Supply chains have been significantly disrupted on a global scale recently due to a confluence of factors including the COVID-19 pandemic, climate change, geopolitical conflicts, and more. These have combined to create “a perfect storm” leading to constrained supply, transportation bottlenecks, labor shortages, inflated raw material and logistics costs, and overall volatility.
In response to various disruptions to supply chains across the globe, businesses are compelled to adopt strategies that enhance the resilience and flexibility of their supply chains. Yet, according to PwC, only a small fraction (one-third) of executives are prioritizing resilience when investing in supply chain technology.
In this article, we’ll define what it means for a supply chain to be resilient, and then explore some key trends in the current supply chain management landscape. Ultimately, the focus is to highlight three key steps in building resilient supply chains and the roles that SAP solutions can play.
What is a Resilient Supply Chain?
Resilience is defined by adaptability, and a supply chain is resilient to the extent that it can withstand and recover from disruptions, by design. SAP defines supply chain resilience as “the capacity of a supply chain to persist, adapt, or transform in the face of change.” Supply chains are networks of complex interconnected processes, each susceptible to failure that can threaten the stability of the entire supply chain.
More so, the business landscape is largely unpredictable; so, building resilience into the supply chain requires the ability to connect every process seamlessly and maintain operational continuity despite challenges. As such, resilient supply chains must prioritize dynamism, visibility, and strategic foresight to thrive in the rapidly changing environment of business.
The Supply Chain Management Landscape
It’s been three years since COVID-19 became a worldwide pandemic and the term no longer shows up in mainstream news. Business people, though, are fully aware of the lasting impacts of the pandemic on operations and supply chains worldwide. In 2022, McKinsey reported that the vast majority of businesses across industries had, in the aftermath of the pandemic, planned to revise their inventory management strategy over the following three years.
Source: McKinsey
Even though the pandemic is now mostly old news, the supply chain landscape still lacks stability due to new challenges that have crept up. There is a growing conflict between the US and China, while wars in Eastern Europe and the Middle East also continue to put global supply chains at risk. According to KPMG, at least 6 of 10 global organizations anticipate major disruptions to their supply chains due to geopolitical troubles.
In addition, 2023 has witnessed a massive increase in the level of sophistication deployed in cyber attacks. Dubbed the largest hack of the year, the MOVEit cyber attack reportedly affected 1,000 organizations and 60 million individuals, with an estimated cost of over $9.9 billion.
1. Process Visibility
Visibility is perhaps the most often emphasized factor in supply chain management even though, in practical terms, it remains underrated. According to The State of Visibility 2023 survey, 77% of supply chain decision-makers claim to prioritize real-time visibility; yet, only 25% have implemented it.
SAP’s Supply Chain Management software helps businesses access integrated systems and real-time data sharing to ensure that teams can mitigate risk by improving coordination in their processes. It is the most comprehensive product, encompassing planning, logistics, manufacturing, and product lifecycle management.
Even though supply chains have several moving parts, true resilience can only be achieved when all the processes are connected and the ecosystem works as one. More so, it facilitates the speed of innovation and operationalizes sustainability efforts.
To ensure process visibility, SAP SCM software provides end-to-end digital threads that connect systems, people, and processes.
2. Predictive Analytics
The ability to predict and anticipate events is instrumental in navigating the complexities and uncertainties inherent in modern supply chain management. One key aspect where this emerges is in demand planning.
According to McKinsey, the focus on supply chain resilience is now expanding beyond visibility and toward demand planning.
Source: McKinsey
Risk-resilient demand planning allows businesses to align their production and distribution strategies with actual market trends, reducing the risk of overstocking or stockouts. By incorporating AI-powered demand forecasting, accuracy and responsiveness are improved.
SAP Business AI provides predictive data-driven insights and recommendations, empowering organizations to enhance their predictive capabilities, make better-informed decisions, and modernize functions from design to operation.
3. Seamless Movement
Ultimately, every supply chain management strategy must be customer-focused. The ability to ensure smooth and efficient movement of goods from production to the point of sale is essential for agility and resilience in the face of uncertainties.
GROW with SAP addresses this by offering features that enhance supply chain operations through real-time inventory and materials flow analysis, promoting more profitable and sustainable transportation scenarios.
Source: SAP
Organizations need to streamline the movements of items across the supply chain and the way to achieve this is by providing visibility into shipments right from the point of origin. That means, there must be a key focus on inventory management, since it’s important to guarantee steady and predictable flows throughout the logistics process.
Ultimately, the goal is to enhance the overall customer experience. And throughGROW with SAP, built-in capabilities for warehouse optimization, transportation optimization, and subcontracting management create transparency across the supply chain.
Focus on Closing the Gap to Build Resilience
Several key decision-makers are aware of the importance of resilience. But now is the time to move from talk to action and the industry must focus on closing the gap by committing to resilience through technology investments. It is a matter of urgency.
As discussed so far, by connecting systems and partners through integrated platforms like SAP’s Supply Chain Management suite, your company will gain end-to-end transparency and coordination.
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