Why Supply Chain Convergence is Critical to Greater Agility and Resilience

convergence

convergenceHaving an effective supply chain practice has always been a difficult balancing act, even in relatively stable times. Many factors need to align for an organization to be able to source materials, produce a product and put it in the hands of customers.

However, the last few years have been defined by disruption. The pandemic has exposed flaws in business practices across industries, which have been acutely felt in their supply chain and procurement operations. Furthermore, inflation has become a growing concern, causing price pressure up and down the supply chain. Mixed in are supply shortages, tariffs and geopolitical issues — all of which will likely continue for years to come.

Amid this perfect storm of disruption, GEP and the North Carolina State University (NCSU) Supply Chain Resource Cooperative surveyed supply chain, procurement and IT professionals across a range of industries to gain insight into their priorities and strategies regarding supply chain resilience and optimization.

Gaps

The survey’s results suggest a series of misalignments where gaps in process, technology and information flow can be a drag on productivity and optimization. Of the professionals surveyed, 59% saw the gap between procurement/sourcing and supply chain to be a major disconnect, and the most pressing pain point. Overall, the survey highlighted disconnects between supply chain and procurement, between middle management and executives within these operations, and between these functions and the enterprise.

The study highlighted a number of areas where these gaps arose.

Gap between supply chain and procurement

Executives within procurement and supply chain are not always in alignment on what guides their planning decisions, whether it’s reducing financial risk or prioritizing lowest-cost suppliers. In addition, from an operational perspective, supply chain executives saw on-time delivery as the highest priority, whereas procurement executives saw achieving lowest costs as the highest priority. Both procurement and supply chain leaders in the survey recognized that the gaps would have a significant impact on key supply chain KPIs such as higher costs, longer cycle times and reduced resiliency.

Gap between supply chain and procurement execs and middle management

Other major studies conducted in the same time frame have suggested that resilience should be the highest priority across the board; this study seems to have a different overall outcome. While those at the CPO and CSCO level concurred with the prior research and saw resilience as the highest concern, supply chain and procurement executives noted this as their third highest priority — which suggests that the C-suite is not effectively operationalizing resilience and communicating it to their teams.

Gap between enterprise goals and supply chain and procurement

The executives also had a different view on enterprise priorities. Supply chain executives noted sustainability as being the No. 1 enterprise priority, while procurement executives chose diversity.

This distinction reveals their different perspectives in these strategic efforts. Procurement executives rank diversity as the most important enterprise priority because a more diverse workforce and supply base leads to better performance on projects and creates teams that can leverage diversity of thought to expand options. Supply chain executives chose sustainability, as broader ESG goals help ensure the company’s long-term business interests while also reducing the carbon footprint and providing other environmental and social benefits.

The biggest impact on sustainability happens through external suppliers and partners up and down the value chain, so greater alignment internally is required to collaborate effectively with outside groups. In addition, to drive successful supplier collaboration and inclusion, diversity should be seen through a broader lens of sustainability rather than just a matter or procurement. There is also an important relationship between resilience and sustainability: while sustainability is the goal, resilience is a precondition for it; they are interdependent.

Gaps are problematic at all times and hinder operational effectiveness. However, in the current disruptive environment — one that we will likely experience for years — problems that arise from misalignment are exacerbated and amplified across supply chain, causing them to break.

What can organizations do to fix the disconnect and build resilience and flexibility into the supply chain?

Convergence

Supply chain convergence — a uniting of processes and information flows across the organization and its supply chain, organically and at a deeper level — is the path to resilience. To get there, organizations need to align their supply chain and procurement operations to address the key pain points of visibility and collaboration.

Technology offers solutions toward greater alignment, and supply chain and procurement executives largely agree on the solutions that can bring them closer together and are critical to convergence:

  • Solutions offering flexible workflows
  • Solutions for master data management
  • Supply chain visibility solutions
  • Control towers
  • Collaboration platforms

To drive convergence and alignment, the technology would need to feature solutions that can enable alignment along the enterprise, delivering:

  • Real-time visibility, tracking and collaboration across the supply chain
  • The ability to connect with multiple tiers of suppliers, logistics providers and partners
  • Configurable workflows to adapt to the organization’s processes
  • Holistic collaborations enabled by process and technology

Technology needs to work seamlessly with processes and enable flexibility, agility and configurability so the user can respond quickly to changing conditions on the ground. When such a solution is in place and there is harmony between technology and process through convergence, organizations may be able to enhance resilience in their supply chains. In doing so, they will bend rather than break when faced with disruption.

Alex Zhong is Director of Product Marketing at GEP. Alex has more than 20 years of practical experience in supply chain operations and has advised many Fortune 500 companies on their digital transformation. At GEP, he leads product marketing for the company’s AI-enabled supply chain solutions. He is passionate about the role technologies play in driving supply chain excellence and business growth.

The post Why Supply Chain Convergence is Critical to Greater Agility and Resilience appeared first on Logistics Viewpoints.

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