Supply chain goes from linear to networked ecosystem

The future of the supply chain lies in higher autonomy and self-sufficiency. Supply chain practitioners are shedding earlier concepts and adopting strategies that lead to a system that is agile and networked while keeping demands of environmental and social compliance in mind. 
 

In the third week of July this year, the US State Department released a Joint Statement on the behalf of partner economies, with India among them, at the 2022 Supply Chain Ministerial Forum. "The shocks to global supply chains from pandemics, wars and conflicts, extreme climate impacts, and natural disasters have put in stark relief the urgent need to further strengthen supply chains, to work to reduce and end near-term disruptions, and to build long-term resilience. This is a global challenge we intend to approach resolutely and cooperatively", the joint statement read.
 

That the global supply chain is broken, and countries and companies are still trying to put the pieces together is hardly news anymore. Shortages of critical inputs and raw materials have hit the output of practically every manufacturer around the world. There has also been a surge in commodity prices as countries and firms have had to scramble for alternate suppliers because of global tensions.
 

 Each crisis, however, also presents an opportunity to look at old issues afresh. Firms across the world are redesigning their supply chains and changing the priorities and goals for it. Most companies are now moving away from the old paradigm, which focused primarily on cost reduction, to one that puts a premium on resilience. The shift is not just about finding alternate suppliers for critical inputs. It has meant a complete change in the architecture of the supply chain system, helped in no small measure by technology. The priority now is visibility of the supply chain at every point and with alternate suppliers having real-time access to the demand and inventory at every level and geography. 

A networked supply chain
 

Accessing real-time data across the value chain is the need of the hour, unlike traditional models of local optimization within legal entities. Thus, when a change in customer demand is captured, it can be seen at all levels — by manufacturers, distributors, OEMs, suppliers, and tier-end suppliers. Changes can be implemented simultaneously across the network and production schedules can be aligned accordingly. 
 

Manufacturing companies are currently relooking at the strategic architecture of their supply chains. Starting with the number of plants and warehousing facilities to their locations and the need for spares to be maintained at multiple geographies, companies are also pulling in vendors into their core supply chain IT systems.
 

A networked system provides supply chain visibility, which enhances transparency and resiliency. With risk monitoring systems, digital twins, scenario planning and early warning systems, organizations can improve visibility and upgrade their response to disruptions through real-time monitoring and scenario planning. 
 

Along with visibility, a resilient supply chain also requires agility that will lead to information- or data-based actions. To achieve a highly sensitive flow, along with end-to-end visibility, simulation and risk monitoring, supply chain practitioners need to develop capabilities across omni-capable networks. Such operating models and a trained workforce will create a trusted and secure supply chain that aids companies to react swiftly and shift operations when a disruption occurs.
 

It is crucial to build supply chain sustainability for another reason: the next-generation ecosystem. Along with speed, cost competitiveness and quality, the definition of supply chain has expanded to include social and environmental compliance. 
 

Supply chain experts are adopting tools that enable them to redesign products for a circular economy by engaging suppliers and industry partners.  Decarbonization of the value chain is a priority in attaining sustainability. This is a challenge as most companies do not own their logistics and rely on third-party logistics providers. 
 

While new demands are being placed on supply chains, the need for cost reduction and cash extraction remains. With portfolio simplification, SKU rationalization, strategic sourcing, spend analytics, and asset optimization, companies can continue to derive significant cash flow benefits albeit now across the interconnected ecosystem.