When I started my career the term “supply chain” was just emerging. Most professionals I interacted with during my early days in this industry were still referring to “materials management” and “procurement” when they spoke of what we call “supply chain” today. We also had a role called a “master planner” who was typically an APICS certified genius who could schedule a factory, inbound supply schedule and procurement plan via grease board, or if very sophisticated, a Lotus 123 spreadsheet.
The term supply chain and the profession of supply chain management has evolved dramatically in the last 20 years. We now have a defined functional set-up across make, move, buy and fulfill components of supply chain. We also have a stable of technology options to help us manage the supply chain operations and the physical movement of assets and inventory. We have also seen the strategic significance of supply chain which has raised it from being a “back of the factory” topic to strategic agenda item for the boardroom. All of these factors have led to increasing amount of complexity in our supply chains.
Let’s take a look at the top five factors driving supply chain complexity and three tactics I suggest for managing this complexity.
Drivers of Supply Chain Complexity in 2020
- Consumer expectations
Although it started merely as e-commerce, the consumer has come to expect a complete digital experience with respect to inventory visibility, product data, consumer reviews, payment and delivery experience. We also see the blending of traditional in-store experience with e-commerce to create a new digital experience for today’s shoppers. It is now an expectation that the “long tail” of the supply chain can put nearly any product in the right style, color and size configuration within reach of the consumer, often within a delivery window now measured not in days but hours. These consumers with their recently trained expectations are adding significant complexity in the supply chain especially in the areas of digitization, SKU proliferation, fulfillment speed, strategic inventory placement and last mile experience.
- Globalization of supply sources and emerging markets
In the first evolution of globalization of supply chains, many large US and European retailers and manufacturers sought to diversify their supply base and reduce costs by moving to suppliers in low cost centers. The second wave of globalization was about getting products to high growth emerging and highly populated markets like India, China and Brazil. We are now in a third wave where organizations must have a truly global supply chain that allows products to be sourced from nearly anywhere and delivered to almost anywhere. This brings a new set of challenges in terms of network design and transportation strategy. All of this is even more complex when you factor the highly volatile trade policies in today’s geopolitical environment which can adjust your sourcing strategy the moment a new tariff rule is put in place.
- Breadth of technology options
Technology moves quickly and technology for the supply chain has been an area of rapid innovation. The overall drivers for fulfillment speed, pressures on the labor market and desire for visibility have driven a large focus on new technologies for supply chain managers. Software has advanced into cloud based models which allow for greater collaboration across enterprises. New advances in artificial intelligence, machine learning and advanced analytics make it possible to gain new insights from the massive amount of data generated in your supply chain. And, advances in “autonomous” technologies are now allowing tasks such as truck driving on the motorway, pallet moves and piece picking to be done by robotics technologies instead of people. And while many of these technologies are “cool,” the implementation, integration and change management associated with these new technologies adds massive complexity for supply chain managers.
- Proliferation of supply chain ecosystem partners
Just as shippers and brand owners have been challenged to improve their supply chains, logistics services providers have also risen to the new complexities with wide variety of outsourced supply chain services. While the old question was simply insource versus outsource, the new challenge is managing across a massive variety of services. A company may choose to insource high volume products or channels while finding ecosystem partners to handle the specialized supply chain services. Choosing the right portfolio of internal and external providers and forming a cohesive ecosystem is a huge challenge and added complexity.
- Supply chain on the boardroom agenda
While it is great that supply chain now is a top agenda item for many CEOs and boards of directors, this increased visibility adds new pressure and complexity for supply chain professionals. Your career could be on the line with the next Wall Street Journal story on a supply chain misstep. Supply chain disruptions are now clearly visible to customers, media and shareholders. This next level of scrutiny on your supply chain strategy calls for clear metrics, reporting, preventative maintenance and continuity plans…again leading to more complexity.
At Körber we recently surveyed our customers regarding supply chain complexity. Here are few of the critical things we learned.
- A staggering 85 percent of survey respondents agree that their senior executives view supply chain as mission critical. It’s considered a competitive advantage and one of the most important aspects of a brand’s image and customer loyalty. In other words, it’s essential and the value of supply chain is no longer ignored by the board room and customers.
- 42 percent say meeting customer expectations in terms of cost, speed, and adaptability is a constant challenge
- 40 percent also struggle with managing product returns
- 50 percent say they are not equipped to handle more than one supply chain complexity at a time
- 1 in 3 are still utilizing manual methods for receiving, storing, picking and packing in their warehouse operations
So, what should you do with all this complexity? It is a challenge, but here are few tips to conquer supply chain complexity.
The first step to overcoming complexity is being honest about the shortcomings of your operations. Sometimes, we’re so close to problems that we can’t see the root cause of issues. We get so caught up plugging holes and applying bandages that we can’t break through the challenges. When we’re expected to generate results, it can be easier to focus on small gains rather than tackling the major issues holding your supply chain back. Maybe your systems and processes are getting too old or aren’t flexible enough to pivot for the rapidly changing environment of your industry. Maybe your labor challenges are stretching your resources too thin.
Whatever the issue, if your business truly values its supply chain as critical to the business (as the data suggests), it should invest in the proper processes and supporting technology to be successful. Identifying the real issues and building solid business requirements and proof points are vital to getting buy in for investments and change.
It is important to have a supply chain strategy that can act as a blueprint for supply chain improvements. The strategy can be great tool to gain buy-in throughout the organization, prioritize initiatives and even share with your customers. A customer who knows you are on the path to improvement is more likely to be patient as you improve your supply chain operations. Supply chain improvement initiatives that are not backed with a multi-year strategy are less likely to be approved as they will feel opportunistic to stakeholders.
Finding the good in supply chain complexity is a mindset. If managing the complexity is hard for you, it is also hard for your competitor. Therefore, embrace the complexity and view it as potential differentiator for your business. The market moves fast. If you build an organization that is flexible, adaptable and has a culture that embraces change from the day-to-day challenges, supply chain complexity will soon be embraced rather than being met with fear by your organization.
Supply chain management has changed dramatically in the last 25 years and I expect it will change at an even faster pace in the next 25. With this change, the added complexity will be exponential. The key is to embrace the complexity and address it with honesty, strategy and commitment to build the culture that will win in this environment.
As the Global Chief Executive Officer of Körber Supply Chain Software, Chad Collins sets the strategy that shapes the direction of the business and empowers customer success. He leads the teams that build, sell, market, implement, and support Körber solutions that help customers overcome supply chain complexity.
Chad has spent over 20 years in supply chain technology, building market-leading businesses and pushing what’s possible in supply chain solutions to enable customer innovation. Chad began his journey in the industry as a supply chain consultant for Cap Gemini Ernst & Young. Before becoming a part of Körber, Chad was the President and CEO of HighJump, a global supply chain software company which was acquired by Körber in 2017.
Chad believes it is critical to create a culture where teams and individuals thrive. A culture that encourages individual growth ultimately creates an environment that provides a greater service to customers.
Chad enjoys spending time on his boat with his family, practicing yoga, and wake surfing.