One thing business is discovering fast in a post-pandemic world is there are serious knock-on effects across all industries, especially with regard to supply chains. What’s been happening recently with petrol and gas supplies in the UK is a perfect illustration. The rising cost of gas supplies, for example, has knock-on effects for other industries like fertiliser for agriculture and the production of CO2 for carbonated drinks. This is not just a lesson for energy suppliers but for every industry. As we accelerate toward a hyper-connected, digitally transformed world, companies urgently need to build greater digital resilience into their supply chains.
Manufacturers have historically viewed Salesforce as simply another supplier in the chain, whereas in fact, there is a lot we can do to help solve some of these issues. In this blog, we will discuss what causes supply chains to break and provide some tips for a more integrated digital strategy. We will also talk about some of the tools available to organisations - such as the use of AI software to provide near real-time insight into problem areas - to help build a digitally resilient supply chain that allows them to take pre-emptive measures to avoid disruption.
Supply chain shocks
In the past twelve months, a string of high-profile disruptive incidents has shown that the vital supply chains we all depend on are extremely vulnerable. In March last year, a huge container ship, the Ever Given, blocked vital shipping routes through the Suez canal for 112 days. Around one million barrels of oil and roughly 8% of liquefied natural gas pass through the canal each day. It is estimated that this one incident cost the loss of 12% of global trade worth $6bn to $10bn a week. More recently, a shortage in the supply of semiconductors to the auto industry will result in 7.7 million units of vehicle production to be lost in 2021, while in the UK, a shortage of lorry drivers has resulted in empty shelves at the supermarkets and prevented fuel from being delivered to garage forecourts.
When supply chains break
When a manufacturing plant halts production due to supply issues, the ripple effect has serious cost implications. For example, when a single power outage lasting no more than a minute occurred at a Samsung Electronics memory chip plant, it took two-to-three days to resume normal operations and cost the company about US$25 million. In many cases, these costs will eventually be passed on to the consumer. No doubt vehicle drivers in the UK will soon be painfully aware of this once disrupted fuel supplies return.
To guard against this, companies need to take a holistic approach to supply chain management. It starts by developing a robust framework for responsive and resilient risk management of all physical and, increasingly, digital assets. It is vital that this capability is technology-led, utilising tools like data analytics, machine learning (ML) and artificial intelligence (AI). It must become second nature for manufacturers, pharma and other industries to have end-to-end insight across the entire supply chain. In this way, they will have the capacity to respond to any risk of disruption before it happens.
Anatomy of an integrated strategy
In their quest for a more holistic approach, leading manufacturers have started to take some early steps towards a more integrated supply chain strategy. One of the first, and most obvious, is to reassess the value of components in terms of their abundance/scarcity relative to global demand and how important they are to the final output. Another key action they are taking is to try, as much as possible, to have top-to-bottom control over the whole supply chain. This includes pressure-testing its adaptability, redundancy, and capacity to deliver real-time feedback. Inevitably this means much closer collaboration across the supply chain as well as near real-time industry-wide data sharing, integrated planning tools for internal and external teams and diversified production capacity. Under this new regime old siloed operating models are replaced with a cross-departmental approach involving all key stakeholders.
Building supply chain resilience
A major factor in building supply chain resilience is digital transformation. Across all industries, Cloud-based applications, AI/ML, IoT and automation are coming together to transform how businesses operate and inter-operate. At Salesforce, we have many of the tools you need for a holistic view of the supply chain - whether it’s remote customer engagement and service support, data analytics for customer insights or collaboration tools we can help manage any supply chain issues in near real-time as they arise.
In summary, the key to securing industries against supply chain disruption and sustaining competitiveness is to have a holistic, end-to-end view across the entire integrated supply chain. Resilience comes from having near real-time insight into problems as they develop and the flexibility to switch to alternatives at speed. Act decisively now to integrate resilience into your supply chain to ensure against disruption from the next shock whenever it arrives.
Do you agree that supply chain disruption is a growing challenge in the post-pandemic world? What is your organisation doing to build resilience into its supply chain?
