We live in an uncertain world. The only thing that is really constant at the moment is change. All the turmoil going on right now is directly affecting the market of supply and demand. In every sector, there is a shortage of raw materials, labour and, in some sectors, simply customers.
Harvard Business Review wrote in February, "The most vulnerable companies are those that rely heavily or exclusively on factories in China for parts and materials. The activity of Chinese factories has fallen in the past month and is expected to remain so for months to come."
Despite constant forecasting in the area of supply and demand, we are now seeing how some companies have to temporarily stop production due to lack of raw materials. Traditional supply chain planning methods are simply not designed to deal with this kind of fundamental ('disruptive') market disruption. The data you now have in your Excel tables is of little help in this kind of extreme situation.
The good news is that such chaotic conditions also present opportunities. We can all learn from the current economic challenges. New approaches make it possible to continue running a profitable business even under current or similar circumstances.
Be flexible
Gartner, in its report Drive Agility in Supply Chain Planning Technology Assessment to Accelerate Digital Business, states, "Conventional, monolithic and supposedly fail-proof methods of assessing technology are not suited to the accelerating pace of digital business. Supply chain technology leaders need to support digital supply chain planning by making their organisations more agile."
What does it mean: 'making an organisation more flexible'? That is mainly about the ability to quickly find quick wins in times of great turmoil, which help to safely circumvent the turmoil. Gartner's report offers the following tips for this:
- Make your organisation 'bimodal' by strategically and flexibly investing in Supply Chain Management (SCM) technology while optimising the assessment process for efficiency, speed and innovation.
- Be flexible when it comes to choosing new Supply Chain Planning (SCP) technology. Put more emphasis on experimentation, testing and learning so that you are able to push the boundaries of what is possible and support the whole decision-making process from start to finish.
- Avoid complicated, risky and costly projects with long lead times by using pilots and PoCs (Proof of Concept) in the selection process for SCP technology. That way, you keep up the pace, create value sooner and stay flexible while reducing risks and avoiding uncertainties.
Bimodal means that an organisation embraces two different working styles, one focused on predictability, the other on exploring new possibilities. You apply one work style to the areas that are predictable and familiar. The other work style focuses on investigating new challenges and experimenting with new possible solutions.
New challenges and possible solutions
Of course, it is hard to be creative when you have to do your utmost to keep the lights on right now. That is why it is essential to deliberately free up some members of your team from time to time to research possible new challenges and experiment with new solutions.
Since we are talking about potentially 'disruptive' challenges, it makes sense for supply and demand-side professionals to embrace a learning process where 'design thinking' and 'design process' converge. This is where human experience merges with value chain optimisation to better predict how the supply chain behaves in the event of a serious disruption.
A team focused on new challenges and possible solutions should be concerned with the following:
- Estimate the scenarios that pose the greatest risks in the event of major disruptions.
- Gathering data and insights from various sources.
- Interview stakeholders to understand potential challenges in behaviour, environment, technology and business.
- Brainstorm on possible quick solutions to the challenges found.
- Designing and testing models.
This should not be a long-term project. It is mainly about exploring possibilities and testing them quickly against reality. If the testing yields positive results, the main goal is to deliver a 'minimum viable product' as quickly as possible that can be applied immediately at the next disruption.
Very practical
How do you estimate the scenarios that could pose the greatest risks in the event of major disruptions? An example:
- A major disruption with serious risks: a major natural disaster in an area where 30 per cent of your main suppliers are located.
- What your organisation needs: a way to keep delivering the orders that generate the most revenue during this disruption.
- Where to focus: based on previous experience and current data, see which orders generate the most sales. Investigate how and where you can quickly find alternative suppliers to still deliver those orders.
How do you collect relevant data from various sources and how can you unlock that data? For example, see what sources you can find that can tell you something about weather forecasts and patterns, about potential suppliers in different areas, about production times and costs, and combine all that data in a database. Look for a good solution that integrates and combines all that data into valuable insights that can help you make informed decisions in a short time.
When organising interviews with stakeholders, look especially for people who have experienced major disruptions in supply and demand before. For example, ask them:
- How was the problem solved at the time?
- What didn't work well?
- What could they have done better differently?
- Which business units were involved at the time?
- What were the results?
- What kind of data was used to arrive at a solution?
- Which technologies were used to arrive at a solution?
- How long did it take to get everything back to normal?
- What were the business implications?
Brainstorming quick solutions to the challenges found can be a lot of fun. If all goes well, by now you have collected a lot of data and now you can unleash your creativity on it. Design Thinking is a great methodology to work on this with a group of people, where you can put different ideas on the table without judgement.
These kinds of brainstorming sessions often generate new ideas on how to solve business challenges quickly. Do not think about the big picture, but focus on the specific part of the value chain you are trying to find a solution for.
Design Thinking usually results in the development of prototypes that can be tested. As you develop models, keep a close eye on how data has helped you and how that data can help you again later if you need to react immediately to a new disruptive situation in the market. In particular, think about the possible applications of new and emerging technologies such as:
- Blockchain, for example, to record the trajectory and history.
- Robotic Process Automation (RPA) to automate the process based on data.
- Low-code development tools to improve interaction between employees, suppliers, partners and customers.
- Cloud applications and augmented artifical intelligence (AI) to explore different options and possible routes when the next disruption starts.
Going through this process together will not only ensure that you are ready to face the next disruption with confidence, but you will undoubtedly discover new insights that can move the organisation forward even when the world is not on fire. Business as usual is actually just boring. Learning how to respond quickly and flexibly to challenges and changes with each other and as an organisation is extremely satisfying and pays off handsomely.
By: Max van Eeghen, Director Benelux & Israel at Boomi
