Of all the operations that companies have, from sales and marketing, to finance, to human resources, operations are expected to function without a hitch, including supply chain and logistics. Typically, they do until some external event comes to disrupt a well-oiled machine.
For instance, the hot holiday gift of the year never makes it to store shelves because tracking information is not updated to alert of a delay in customs. Or a container ship gets blocked in a port or a canal. Or a critical part for a factory costs double because the supply firm went bankrupt, and the factory had no mitigation plans for alternative suppliers. Or a pandemic hits the world stage, and additional supplies of medical equipment are needed, which aggravates and stretches the existing supply chain. However, the root cause of these situations are often long-standing digital breakages within back-end systems.
I have discussed in a previous article that there are three separate but interlinked supply chains: the physical, the informational, and the financial, and these play off each other. Digital breakage occurs when the systems and processes fail to interact with each other, with the consequence that companies become unable to react quickly to situations. This creates circumstances like the events described above.
The global logistics sector was valued at $7.6 trillion in 2017 and is expected to reach $12.9 trillion in 2027. That is not surprising, given how closely it is affected by all the key business trends, from global economy shifts to the emergence of AI. Organisations use technology to track goods in split seconds, while forecasting how, say, a major weather event may affect the availability and price of a key product.
Recently, the backlogs in the ports of Long Beach and Los Angeles, where up to 60 container ships were sitting offshore awaiting berths, showed just how fragile the supply chain is. Then, two container ships lost a total of 5,000 TEUs overboard as they were hit by freak waves. And then the Suez accident followed! Everything from white goods and appliances to toys, to furniture, to apparel and footwear has been impacted and delayed.
At the same time, the possibility of having much closer real-time data about where products are staged throughout the entire supply chain – using machine-learning algorithms, for instance – can radically change a company’s strategy. Supply chain responsiveness has become critical, but most often digital breakages occur not from a failure in strategy but in execution.
WHERE DIGITAL BREAKAGES OCCUR ALONG THE SUPPLY CHAIN
The escalation of digitalisation has had a huge impact on most aspects of day-to-day life. As consumers embrace digital media, companies are having to reimagine their approach to traditional business processes.
In part, this trend is driven by the need to adapt to consumer habits in the B2C sector. B2B entities are also adopting digital trends to capitalise on gains in efficiency offered by automation, greater visibility, and the ability to break down data silos and reduce operational costs.
First and foremost, though, management needs to be informed quickly when a digital breakage has occurred. These breakages ensue because of a lack of connected information streams throughout the quote-to-cash cycle, be it in order management, intralogistics, freight forwarding, or transportation.
HOW TO RESOLVE DIGITAL BREAKAGES ALONG THE SUPPLY CHAIN
You do not need to be a supply chain expert to know that the sector has undergone some sweeping changes over the past decade. These have ranged from the onslaught of cheaper manufacturing bases in the East and the lengthening of the supply chain, to the revival of traditional manufacturing bases in the West as costs rose in China.
The advent of new technology has further propelled the sector’s evolution. It has enabled the supply chain to become more collaborative, support new feature areas, and respond to changing demands. However, it can also add complexity, for example when different legacy systems cannot communicate with one another.
Breakage #1: not making the most of your data
It is one thing to make data from the extended supply chain available to individual organisations, but if those organisations fail to utilise it in meaningful ways, the impact is significantly reduced. An example would be providing data on freight-forwarder clearance operation delays to the inbound receiving group, who then fail to adjust their planning for scheduling personnel.
The fix: leverage your data
A critical error in developing legacy systems was to overwrite data as operations were updated. That way, it was impossible to create an audit trail. The solution is to create an event manager where each critical process step is recorded, allowing you to have visibility to custodial handovers and the exact time when the breakage occurred and pinpoint the corrective action.
Breakage #2: not knowing about shipment issues and details
Automation impacts every industry and vertical in the global economy. Connectivity between suppliers and trading partners facilitates fast data exchange that drives immediate status alerts in the delivery process and allows for quick reaction and turnaround. Obtaining early warning signs from suppliers and shipping companies allows customer service and the sales organisation to actively alert customers to potential delays. Without this information, companies will be struggling to fulfil replenishment orders to stores and be unable to redirect SKUs to hot spots to satisfy demand in peak seasons. At worst, this could mean that a competitor product is selling in their place.
The fix: connect your shipping and service processes
Companies should integrate their order management systems into customer service applications to inform agents about shipment delays and empower them to actively call customers. Many customer service centres only provide technical data on products and take orders from customers over the phone. This is reactive, however. To become more proactive, the order replenishment status should feed into your customer service apps. Feedback surveys rate this type of one-stop service as significant enhancement to customer satisfaction.
In part 2, we will take a look at two other breakages and how to fix them as well as how Cloud and Data can provide solutions for digital breakages in the supply chain.