Point of View

Unchain Your Supply Chain – Adopt the OneOffice Mindset

February 24, 2021

Musings from the Virtual Roundtable on Supply Chain Management

COVID-19 shined a light on our supply chains and illuminated the cracks that have always existed. The pandemic shock created a once-in-a-lifetime opportunity for supply chain executives to do what we always knew we had to do. We cannot afford to waste this crisis.

In December 2020, over 20 senior supply chain and operations executives from around the world attended a digital roundtable that HFS organized with support from IBM (see Exhibit 1).

Exhibit 1: Twenty-two enterprises participated in the HFS-IBM supply chain management roundtable

Source: HFS Research, 2021

The participants agreed that the pandemic exposed the complexity in traditional supply chains. Roundtable participants rated the impact of COVID-19 on supply chains at 3.9 on a 5-point [1]. Simultaneously, the pandemic shock catapulted supply chains to a C-level conversation as organizations realized that resilient, transparent, and traceable supply chains would dictate who would thrive, who would survive, and who would cease to exist.

The Chinese use two brush strokes to write the word crisis. One brush stroke stands for danger and the other for opportunity. In a crisis, be aware of the danger—but recognize the opportunity.

John F. Kennedy

[1] On a 5-point scale, where 1=Not impacted at all, and 5=Significantly impacted

Break free from the supply chain silos with a OneOffice mindset

“Supply chain” is a misnomer for meeting the realities of today’s world. It suggests linear and constrained thinking. We need to break free and create the OneOffice mindset (see Exhibit 2). Roundtable participants cited resiliency, flexibility, and adaptability; disparate data sets; reactive planning vs. proactive planning; and a lack of end-to-end view as the biggest SCM (supply chain management) challenges going into 2021. You now have no choice but to collapse legacy corporate silos to align our customers, employees, and partners as OneOffice. In fact, if you can’t operate your supply chain as one integrated unit where data flows freely between your process chains throughout the organization, then you probably won’t survive much longer in today’s brutal pandemic economy.

Exhibit 2: Adopting the HFS OneOffice mindset will help enterprises break free from supply chain silos.

Source: HFS Research 2021

Supply chains are about collaboration and an ecosystem

For too long, supply chains have been shackled by the idea that they must be linear—a “chain”—but enterprise leaders have finally recognized the need for supply networks. Supply chains need an ecosystem approach—both internally and externally. Organizations will need to collaborate across industries to pinpoint sources of disruption, where to disrupt, and how to keep reinventing themselves in an unforgiving world in which we no longer have time to rest on our laurels.

The emergence of distributed ledger technology (blockchain) makes the vision of distributed and trustworthy information a reality. Supply chains are emerging as the No. 1 use case for blockchain technology (see Exhibit 3). However, building a thriving ecosystem is challenging. Achieving the elusive network effect requires significant investments. There are regulatory and compliance issues, fear of the loss of proprietary information, and concern over competitors’ ability to cooperate. To tackle these challenges, IBM is on hand with dedicated blockchain solutions for supply chains coupled with countless customer success stories, which should keep clients’ minds at ease and make the transformation as efficient as possible.

Exhibit 3: The supply chain has emerged as the hottest use case for blockchain

Expand the “people, process, and technology” paradigm to include data and change management

Enterprises can no longer afford to resist change; they need to embrace it. In our roundtable, industry leaders concluded they had put much emphasis on the technology at the expense of the people and process. Secondly, the traditional view of people, process, and technology is no longer sufficient. Data and change management needs a seat at the table, too (see Exhibit 4), and it is easy to see why.

Exhibit 4: The five “have-to-have” capabilities to make your supply chain a success

Source: HFS Research, 2021

Data plays a pivotal role in intelligent demand sensing, thus enabling lighter inventory. Access to sufficient high-quality data helps enterprises quantify risks and address vulnerabilities. Data aids in gaining more visibility across the supply chain, thus empowering decision makers. Master data with good governance will help trace parts, thus improving the time to respond to customer needs.

“Change management is holding us back; how do we tell people that we are changing the way we work? Data and change management are some of the biggest issues we face.”

Supply chain executive, global oil field services company

Survival is on the line, and emerging tech is the silver lining

Business priorities changed overnight, creating new opportunities and use cases for emerging technologies. The budding romance between the supply chain and emerging technologies is exhilarating. Supply chain aficionados salivate at artificial intelligence-powered and cloud-enabled autonomous supply chains, but the truth is that scale has been hard to find (see Exhibit 5). Developing the business case, a lack of data quality and availability, integration issues with legacy systems, C-suite commitment, and lack of digitally fluent talent are the top five challenges to realizing value from emerging technologies. The challenges to adopting technology are not about the technology itself.

Exhibit 5: Despite the promise of emerging technologies in the supply chain, scale has been hard to find

Source: HFS Research, 2021

The power of AND is greater than the power of OR

A combined use of emerging technologies is significantly more beneficial than using any of the technologies in isolation. We surveyed the attendees at our roundtable, and the results were clear: Leveraging one technology alone is not enough. As Exhibit 6 shows, 64% of attendees told us that combining all emerging technologies was the best approach to deliver genuine business value. Enterprises must carefully assess their supply chain and make an informed decision about blending emerging technologies that best suit their needs. Blindly following the flavor of the month does not yield results. One example of carefully blending technologies is IBM leveraging the combined strengths of AI (artificial intelligence), analytics, and automation to provide a solution that helps clients build resilient supply chains with AI-driven workflows.

Exhibit 6: The power of AND in leveraging technologies will help in effective supply chain function for hyperconnected enterprise.

Q: Which of the following emerging technologies promises the strongest business case for supply chain?

Source: HFS Research, 2020

One lesson that the pandemic shock has taught us is that enterprises need a more flexible technology platform for their supply chains. The sentiment moves away from “wall-to-wall SAP,” where enterprises are held hostage to the ERP, toward a more agile technology architecture that offers more control.

“Plug-and-play is more like plug-and-pray; it can only go so far in fixing our supply chains.”

Supply chain executive, Global company

Finding this balance is hard. Shrink-wrapping your ERP with APIs and containerization might be the solution for leveraging industry standards for transactional activities, but invest in best-of-breed solutions where you want to differentiate.

“Trust” in your supply chains will drive future enterprise value

Supply chains of the future need to be resilient, with the ability to bounce back and respond to demand and supply volatility. Supply chains also must be transparent to track goods and services from source to the end consumer. Supply chain resiliency and transparency drive trust, and supply chain trust drives future enterprise value. But both transparency and resiliency come at a cost. As a result, supply chain executives need to start thinking in long-term horizons. Because If you don’t change, your customers will force you to change because supply chain risk is now a significant brand risk. For instance, the demand for sustainably produced palm oil surged after consumers realized the devastating impact of palm oil on deforestation and wildlife such as orangutans.

Keep it simple, stupid!

Post the pandemic shock, many enterprises started building inventory to guard against potential shortages. However, several roundtable members noted that supply chain departments that stuck with the principles of keeping a lean inventory managed the situation better, mainly because they had developed capabilities to be more agile and flexible. When in doubt, go back to the tried-and-tested fundamentals. Bring it back to the seven-step sourcing methodology (which you can read about here)—that drives more resiliency.

The Bottom Line: We will never get another opportunity to do what we always knew we had to do.

Unlike recessions, the current pandemic is rooted in a health crisis, disrupting supply chains and causing far-reaching, unexpected economic repercussions. It’s steering us to a “judgment day” scenario where we have some critical choices to make for our organizations and ourselves. COVID-19 exposed things we can’t do, but it also helped us realize things we can do (see Exhibit 7).

Exhibit 7: 2021 will be the year of ______ (from roundtable participants)



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