with the “Making a Difference” theme, we have made a donation to JDRF.
The current COVID-19 crisis is disrupting many supply chains, but it’s also accelerating some trends, like e-commerce. What impact or challenges is this creating for companies?
“Right now companies are trying to figure out which changes will be temporary and which ones will be permanent,” said John Richardson, Vice President of Supply Chain Analytics at Transportation Insight. “Everybody has an opinion at the moment, but nobody knows who’s right. The challenge is that companies will have to think differently moving forward.”
“In our last conversation, we talked about how change management is hard for companies,” added John. “But now we’re not talking about changing a process or system, we’re talking about changing how you think. Companies have to figure out how to make their supply chains more agile.”
In terms of thinking differently, John makes the case that it begins with changing our perspective of supply chains.
“The supply chain has this connotation to it that it’s sequential,” explains John. “But look at all of the e-commerce developments over the last several years, including drop shipping. Now you’re not being sequential anymore; you’re actually skipping steps.”
“Even though we haven’t been calling it this way, the supply chain has become a web,” continued John. “So to succeed, you have to start thinking about how you can operate in an environment where you can go backwards and forwards and around.”
This “supply web” concept not only applies to the physical flow of goods, but also information flows. This includes having greater visibility to upstream suppliers and sharing more data and information with them.
“A spider sitting in the center of a web can sense any vibration anywhere on the web,” says John. “Companies want to have that same capability right now. They want that visibility to know that if I’m an essential business but two tiers up I have a supplier who is not or is shut down due to a COVID-19 outbreak, what does that mean to me? What’s the impact?”
So, how do you begin that transformation from supply chain to supply web? What are the key steps?
“You have to literally map your supply network and customer network,” John recommends. “Whether you bring in a partner to help you or use internal resources, you start by talking to your suppliers and sharing information with them to learn about their vendors. Then go through a modelling exercise to understand not only cost and service, but also risks. Determine where you need to enhance relationships and where you have visibility gaps. Then develop some contingency plans.”
Adequately mapping your supply chain — or, supply web, if we’re thinking differently — takes time and effort, which is probably why many companies haven’t done it (or haven’t done it well).
The challenge is evident in many of the network design projects John has done for clients. “Understanding where components are coming from, especially from overseas, is not [always a straightforward process],” explains John. “Are you really sure about which countries and which ports they are coming in through, particularly if they are coming in prepaid?”
“I can’t tell you how many times the address for a supplier is downtown Chicago,” adds John. “I’m sure they’re not manufacturing this component on the 30th floor there.”
This master data problem was underscored by one of our Indago research community members in a survey we conducted earlier this year on supply chain mapping:
“We know precisely where our local suppliers are located and the countries of the next supplier upstream. Suppliers further upstream are rarely known with certainty. We have not engaged in any mapping exercises to date. Unfortunately, most of the supplier locations in our ERP are office addresses and often not the location where product is actually manufactured or sourced.”
Is managing a supply web different than managing a supply chain? How do you measure success? What are the benefits of adopting a supply web perspective and approach? I encourage you to watch the episode for all the details on those questions and more. Then post a question or comment and share your perspective!