Winter is upon us, and with the arrival of cold weather, rising energy prices, and oil and gas supplies being impacted by geopolitical tensions, businesses once again face potential supply chain challenges.

In addition to the disruptions that have been nearly constant for the last three years, there’s now an additional wrinkle: a potential softening in the global economy. But these struggles don’t automatically spell doom for business; rather, they provide industry leaders the opportunity to seize a competitive differentiation through their supply chains.

Following are three strategic actions that businesses should be investing in now, to weather these global disruptions.

Mitigate risk with hyper-connected supply chains. The volatility of the past three years has revealed the fragility of, and perpetual under-investment in, the supply chain. With the continued de-vertical integration of large corporations and shift to globalization, the supplier base and co-manufacturers have become of critical importance to driving data connectivity.

While most companies focus on their Tier 1 suppliers, according to Resilinc, 80% of supply chain issues originate with sub-tier vendors. Yet while technology is available to help businesses process large amounts of data, few have made the necessary investments in a hyper-connected supply chain across business functions — let alone through the multiple tiers of the supply base and downstream to the end consumer.

A McKinsey report, “Taking the Pulse of Shifting Supply Chains,” found that only 2% of companies have visibility into risk across their Tier 3 suppliers and beyond. Adding insult to injury, most of these incidents go undetected — Gartner reports that “89% of companies have experienced a supplier risk event in the past five years, yet awareness and plans to mitigate risk lack maturity.”

It doesn’t have to be this way. Businesses can secure visibility and regain control by making investments in supplier relationship management (SRM) and supply chain planning (SCP) software.

SRM brings vital structure to the supply chain, allowing businesses to manage and nurture all supplier relationships. Companies can better evaluate supplier performance and enable digitally connected planning that spans all tiers. The software also brings visibility, which is essential to becoming more agile.

This approach differs significantly from the traditional model of leveraging volume and sole-sourcing to achieve the lowest purchased cost. That’s what ultimately caused companies to become exposed to costly external disruptions. For example, the entire semiconductor industry had upwards of 43% of all certified neon gas tied to just two Ukrainian suppliers. And six companies across Russia and Ukraine provide more than 83% of krypton gas to these same businesses.

SRM also delivers customers better visibility into product availability while allowing the business to reduce waste caused by excess inventory, production disruptions, premium freight, write-offs, changeovers, sub-optimal distribution and customer dissatisfaction. More recently, the benefits of SRM are helping to drive the data capture required for measuring carbon emissions by supply chain partners.

Businesses also need safeguards that eliminate surprises such as unexpected surges and drops in demand.

Drawing on artificial intelligence and predictive analytics, SCP software enables teams to anticipate disruptions, and provides insights on how they can be resolved at the lowest cost — all before they reach a boiling point. By detecting challenges early, businesses have more options, often at a cost that’s less disruptive to the business.

One critical component often missed in these investment cases is the data improvements that SCP can bring to an enterprise. By eliminating latency and establishing a single source of truth, it facilitates faster and more intelligent decision-making. At the same time, SCP connects critical parts of the business, from sales and finance to operations, to ensure that everyone is working from the same playbook.

Explore supply chain feasibility. If you launch a big holiday marketing and advertising campaign for a new product, can your supply chain meet the resulting demand and pressing deadlines? Not likely, since only about 20% of businesses use advanced planning and scheduling (APS) tools in their supply chains. That figure should come as no surprise; it continues a historical trend whereby businesses overinvest in marketing and revenue-focused tools while underinvesting in supply chain feasibility and tactical execution platforms.

APS software allows supply chains to become more agile, by providing teams with critical insights needed to make faster and more accurate decisions. The ability to simulate “playbooks” around potential disruptions or the allocation of scarce resources is no longer a luxury. APS is essential to having a competitive supply chain.

Bring supply chains into the C-suite. The final point of focus is executive leadership. A supply chain can only transform if top executives are fully onboard. Here, there’s good news: the events of the last few years have prompted C-suite members to place one foot in the supply chain and recognize that issues exist.

This awareness is front and center in a 2021 CFO Survey from Duke University’s Fuqua School of Business, in collaboration with the Federal Reserve Banks of Richmond and Atlanta. According to the research, “three-quarters of firms report disruptions, including production delays, shipping delays, reduced availability of materials, and increased materials prices.”

But addressing these issues requires more than awareness. There’s a need for investment and a critical evaluation of internal maturity and business acumen. Businesses have never made supply chain investments a top priority, and this reluctance has left them with supply chains that are incapable of navigating the many unexpected and shifting demands that are happening now.

The issue is exacerbated by labor shortages. Combined with remote or hybrid working arrangements, this dearth of talent has led industry leaders in supply chain proficiency (Coca-Cola, Unilever, P&>, Qualcomm, Walmart, Cisco, and GE among them) to seek partnerships that can deliver supply chain excellence-as-a-service.

Executives must also introduce the concept of enterprise decision-making. This approach removes traditional silos in favor of a connected view, whereby teams can see their entire supply chain from the customer through multiple tiers of suppliers. The resulting agility allows the business to make financial commitments based on what’s happening in the supply chain, and what’s feasible to achieve.

These are just some of the investments that businesses should consider. Whatever the decision, it must involve company leadership. Only in this manner can businesses gain the visibility and agility needed to succeed, in a climate rife with economic slowdowns, geopolitical tensions, increased trade pressures, and more.

Michael Ciatto is global business leader of supply chain with Genpact.

Source: https://www.supplychainbrain.com/blogs/1-think-tank/post/36239-achieving-supply-chain-success-in-the-face-of-global-disruptions