A recent analysis by Bain Capital shows that companies with resilient supply chains grow faster because they can move rapidly to meet customers’ needs when market demand shifts. Flexible supply chains cut costs and improve cash flow, in part through a 10% to 40% increase in inventory turns. This enables leaders to reduce disruption by building buffers throughout the supply network and invest in advanced analytics to improve planning and forecasting accuracy.
Businesses that invest in supply chain resilience reduce product development cycles by 40% to 60%. As production teams adjust faster to changes in market demand, revenue growth accelerates. Companies with flexible supply chains expand output capacity 15% to 25% by optimizing operations.
The following are five capabilities businesses need to create supply chains that are resilient to shocks like Covid 19:
1) Network agility. Reacting quickly to disruption requires a flexible ecosystem of suppliers and partners that can handle sudden shortfalls or even produce new products. That means setting up alternative manufacturing sites and assembly nodes and making the most of Industry 4.0 tools to optimize cost, improve visibility across the network and accelerate reaction times. Leaders develop tailored solutions for each segment of their supply chains to boost performance and cut costs. Those dependent on offshore production move some manufacturing onshore or closer to their core markets. Toyota reduces risk by having one supplier produce 60% of the needed parts, and two additional suppliers each produce 20%.
2) Digital collaboration. Cloud-based supply chain applications and collaborative platforms and tools enhance information sharing. They also improve the quality and speed of decision making within an organization and with suppliers and other external partners in a secure environment. Amid the Covid-19 pandemic, manufacturers have demanded greater visibility into the supply chains of their suppliers—a practice worth continuing. Leaders are applying automation and robotics to make their supply chain more autonomous and adding suppliers in their home markets to ensure business continuity.
3) Real-time network visibility. Control tower solutions that integrate data across the entire supply chain, 5G technology and blockchain offer leadership teams real-time visibility. Companies can better calibrate supply with forecast demand by comparing internal production capacity data with real-time demand signals such as weather data.
4) Rapid generation of insights. Leadership teams can stay a step ahead of supply chain disruptions by improving their ability to rapidly analyze internal data and external sources of big data. That means harnessing machine learning and artificial intelligence for predictive and prescriptive analytics. Those tools can deploy early-warning technologies, model risk scenarios and develop preprogramed responses. Increased risk of disruption also requires updated planning parameters and objectives, since old assumptions are no longer valid.
5) Empowered teams. Decentralized teams can react quickly to insights generated by advanced analytics and create the rapid-recovery capabilities that will help companies navigate smoothly in times of disruption.
All of these capabilities are features and functions of a supply chain operated by an outsourced Supply Chain as a Service company. Otherwise known as a 4th party logistics operator.
Source: Bain