For years now, blockchain has been touted as the “next big thing” with tech titans like SAP and IBM leading the charge in evangelizing it across a broad range of industries, including supply chain management. But when IBM announced a landmark company reorganization in February of this year that included cutting up to 90% of its blockchain team, it signaled a new era of recoiling that appropriately prioritizes practical possibilities over pipedreams.
Maybe someday blockchain will entirely transform supply chain management. However, in its infancy, this technology currently offers little in the way of addressing challenges at the individual manufacturer level and is not showing to be scalable or even readily accessible by nearly anyone, perhaps not even the tech giants. After all, IBM had dubbed itself the “blockchain leader for business” in 2017.
From a supply chain perspective, it is too a hasty decision to jump on the bandwagon of early-stage technologies, like blockchain, IoT and drones, when so many suppliers and factories are either relying singlehandedly on static Excel spreadsheets or, even worse, still facing challenges in advancing past manual pen and paper data entry.
A strong digital ecosystem is key for a sustainable technology adoption strategy and it starts with optimizing basic processes. For example, digitizing supply chain inspection and auditing processes can help preserve efficiencies, quality and ethics across the supply chain. Only by first digitizing fundamental processes will businesses then have an infrastructure in place that enables them to ambitiously explore how more advanced technologies can drive operations.
The following pillars will help businesses lay the necessary framework for an efficient, malleable digital supply chain ecosystem and long-term digital transformation strategy.
Technology is there to facilitate, not complicate
When global consumer goods supply chains were initially disrupted by the COVID-19 pandemic, many businesses found out the hard way just how limited their supply chain visibility was. At the root of the problem, businesses lacked a real-time view into what was happening on the ground and lacked the actionable insights needed to confront the crisis. This led to mass shortages and foregone business opportunities that disadvantaged businesses and consumers alike.
With core processes still largely relying on antiquated, disparate and siloed system, many businesses were unable to leverage technology to adapt strategies. For example, historically, manufacturers in China have been about three times faster than their counterparts in other regions to deploy industrial robots but that momentum actually dwindled by 20% during the first quarter of 2020 when compared to the same period in 2019, according to a report from McKinsey. This is a troubling dichotomy, with manufacturers unable to embrace more technology at a time when they truly needed it most to help offset disruptions.
Keep an open eye on the supply (and identify risks in quality and ethics)
Now more than ever, with supply and consumer demand in a volatile state of flux thanks to the pandemic and uncertainty surrounding global trade, businesses must put supplier risk management at the top of the agenda. However, a pre-pandemic survey by Jigsaw Business Group found that 57% of businesses have poor visibility across their supply chains.
Most businesses are walking “in the dark” in terms of managing on-the-ground supplier relations, lacking both actionable data and a real-time view of what’s happening along their supply chain at any given moment. The floodgates are left wide open for a deluge of disruptions and disaster. For example, what if a provider of a key product part is bought out by a foreign company? What if another supplier’s supplier modifies production in a way that delays shipment or changes product specs and quality?
The variability for disruption are endless and deeply threatening. Yet the business won’t know about it until it’s already happening – and already potentially costing them.
Therefore, the digitization journey must begin by fully mapping the supply chain to understand where operations currently stand, identifying any and all risks that each supplier brings into the mix. When risks are attributed to suppliers along the chain (and suppliers’ suppliers too), the best solutions for bridging gaps and mitigating risks can then be pinpointed.
Prepare for more supplier diversification
If the US-China trade war and increasing operational costs in Asia did not already disturb a business’s manufacturing footprint or supplier network, they have almost certainly been jolted by the shockwaves of uncertainty sparked by the COVID-19 pandemic.
While businesses have learned a multitude of supply chain lessons in the past year, one that stands out is the importance of using a nomadic sourcing model to better navigate an increasingly complex business environment rife with geopolitical tensions and volatile demand patterns. By accessing suppliers across different geographies, businesses are able to nimbly shift production and source from the lowest cost and highest value suppliers at any given time.
Speed, agility and efficiency are at the essence of a modernized supply chain, allowing businesses to diversify suppliers. Whether facing travel restrictions due to a global pandemic or factory shutdowns after an earthquake, businesses must be able to shift and continue production uninterrupted. But shifting to suppliers in new geographies should never be done without conducting due diligence as the manufacturing landscape is lined with rising hurdles in compliance and emerging risks for quality and ethics.
Before signing with a new supplier, especially those in geographies they lack experience in, businesses must again consider the full breadth of risks. Otherwise, the shift could prove devasting. We are currently seeing the effects of this in today’s supply chain landscape. For example, according to data from supply chain auditor and inspector QIMA, demand for inspections and audits in Southeast Asia increased +19% YoY across the board in 2020, a figure that was twice the YoY growth rate reported from 2018 to 2019. However, the ethical audit data collected by QIMA at factories in 2020 paints a disturbing picture with the share of factories ranked “red” for critical non-compliances increasing by more than 100% in the second half of 2020 compared to the first half of the year.
Innovate incrementally with a spotlight on human capital and supplier relations
In the evolving supply chain landscape, businesses must balance diversification with end-to-end supplier transparency. Technology alone won’t work, with effective digital transformation requiring a stable blend of both technology and talent. Only with the right expertise on hand can a supply chain be properly mapped and risks identified. When an optimal balance of people and machines is achieved, a business can continuously invest in more advanced solutions (and the right talent to empower them) and expand its digital footprint.
Furthermore, while a nomadic sourcing model strengthens diversification capabilities, it also risks diluting supplier relations and creating more distance between businesses and their suppliers. Effective technology adoption must mind this potential divergence and strengthen relationships with suppliers, rather than hamper them.
For example, with a digital inspection platform, inspectors armed with just a tablet or other mobile device can upload data directly and immediately, increasing the pace, accuracy and convenience. Furthermore, cloud-enabled features make it easier to work with inspectors remotely, a key feature amid travel restrictions and quarantines. Some digital solutions also function multilingually, allowing users to work in their native language and others facilitate compliance with government regulations and testing standards, such as CPSIA and Prop 65, built directly into the system.
Practical applications for a digital inspection platform cut to the very core of operations and can inform key decision-making, including identifying failure rates of individual factories and inspectors, defect rates of specific products at individual factories and country-by-country performance.
Other recommendations for digitization include widening scope of data collection, improving workflow configuration and ensuring that any platform implemented offers API integration with the existing systems and processes already in place. To amplify supplier onboarding and support talent development, some digital platforms offer training courses on operational workflows and best practices.
Fuel up for the long-haul with a pragmatic, sustainable approach
In a business landscape abuzz with bourgeoning technologies, businesses can cut through the noise and smartly bolster their digital ecosystem by digitizing fundamental processes first, such as supplier inspection and auditing. Beginning the digital transformation right on the factory floor allows a pragmatic, sustainable approach to building digital competencies and expanding the digital ecosystem.
Only by fully mapping supply chains and introducing a new framework for supplier relations will a business be able to truly flex their tech muscle. Rather than haphazardly investing in dubious technology, they’ll have a malleable digital ecosystem in place that not only supports nomadic sourcing but guides agile technology adoption based on practicality and application. With this sustainable approach, businesses will be able to examine each technology as it comes to market and determine if, why, when and how it makes sense for them to deploy.
