What is next for digital supply chain strategy

Supply Chain & Operations Consulting Services

Discover how EY's supply chain team can help your business redefine its end-to-end supply chain and operations to support your enterprise objectives.
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What is causing supply chain issues?

The world has experienced a sustained period of geopolitical tension, leading to significant shifts in supply chain dynamics. The war in Ukraine, for example, resulted in a doubling¹ of global cereal and oilseed prices, causing ripple effects across various industries. Additionally, CEOs are grappling with the prospect of a sustained period of inflation, with around 34% of them anticipating higher input prices in the foreseeable future.²

Digital disruption has also played a crucial role in reshaping supply chains. Supply chain digitalization has accelerated, with 78% of supply chain executives acknowledging the transformative power of digital technologies.³ This shift toward digitalization brings new opportunities for efficiency gains and improved decision-making across the entire supply chain.

Strategic interventions, such as near shoring and reshoring, have become imperative for companies seeking to build resilient supply chains. A staggering 96% of executives are considering these strategic interventions to mitigate risks and ensure a stable supply of goods and services.⁴

Furthermore, the increasing pressure to address climate change and build sustainability has become a defining factor for supply chain reimagination. Consumers are more conscious of the environmental impact of products, with 75% of US consumers expressing concerns in this regard.⁵ As a result, companies are embracing sustainability-led supply chain redesign to align with evolving consumer expectations.

The four pillars of supply chain reimagination

To navigate these complexities and seize opportunities, companies must embrace a comprehensive approach to supply chain reimagination. This framework revolves around four key pillars:

Supply chain resiliency and sustainability: This pillar focuses on building resilient supply chains through tech-led process excellence. Integrated business planning, manufacturing reliability and secure alternative sources of supply play crucial roles in ensuring uninterrupted operations and meeting customer demands.

End-to-end (E2E) cost optimization: Cost optimization across the entire supply chain is paramount for competitiveness. Strategic sourcing, manufacturing waste elimination and optimizing logistics spend are among the key levers in achieving sustainable cost reductions and operational efficiency.

Supply chain digitalization: The digitalization of supply chain processes unlocks new possibilities for efficiency and agility. Autonomous planning, digital factories and procurement analytics enable real-time decision-making and improved collaboration. E2E visibility and quality management ensure seamless integration across functions, driving overall supply chain effectiveness.

Strategic interventions: This pillar encompasses segmentation and portfolio optimization, footprint optimization and sustainability-led supply chain redesign. By strategically re-evaluating their operations and adopting asset-light strategies, companies can align their supply chains with changing market dynamics and future-proof their operations.

Unlocking the benefits: impact for businesses

A review of previous EY supply chain engagements reveals that the adoption of a supply chain reimagination framework has resulted in significant benefits and impacts for clients across four dimensions:

Implementing robust resiliency measures can lead to a 3% to 5% increase in overall revenue, a 5% improvement in forecasting accuracy, a 50% to 60% reduction in supplier lead times and a 15% to 30% increase in overall equipment efficiency (OEE).

A focus on cost optimization can deliver a 4% to 6% reduction in direct material costs, a 5% to 10% reduction in manufacturing costs and a 6% to 10% reduction in transportation costs through route optimization and freight rate benchmarking.

Embracing digital transformation within the supply chain can result in a 10% to 15% reduction in inventory carrying costs, a 5% to 10% reduction in manufacturing costs and a 6% to 10% reduction in warehouse and distribution center operating costs.

Implementing strategic interventions can lead to a 10% to 25% reduction in transportation costs through network redesign, and a significant improvement in on-time-in-full (OTIF) performance, reaching 95% or higher.

Embracing the future of supply chain management

The landscape of supply chains is evolving rapidly, driven by a confluence of macro disruptions and the need for sustainability and resilience. Companies that embrace the supply chain reimagination framework can position themselves at the forefront of this transformation. By adopting a holistic approach and leveraging technology, process excellence and strategic interventions, organizations can build resilient supply chains, manage costs, enhance digitalization and align their operations with changing market dynamics.

As the business environment continues to evolve, supply chain reimagination is no longer an option but a necessity for companies seeking long-term success. By rethinking their strategies and embracing these four pillars, organizations can unlock the full potential of their supply chains and thrive in an increasingly complex and dynamic world.