The road ahead: Crafting resilient supply chains
“The supply chain is the heart of a company’s operations. To make the best decisions, managers need access to real-time data about their supply chain, but the limitations of legacy technologies can thwart the goal of end-to-end visibility.” — Bill McDermott
A supply chain is a complex network that manages the creation and distribution of goods and services, involving interconnected activities, organizations, people, and resources. It encompasses every stage, from raw materials to the final product in consumers’ hands, including procurement, production, transportation, storage, and distribution. Stakeholders like suppliers, manufacturers, logistics providers, retailers, and consumers collaborate to ensure a smooth flow of products. Let’s consider the automotive industry as an illustration. Prior to a customer’s purchase of a vehicle, a sequence of intricate steps unfolds. It commences with the extraction of iron ore from the Earth, followed by its transportation to a manufacturing facility. There, the iron ore is transformed into steel, a material crucial for crafting the car’s chassis. The manufacturing process encompasses the assembly of various components, ranging from engines, batteries, and electrical parts to rubber tires, a metal body, and the application of paint. After the meticulous manufacturing process is complete, the finished car is made available to the end consumer through retail outlets. Effective supply chain management optimizes these processes, minimizing costs and enhancing efficiency. In our globalized world, supply chains are crucial for businesses and economies, shaping trade patterns and influencing the availability and affordability of goods and services worldwide, said Akshat Jain, Research Scholar, IIT Delhi.
In the digital era, the supply chain is no longer a back-office function. It is a critical function for any business that wants to grow. Not long ago, when Covid-19 hit the world, global supply chains were affected immensely. Manufacturing organizations faced unprecedented challenges and serious disruptions. Therefore, supply chain scholars and practitioners are concerned more than ever before. In the wake of the Covid-19 pandemic, multinational corporations found themselves grappling with significant disruptions. As the virus spread throughout India, the supply chains of various companies were severely impacted. For instance, the export of face masks came to a halt, creating a supply shock. Simultaneously, a demand shock was experienced, marked by a surge in the need for essential products. However, challenges emerged, including delayed deliveries, difficulties in securing merchandise, unexpected travel disruptions, and a shortage of labor due to the reverse migration of workers from urban areas. Consequently, the gap between supply and demand widened significantly.
Before the pandemic, supply chain managers primarily focused on just-in-time inventory management, a method aimed at cost reduction and efficiency improvement. However, the Covid-19 outbreak revealed the limitations of this approach in preparing global supply chains to withstand extreme shocks, such as those induced by the pandemic. Moreover, the pandemic underscored the critical importance of robust risk management and mitigation strategies. Organizations now face the imperative of reassessing their supply chain strategies, designs, and dependencies. By doing so, they can proactively avoid ad-hoc responses to future natural disasters and unforeseen disruptions, ensuring they are well-prepared to effectively navigate unexpected challenges. The essence of supply chain transformation lies not in technology alone but in people. This perspective resonates especially in the current context, highlighting that without human involvement, the governance and utilization of these technologies would be void, underscoring the indispensable role of people in driving technological advancements.
According to KPMG 2023 CEO Outlook, the disruptions to supply chains are expected to continue even in 2023. Enhancing supply chain resilience is crucial in addressing the challenges arising from the Covid-19 outbreak and ensuring a more robust supply chain. The foundation of supply chain resilience lies in a range of capabilities that empower companies to uphold and strengthen their operational and competitive stance in the market.
