Supply chain strategy is due for some reimagining. If there’s one thing business leaders are sure about after the events of the last few years, it’s that simple fact.
In today’s reality, the old approach just doesn’t work anymore. Or, at least, it doesn’t work anything like efficiently or effectively.
This is because as our economy has become increasingly globalized and connected — and products are expected to come (and go) from (and to) everywhere, often as fast as physically possible — the fault lines have been repeatedly exposed. We thought we were fulfilling a utopian vision, but as it turns out, we’re nowhere close.
Think about the perfect storm of headwinds facing a modern supply chain:
- Customer Demands: Consumers are more informed about their purchasing decisions than ever. This means, from the get-go, supply chains are on thin ice. Expectations are high, and patience is low.
- Globalization Realities: Supply chains rely on numerous trading partners, scattered across the entire globe. In other words, while there are ways for them to work well, there are many more ways for them to break.
- Business Volatility: With everything so connected, world events can make massive impacts. Whether a major storm hits America’s coastline, a trade war commences in the East, a real war kicks off in Europe or a pandemic spreads in, well, everywhere, companies must be prepared for constant global disruptions to the supply chain.
- Sustainability: A purpose-driven approach is obviously important (because saving our planet is important), but it can create challenges as supply chain options become limited in an attempt to avoid working with questionable trading partners and turn toward equity- and sustainability-focused ones.
These challenges are real, and they’re not going away. So, let’s shift our approach and change how we’re thinking about the supply chain — starting with a focus on networks.
The Risks of Our Current Approach
Today’s enterprise-centric systems weren’t really built for the size and scope of today’s global networks. This means that shortcomings abound. Too often, they rely on paper-based or manual processes, siloed systems operating via one-to-one connections, and point-to-point methods meant to simultaneously encompass the needs of customers, suppliers, manufacturers, distributors and service providers. Simply put, they function reactively and linearly — increasing risk, inflating cost, decreasing visibility and limiting collaboration.
Think, for example, about a beverage company aiming to accomplish a relatively simple-sounding task: delivering a drink to a customer. Even in that process, complexity runs rampant in contemporary times. Without an advanced network, they might face:
- A lack of real-time visibility into what’s happening with critical suppliers (limiting the ability to respond to disruptions)
- Frequent day-to-day interruptions (due to delayed shipments, out-of-stock materials or supply shortages)
- Exposure to significant damage from major disruptions (to both customer satisfaction and overall revenue goals)
These are risks for many modern organizations whose technology just isn’t built to sense and respond to change. To mitigate these risks, companies often find themselves carrying excess inventory and building redundancies into the supply chain, actions that lower overall speed and limit operational flexibility — which, in these days, means a major barrier to efficiency.
There has to be a better way.
The Way of the Future
The better way looks like what I call “The Network of Networks,” a supply chain management approach that connects all of an organization’s critical partners through a unified network, one that breaks down the barriers of siloed systems and opens up more opportunities — opportunities for working together and for achieving better business outcomes.
The Network of Networks is about learning from the past, taking action in the present and anticipating the future all at once. It’s about shifting away from a deterministic solve towards one that’s more predictive and forward-looking. It’s about enhanced intelligence, improved resiliency and a greater understanding of range and risk tolerance — across the entire supply chain.
So, what does it look like? There are three pillars:
- A successful global network provides multiple ways to participate. An individual organization must have the flexibility to play numerous roles, whether as buyer, seller, shipper, carrier or something else.
- A successful global network encourages a community of diverse participants, one that welcomes and connects trading partners and other networks in all forms.
- A successful global network stands on open architecture, making it easy to connect to any system, data source or application for any partner that’s connected to the network.
This is a future of best practices and standardization, of scalability and speed, and of connected data and streamlined business processes. And this is a future we’re working at tirelessly at SAP, as we build better ways to optimize and connect users on a single network and interface.
Rethinking our approach to supply chain management can revolutionize how companies work with their partners going forward. It can fundamentally change the way companies collaborate to design, manufacture, deliver and support the goods and services that customers all around the world need every day.
All it takes is a little reimagining. So, let’s reimagine that future — together.