How global supply chain strategy is changing and what comes next

Emerging from the aftermath of the global pandemic, leaders have an opportunity to reimagine their supply chains for the future.

In brief

• Chief operating officers once again seek stability and cost control in supply chains, but disruption remains a looming threat.
• Supply chain leaders should embrace four strategies to navigate complexity, as a one-size-fits-all approach does not exist.

The landscape of global supply chains has undergone a significant transformation in recent years. From geopolitical tensions to digital disruptions and climate change pressures, companies are facing a multitude of challenges that are reshaping the way they think about supply chain strategy. In response to these disruptions, a new paradigm of supply chain reimagination is emerging, driving companies to rethink their strategies and adopt a holistic approach to ensure resilience and capitalize on new opportunities.

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:

1. 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.
2. 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.
3. 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.
4. 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:

1. 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).
2. 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.
3. 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.
4. 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.

By focusing on these four areas of supply chain reimagination, companies can potentially achieve a profound impact on their profit and loss statements.

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.