Shifting from a Supply Chain to Supply Network
A common adage during disrupted times is that “progress is not a straight line.” This applies to many aspects of our world during the past several months. Recently, my family decamped to our ranch in Montana for some fresh air, family time and perspective. But I cannot escape some of the challenges these times have provided. Even in this rural setting, my professional and personal challenges have coincided. Case in point: my local cycling shop hasn’t been able to keep up with the increased demand for bikes and spare parts due to supply shortages and supply chain disruptions.
Small and rural though it may be, my bike shop is experiencing the same challenges businesses of all sizes face. And a company’s ability – or inability – to adapt is not determined by size or industry alone. From bike shop to big corporation, all supply chains have been impacted by COVID-19. The impact transcends manufacturing, distribution, logistics, demand, to the overall financial well-being of organizations and all of their business partners. We’ve had a rough ride.
It has become abundantly clear that the traditional, linear way of moving along the supply chain is no longer sufficient – whether it’s managing disruption due to COVID-19, needing to find new suppliers because existing ones can no longer fulfill orders, or requiring new types of supplies based on shifting business models.
In response, businesses must rethink how they view their supply chain. Not only is progress no longer a straight line, but the modern supply chain no longer resembles a chain at all. Instead, it’s a collaborative, dynamic supply network.
Supply networks shift away from singular, point-to-point processes, toward a many-to-many structure that enables 360-degree visibility. Once connected to a network, businesses become both a buyer and supplier, and gain broad visibility into the interconnected operations of their trading partners. This allows them to identify emerging trends and react to them before issues arise. It also enables firms to identify and collaborate with new partners to reduce costs, improve cash flow and develop new products.
Driving Resiliency, Profitability and Sustainability
The concept of a supply network is rooted in SAP’s vision of the Intelligent Enterprise. In his keynote during SAPPHIRE NOW Reimagined, our CEO Christian Klein explored three business pillars of the future: resiliency, profitability and sustainability – and supply networks play a pivotal role in all three. To move from survival mode toward long-term business growth, businesses can use supply networks to commit to these pillars. Let’s explore them:
Resiliency: Organizations need to transform digitally to ensure they can withstand disruption and navigate toward recovery. The visibility offered through supply networks helps businesses reduce costs, optimize operations, break down functional silos and create room for growth.
Recent research found that companies with resilient supply chains grow faster because they can move rapidly to meet customer’s needs when market demand shifts. Walmart, for example, pivoted quickly during the crisis. By accelerating their roll out of Express Delivery, Walmart was able to deliver a wide range of items – throughout the pandemic – to customers in two hours or less.
Profitability: Businesses must scale and automate operations to drive profitability. The efficiency afforded by digital supply networks transforms common processes with minimum friction and maximum output. I recently spoke with a customer in the utilities industry who wanted to achieve complete automation through 100% supplier enablement. I explained that automation is only the beginning. When business leaders think of the network as a profitability-driving tool across an ecosystem of business partners, they often discover that ROI takes care of itself.
Sustainability: Leaders need to prioritize reducing their business’ carbon footprint, by using technology to spot inefficiencies and instill long-lasting change. By connecting to a supply network, organizations learn more information about their suppliers – including key sustainability data, which can (and should) influence with whom they choose to transact commerce. They also gain access to insights such as their carbon footprint and how they can mitigate risk.
The Digital Imperative
Another key message from this year’s SAPPHIRE NOW Reimagined event is that digital transformation is no longer an option, it’s a must. It’s the only way that businesses will maintain sufficient resiliency and scale at the rate necessary to survive. Rather than subscribing to phrases like, “transform or die,” or “disrupt or be disrupted,” for me, it’s more about the clear benefits and improvements that technology can offer. I love it when companies start with a relatively simple business need and evolve to provide/offer? benefits they never thought were possible. I often cite our customer VELUX Group as an example of this – a Danish manufacturing enterprise that was able to automate 64% of 20,000 monthly order lines by digitizing and streamlining supplier collaboration.
The truth is that this is our new reality. From here on out, if you’re not digital, then you run the risk of being the disrupted rather than the disruptor. It doesn’t matter whether you’re a small-town bike shop or a multinational corporation. Moving from a linear supply chain to a connected supply network can make all the difference by helping businesses become more resilient, profitable and sustainable. As companies adjust to meet the needs of a volatile marketplace, accelerating dynamic digital engagement will enhance their ability to thrive in uncertain times.
This post was shared by me originally on LinkedIn.