Over the past decade of working in supply chain, thousands of operators have asked me: how can the industry adopt actionable solutions to increase performance while minimizing cost and risk and execution time?
When the pandemic hit, the tone of this question changed substantially, from a nice-to-have, to a must-have. Suddenly, companies found themselves facing massive vulnerabilities in their operations. A generation’s worth of mounting pressure for an efficient supply chain had finally led to a collapse, exposing gaping holes in supply chain’s robustness and health. One operator opined that they almost went out of business when their suppliers were taken over for COVID mask production. Companies scrambled to address these weaknesses, while the commentary from academics and corporations poured in.
Overwhelmingly, these third-parties provided lofty advice that overlooked on-the-ground supply chain realities. Take, for instance, this article by Harvard Business Review. Its academic perspective is chock full of idealistic and outdated recommendations, slanted towards upholding the same supply chain model that capsized the industry in the first place. As a founder and CEO of a supply chain management SaaS company, I not only want to debunk these outdated recommendations, but I also want to provide clear and easy to implement solutions that your company can actually take advantage of. Here’s what Harvard Business Review (HBR) got wrong about supply chain, and what we as an industry can do to make it right.
HBR’s View on Supply Chain: Sound Familiar?
A major premise of HBR’s article is to “pandemic proof” the supply chain. Sounds great, right? That is, until you read further and realize they’re offering the same 20+ year old practices that will “make supply chains more resilient while not weakening their competitiveness.” We’ve all heard this “resilient” approach before:
- Create an in-depth map of your supply chain (which they acknowledge as “time-consuming and expensive”)
- Regionalize your suppliers (while copping that “building a new supplier infrastructure in a different country or region will take considerable time and money”)
- Carry safety stock (which, “like any inventory, carries with it the risk of obsolescence and also ties up cash.”)
- Adopt innovative technology—but how, and which ones?
- Streamline SKUs but with no mention of the cost for implementation or potential profit losses.
Does this advice sound expensive, time consuming, and impractical? It is. Let me suggest a better path forward for supply chain management that involves just three steps:
- Ditch the old-school resilient model recommended by the Harvard Business Review and transition to a dynamic one;
- Adopt sustainable practices that empower your supply chain to be maintainable and efficient for the long-term;
- Replace outdated system-optimization recommendations with modular solutions that are cost effective and easy to implement today.
A Dynamic Supply Chain is the Future of Supply Chain
Harvard Business Review’s first mistake is to push resilience as a supply chain cure-all. You may have heard me make this argument before when assessing similar recommendations from McKinsey & Co. “Resilience,” in this sense, is code word for “rebuild supply chain to what it was before the pandemic hit, except reinforced to take a punch.” There’s an obvious problem with this logic. The pandemic didn’t create supply chain’s vulnerabilities; it simply exposed them for what they were. That being said, patching up these weaknesses with the same strategies that left them exposed won’t solve supply chain’s structural challenges. It also won’t make them better able to protect against supply chain’s inherent volatility, or the climate-change related disasters or geopolitical-related disasters or Insert-Unknown-Disaster-Here that could impact supply chain next.
“The pressure to operate efficiently and use capital and manufacturing capacity frugally will remain unrelenting.” – Willy C. Shih, Harvard Business Review
Rebuilding supply chain towards “resiliency” is a sure-fire way to ensure your supply chain stays stuck in the same outdated model that didn’t work before the pandemic hit and certainly won’t work in future crises—which will have their own unique dynamics. Companies should shift focus towards implementing a dynamic supply chain model, one that understands the inherently volatile nature of supply chain and enables companies to respond to issues in real-time which have ever-changing variables and implications.
A dynamic model abandons the notion that companies can predict the next crisis or somehow protect their supply chains from it. Rather, in a dynamic model, we empower teams with the right tools and management with the right information, in order to transform a supply chain into an agile, responsive operation—no predictions, consultants, or massive resource overhauls necessary. The supply chain is setup to deal with issues as they arise—and the team is ready to take on the next challenge regardless of the crisis.
A Sustainable Approach is Enabled by Agility and Efficiency
Harvard Business Review’s recommendations put an enormous amount of pressure on companies to make large structural changes (like minimizing their global reliance upon China) while still maintaining the same extremely high efficiency standards that have defined supply chain for the last three decades. Look, we all have to stay competitive in today’s market. However, it’s naïve to assume a less flexible supply chain can somehow result in a better performing, cheaper supply chain that is also better prepared for systemic shocks and increasing volatility. Companies need to focus on marrying efficiency with agility in order to stay competitive in the long run. This two-pronged approach involves integrating technology into your supply chain operations that upholds real-world supply chain practices.
At Elementum, we outline a number of technology-empowered strategies that allow supply chain managers to both strategize on immediate issues while keeping an eye on long term goals. Take, for instance, the U.S. groceries market. As Harvard Business Review points out, they have “difficulty adjusting to the plunge in demand from restaurants and cafeterias and the rise in consumer demand.” Elementum works with several food providers, such as Ken’s Foods, Blue Diamond, and Sofina Foods, that have taken a proactive approach to tackling supply chain volatility. With Elementum, they can respond in real-time to demand fluctuations and ensure the right exceptions are always properly prioritized. Food manufacturer Ken’s Foods, for instance, used Elementum’s incident management platform in order to shorten response times to customer order issues, assign clear accountability for handling the issue, and identify the root cause. Not only did they end up saving revenue opportunities that would have been otherwise lost—they were able to solve these issues 8-10x faster. Best of all, Ken’s Foods was up and running with Elementum in less than a week. You can hear from Ken’s in their own words.
Sustainable Wielding the Right Technology Over Structural Overhauls
HBR advises organizations to make extreme overhauls to their supply chain operations, starting with mapping out their supply chains in order to achieve end-to-end visibility. I’ve been in this game of mapping out all the tiers in a supply chain. It’s a never-ending battle with few winners. Even if you can identify all of your supply chain permutations, you still need to get all of your suppliers to send you information in real-time in a usable format. Have you been to a Tier 3 supplier lately? Or a farm for that matter. What’s more, asking for end-to-end visibility without providing the right context or process-enablement amounts to being able to see thousands of shipments, but not being able to identify or prioritize the one that actually matters.
By providing the right content and process-enablement, Elementum provides visibility into the parts of your supply chain that matter: the exceptions. Take, for instance, McGees & Co.: an interior design firm and online furniture store that was mystified when a certain piece of furniture kept arriving as damaged. Using the Elementum platform allowed McGee & Co. to discover a freight carrier that repeatedly delivered damaged goods. By replacing this carrier, McGee & Co. brought a 35% increase in damaged shipments down to just 5 or 7 percent.
By embracing a dynamic supply chain model like the one enabled by Elementum’s Supply Chain Service Management Platform, you can have:
- Visibility into your supply chain operations that enable actionable insights
- Clear accountability for understanding necessary changes and how to make them
- Root cause analysis that empowers your supply chain to make sustainable changes in both the long and short term.
Supply chain management is difficult, and it’s getting more difficult. No doubt about it. However, don’t let the so-called “experts” fool you into taking a step backwards. Leave the “resilient” supply chains in the past, and step into the future with dynamic supply chain management. See how easy it is to get started with Elementum, by requesting a demo or getting in touch at www.elementum.com. You can also email me at email@example.com.