Navigating tomorrow with resilient and flexible supply chains

For businesses that move and distribute goods, the disruptions from global events have underscored the importance of having an ERP technology architecture designed to support planning, managing, and executing distribution operations. The world is constantly changing, and while specific crises may subside, the pressure to operate efficiently and use resources effectively will always remain. The ongoing challenge for companies is to make their supply chains more resilient and flexible without compromising their competitiveness.

The inevitable complexity of supply chains

No modern business can replicate the fully self-sufficient model of Henry Ford's era. Today, few, if any, organisations have the full range of capabilities to produce everything themselves. This has led to a reliance on specialised suppliers and sub-contractors, who in turn depend on others. While this networked approach offers flexibility and access to the latest technology, it also makes businesses vulnerable to disruption, a lesson harshly learned in recent years.

The push towards digital transformation

Recent global disruptions served as a wake-up call for companies slow to adopt digital solutions. Business leaders quickly recognised how technology could enhance operations. A renewed focus on innovation is now evident, with more than a third of organisations accelerating their digital transformation efforts to address technology gaps.

A study by the Royal Academy of Engineering highlights how digital technologies can improve visibility across the supply chain. During recent crises, businesses with modern inventory and traceability solutions were able to pivot quickly, allowing food suppliers to protect the integrity of their supply chains. Similarly, companies that had implemented software for handling product returns were better equipped to manage the surge in online returns that accompanied the rise in e-commerce.

By leveraging data from digital platforms, businesses can gain maximum visibility into demand, inventory, capacity, supply, and finances. Companies with these capabilities were able to respond more swiftly and successfully to recent disruptions.

New life for old strategies and tools

Recent events have given a new lease on life to strategies that were previously considered outdated. Practices such as holding intermediate or safety stock are now valued, countering the long-held tradition of just-in-time (JIT) replenishment and lean inventories. Businesses now weigh the cost savings of JIT against the significant costs of disruption. Similarly, the practice of offering a high variety of products is being re-evaluated against available production capacity.

The bill of materials (BOM) has re-emerged as a critical tool for identifying supply chain risks. By analysing the BOM hierarchy, teams from procurement, logistics, and finance can collaborate to uncover vulnerabilities, helping to protect the company from future disruptions and realign procurement with business goals.

Adapting processes for a new reality

Some once-fashionable processes are now being scrutinised. For example, Demand Driven Material Requirements Planning (DDMRP), which uses historical order patterns to determine material buffers, is less effective when those patterns become unpredictable and unstable.

In times of global volatility, managers found their production forecasts for the quarter were often obsolete. Instead, they now understand the importance of having a real-time grasp on current metrics. They need to leverage different data sources through dashboards to enable more agile decision-making. This requires a deeper understanding of data and technology to make informed choices.

The disruptions have also forced companies to reassess processes like order fulfilment, which includes receiving, storing, picking, packing, and shipping goods, as well as processing returns. To become more efficient, this process needs an inventory management system that automates workflows and reduces human error, which in turn lowers operational costs.

Holding extra stock to mitigate disruptions increases costs, making cost containment a more critical business practice. A comprehensive warehouse and inventory management system provides the data-driven insights needed to get a full picture of all associated costs, from procurement and transport to storage, handling, and quality control.

In a market where stock availability is uncertain, integrating sales processes with real-time warehouse and inventory data improves customer service. A sales order processing system can automatically initiate a purchase order, a warehouse transfer, or a new production job when stock is low.

The crucial role of supply chain automation

Supply chain automation involves using technology to centrally manage and automate all or part of the supply chain. In the current business environment, this offers several advantages, such as reduced manual labour and increased productivity, efficiency, and accuracy.

Benefits of automation include:

• Decreasing operating costs by reducing labour, inventory, warehousing, and overhead expenses.

• Increasing productivity through optimised resource deployment.

• Improving accuracy by minimising errors from manual processes and providing real-time inventory information for better cost control.

• Boosting volume by combining skilled workers with the precision of automated equipment.

• Seamless integration with the systems of key suppliers and customers.

• Saving time by streamlining labour-intensive tasks.

• Ensuring compliance through standardised processes.

The future of supply chain management

Ongoing global volatility may lead to significant shifts, such as governments intervening in key supply chains and a move towards more localised or regionalised networks. The key to success will be using data to make better and faster decisions. Winning companies will likely invest in the technology, data, processes, and people needed to improve efficiency, reduce costs, and modernise their operations, making their supply chains more adaptable and responsive to changing conditions.