As each new viral outbreak severely disrupts businesses and hurts economies, the risky legacy model of supply chains becomes more exposed. Building in flexibility now is key not only for handling today’s challenges, but preparing for tomorrow’s curveballs as well.
In our recent webinar How to Evaluate and Build Supply Chain Strength Today, Bruce Richardson, Chief Enterprise Strategist at Salesforce, in conversation with Ray Hein, CEO of Propel, discussed how to evaluate your demand, organize your supply chain, and build flexibility now.
Their ultimate takeaway? This too shall pass — but we will need to re-evaluate how we work in a landscape that might be forever changed.
Read on for more.
“For next time — and not just for healthcare or medical devices, but for all of us running our businesses — we need to step back and ask ourselves, ‘What did we learn from here?’ and ‘what didn’t we know going in that, had we tried to build a 360 view of what this means to us, how would we have responded to what we’re facing now?’”
This pandemic highlights why we need to rethink the whole supply chain.
“We really need to move production closer to the source of consumption,” Richardson said.
“I don't think you can have as much of your source of supply contained in one region. You have to lower the risk of doing that. You need to have a faster response.”
Hein agreed: “What we’re going to see is a movement towards being more distributed so that [organizations are] more nimble and resilient to any one event.”
The key to building flexibility into your supply now? Treating suppliers and partners as your VIP customers.
Instead of cancelling huge orders overseas, which leaves suppliers holding the bill that’s been ordered but not paid, and leaves behind huge inventory, prioritize supplier communication even as you build in geographic diversity into your supply chain.
“Value relationships and value chains will pay off in spades in the long haul with folks that think about it in a very different manner,” Hein said.
“Granted, everyone is trying to make sure they reach margin goals and the like, but we’re only going to win together in a global economy if we treat each other and come back together in the same way and in the same fashion. Having a very collaborative, open relationship is going to be how we come out of this.”
We’re going to see an uneven recovery, agreed Hein and Richardson, based off of the fact that some companies were better prepared with their tools and their systems and their supplier relationships (and some people are scrambling).
What to Expect
- Global impact to supply and demand
- Recovery will be uneven
- Existing technology shifts will accelerate
- Flexibility and speed are key to future success
“CFOs are saying they're not putting any more money into capital expenditures, meaning, if you don't have a good cloud strategy or cloud story, if you’re a vendor, you’re going to be left behind,” Richardson said.
“If you’re not thinking about how you’re going to automate some of these processes between you and your customer and you and your supplier, you should hurry up and turn that around. If you’re not making an investment in analytics or demand-sensing systems where you’re getting some early indication of what customers are thinking, or if you're not monitoring your suppliers about how quickly they can respond, you’re wasting a lot of precious time.”
Richardson and Hein agreed that ERP and PLM have been the last bastions of moving to the cloud. What’s happening in the global supply chain is forcing a function for true digital transformation and true industry 4.0.
Your Next Steps
- Identify and focus on healthy areas of demand
- Determine which existing suppliers can fulfill orders
- Find new suppliers in diverse locations
- Treat suppliers like VIPs
- Build flexibility into technology and processes now
- Embrace work from home
- Have a disaster recovery plan in place