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Strengthening Supply Chains by Understanding Digital Breakages

 
 

Next Gen Insights | Antony Francis |
11 August 2020

Due to what is unquestionably one of, if not the largest global issue in recent memory affecting food, goods, and supplies distribution, there has seemingly been more discussion about supply chains than ever before.

When the crisis initially came to be, most of us experienced empty shelves in stores, which took weeks, and for some, months to restock. Some people had visions of post-war rationing as stores imposed their own rules, while many on social media were stigmatising individuals for hoarding supplies and food.

Even more critically, the whole healthcare system was brought to its knees with inadequate supplies of PPE and medical equipment as demand suddenly spiked.

So, what happened to our beautiful, efficient global supply chain that pulses product through itself in a timely fashion? Simply put, it overstretched and broke.

COULD THIS HAVE BEEN AVOIDED?

Certainly, no one predicted the size, scope, and speed of the current situation coming to pass. Other than some serious modelling in predictive analytics on the impact of a pandemic on supply lines, it’s become evident that practically everyone was taken by surprise.

This is, however, not a new phenomenon and is not solely related to a medical crisis. It is clear, though, that the best laid plans which emerged out of learnings from previous events still do not work. Let us look at some examples:

  • Annually, as a storm is announced during hurricane season, store shelves usually end up ransacked and empty prior to and after its arrival on land.
  • Whenever the media mentions a possible shortage of a given product or a temporary suspension of an essential service, supplies tend to become scarce in preparation for and following the event.
  • Certain geopolitical crises can cause an increase in gas prices, resulting in long queues at the pumps and even fuel shortages.

What are the causes that allowed these and other supply chains to get stretched beyond the breaking point? One must look back over these past 40 or 50 years at the globalisation of the economy and the definite acceleration of this process since 2000.

As production moved offshore to Asia, Mexico, or into low-cost European countries, the supply chain was lengthened and stretched. What used to be considered a simple B2C or B2B transaction has become B2B2B2B2C in many cases.

As a result, the whole industry of global logistics was developed, supported by both maritime carriers and large freight aircraft. Container ships with over 18,000 Twenty-foot Equivalent Units (TEUs) are now commonplace and the major air freight companies take up the balance for expedited delivery, especially for electronics. The movement of most commodities and products is now organised by a network of freight forwarders who manage the end to end process for their clients. These integrated physical networks include satellite tracking, shock and temperature-controlled devices, container positioning, and load and unload optimisation, which already require complex solutions to ensure the preservation and transportation of goods without taking into account even more external pressures.

AREAS IN NEED OF IMPROVEMENT

None of this would be possible without integrated technology that has evolved and become more collaborative over time. However, these systems still lack in some critical areas which could expose risks of breakage in the supply chain. Some examples can be found below:

DEMAND PLANNING

The principal issue is sharing forecasts across the extended supply chain. It must become a collaborative effort across multiple enterprises. While this requires a level of trust in the data provided, failure to properly maintain such information simply eliminates the possibility of mitigating pressure points at each hand off. The absence of such a digital thread prevents a connected data flow and integrated view of the asset's data throughout its lifecycle. See the Endava blog post on Predictive Analytics for an even better understanding.

Participants in the extended supply chain must begin by getting their houses in order. Trust will come if the information handed off to the next participant is accurate, timely, and complete. Simply put, they must ensure that internal processes deliver on each of these promises. 

An example would be harmonised tariff code tables. These tables are updated on a regular basis by governments and customs agencies. Failure to integrate these updates in the preparation of export documents can result in huge exposure to fines, stoppage of goods in transit, and endless lawsuits between participants on “who got it wrong?”. Someone must be held accountable to execute these updates immediately. 

Another example would be the failure to update or alert a temperature change outside of norms during shipment. Failsafe back-up processes must be established to eliminate this risk. If this is not done, and the product is unusable on arrival, the opportunity for early reorder is missed.

DATA MANAGEMENT

Having huge amounts of data is one thing, but it is what you do with it that is important. Furthermore, if the estimates of there being around 30 billion IoT connected devices functioning by the end of 2021 are accurate, then we are headed towards adding massive amounts of available data. This additional barrage of data will initially add further challenges. However, the opportunity is huge as it will allow supply chains to garner information straight from the customer, and if properly managed, can be fed back up the line.

With the right tools in place, organisations can gain visibility into the supply chains to identify areas of concern and react to issues as they are flagged. Building digital dashboards that sit above these systems and act as command & control are critical tools in the supply chain.

The worst thing to experience with a newly implemented dashboard is for the pass/fail parameters to be incorrectly set, so that even pass transactions are shown as exceptions. Test, test, and test are the operative words here! If the former situation arises, lack of trust and confidence are simply pushed down the line. Gaining back trust, as we know, is a huge uphill battle.

SUPPLY CHAIN STRETCH

There has been a movement over the years to stretch the supply chain by reducing inventory sizes to what some would say are dangerous levels. Some companies have eliminated strategic inventory locations and buffer inventory levels, with the result being that JIT is only achievable when all goes well. But a resounding snap is heard when the unexpected happens. Automation, IoT, and business intelligence technologies have been central to improving adaptability and optimising the supply chain for variable customer demand. The result, when done right, is increased visibility, responsiveness, and resilience across the entire supply chain ecosystem. 

In an extended supply chain, there are literally hundreds of components each with its own BoM (Bill of Materials). For example, the F-35 fighter produced by Lockheed Martin incorporates over 300,000 parts from 1,500 suppliers from 11 countries. Recently, the knock-on effect of breakages in the supply chain caused a delivery delay of 18 to 24 jets out of the 141 planned. Good advanced planning and regular coordination between participants can alert and mitigate these impacts.

APP USAGE

There is a plethora of apps available today that purport to do this and that in providing information about product whereabouts. Many of these apps lack the depth of connectivity that real dashboards provide when linked to corporate data. They don’t have some of the value-adds that robust integrated systems provide, using dashboards that should be developed in all three environments: PC, tablet, and handheld.

Before launching blindly into selecting the ‘next best app’ it is critical to begin the process using best practices. 6 Sigma DMAIC (Define, Measure, Analyse, Improve, and Control) tells us to begin with a review of the ‘As Is’, followed by the desired outcomes, and then to map the gaps to define a path to the solution. Failure to do this often results in a problem/solution approach without a rational thought process.

A POTENTIAL SOLUTION FOR THE FUTURE

One area that could add significant value in the concept of an end to end fully reconciled transaction set is blockchain. Much has been written about the benefits (and drawbacks) of blockchain. On the subject of supply chains, you can approach the use of blockchain on two fronts – that is, implementing it in the order delivery cycle and in the payments process – but here we will focus only on the former.

The keyword here is TRUST. As a participant in the new very extended supply chain, how can I trust the information being passed along to me? It is already clear that blockchain’s ability to “automate trust” through a distributed digital ledger and automated transactions when pre-set conditions are met significantly raises supply chain efficiency. More importantly, blockchain must become a single trusted and agreed-upon data format for all partners across an ecosystem.

This will require not only time, but also multiple agreements on data standards between players across the supply chain. Indeed, blockchain may not be the panacea that many believe it will be. However, until blockchain adoption becomes ubiquitous, all is not lost. There are literally hundreds of control points along the supply chain where information is exchanged, shared and acted upon. Even though it lacks the automatic trust that comes with blockchain, establishing event manager platforms where everything is timestamped for measurement and dashboards to alert participants where information or events have not happened as planned provides an excellent substitute. These feed into real-time command & control centres and provide early warning signs to potential stretch points or failure issues that need to be put in place or strengthened with appropriate escalation protocols. Management can then act quickly to rectify the situation.

CLOSING THOUGHTS

Is the concept of an unbreakable digital supply chain a pipe dream? Could we learn of a breakage in the supply chain before it happens? Will supply chains ever have self-learning capabilities and intelligently modify processes on the fly? The only way we can ever find out is by collectively taking a chance with implementing more up to date and innovative practices and technologies designed to keep both informational and supply chains properly regulated and intact no matter the circumstances.

Antony Francis

Consultant

Antony has spent the last 25+ years helping organisations improve their supply chain processes and logistics operations by integrating automation and technology to accelerate and scale service to customers. He has a deep understanding of fulfilment operations, brick-and-mortar and e-commerce, returns processing and product refurbishment and repair. Throughout his career, he has had the opportunity to travel to over 43 countries. When he isn’t jet setting around the globe, Antony enjoys books on European history and is passionate about opera and wine. He is also fluent in French. Très bon!

 

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