Continuous evolution is the norm today. Whether facing technology and digital disruptors, changes in workforce skillsets or the transformation of operating models, supply chain executives can be certain: the ways of the past century will not position you as a leader in this century.
So what does it take to be a 21st century supply chain amidst these changes?
Future-ready supply chains are customer-centric, can operate in the ever-changing digital world with agility and do so profitably in order to be a revenue driver for the business. KPMG believes that future success for supply chain depends upon being purpose-built and built to last.
The agenda for the future of supply chain
As they shift towards customer-centric offerings with demand-driven and automated networks, supply chain operations will see significant disruption across six key areas.
1. Customer-centric supply chains
Customers today want personalized services and rapid delivery. Do you think of supply chain as the biggest contributor to the customer experience? You should. And knowing your customers is an important part of supply chain success.
Many organizations don’t understand their true cost to serve or who their most profitable customers are. They don't know if they are over-servicing or under-servicing. Between internally focused metrics and other metrics more inclusive of last mile and reverse logistics, they still lack the full picture.
To become customer-centric, supply chains must partner with marketing, promotion and R&D to ensure that customer requirements are built into the structure and metrics. The future-ready organization will focus on:
- Micro-segmentation - Knowing exactly who your customers are will provide truer costs to serve and allow the supply chain to meet specific customer requirements.
- Macro trends - Comprehending the changing landscape of customer behavior (e.g. offline to online to offline) will allow the supply chain to pivot to meeting new requirements (e.g. last mile/reverse).
- Configure to order - Understanding customers will allow organizations to predict trends and configure to order quickly and efficiently.
- Visibility - Seeing not just where orders are but also where they came from and what raw materials are associated will be increasingly important for sustainable supply chains.
2. Supply chain ‘as a service’ platforms
The emergence of "as a service" platforms and providers adds more complexity to the supply chain outsourcing discussion. It is no longer just about logistics outsourcing. Now manufacturing, planning, warehousing and more can be obtained as a service. Organizations must decide what components they will outsource and what they will provide in-house.
In order to be future-ready, organizations should develop an outsourcing strategy for their supply chains that establishes a balance between the importance of cost, service delivery, risk mitigation and longevity of relationship. This will allow a build/retain discussion resulting in better outcomes.
The end goal? Be an organization characterized by an outside in operating model empowered by "as a service" platforms, which is driven by business, customer, and employee insights and powered by technology and talent.
3. The supply chain workforce of the future
It is not surprising that new supply chain roles and skills will be required to execute supply chain operations in the future. But how should an organization in an industry that is admittedly steeped in traditional ways of working balance the co-existence of both digital and human work?
Supply chain organizations are facing stiff competition from non-supply-chain companies as well as other functions within their own organization in attracting new skills and are faced with a gap for new talent that balances analytics skills and supply chain expertise.
In order to address the changing skills landscape, decreasing talent pool, shifting demographics including where, how, and when people want to work, and the need to prioritize dexterity over technical know-how, the supply chain of the future will be obliged to focus on these key components:
Digital and human co-existence - Create a modern, digital working environment where employees are less burdened with repetitive tasks, but key decision-making remains with human experience.
Supply chain as a business partner - Change to a culture which makes supply chain a business partner across functions.
Digital center of excellence - Deploy a digital center of excellence to accelerate value creation that focuses investment on the most impactful opportunities across functions..
New roles - Identify roles, skills and behaviors needed to meet an organization’s targets.
4. Future-ready supply chain capabilities
As supply chains strive to adapt to a fast-changing world, technology can play a major role in making them more agile, responsive and efficient. But with a huge array of possible digital solutions, organizations risk making poor investment choices. With the technology landscape constantly shifting, what are the technologies which will benefit your supply chain and production functions?
KPMG believes leaders should first clarify their strategic ambitions and only then select technologies that support these goals, with three key priorities:
- Embrace IoT to connect the "top floor with the shop floor" and beyond.
- Innovate digitally to deliver smarter products and processes.
- Harness the power of analytics to drive better decision-making.
Future-ready supply chains will also focus on these key questions:
- What’s hype? - With the technology landscape constantly shifting, what are the technologies which will benefit my supply chain and production functions?
- New risks - With more technology-enabled assets and cyber risk, how will I guard against the increased threat of downtime?
- Building a roadmap - After identifying the relevant technology, how do I implement them in a way which realizes value?
- Supporting skills - Do I have the right set of skills needed to get the most out of my investment in technology?
5. Supply chain cognitive decision centers
The effectiveness of a supply chain ultimately comes down to two things: efficient processes and effective decision making. However, both these factors are often impacted negatively by conflicting objectives of different functions within an organization.
A cognitive decision center takes a cross-functional view of the supply chain covering products, suppliers, distributors and customers. It enables organizations to balance cost, revenue and profit decisions, using advanced simulations and modeling to identify the optimum trade-off. The center is focused on wide organizational goals, so that any decisions – and the incentives of the decision makers – are based on what is best for the enterprise as a whole. Leaders gain complete supply chain visibility and the ability to make rapid, informed decisions, to better respond to customer needs and manage performance.
Future ready supply chains will:
- Use decision making as a business discipline - Embed a culture and process around "decision excellence" to enable the center. This is now made possible through advances in analytics technology.
- Curate ecosystems - Develop a set of core collaborative partners across the ecosystem to ensure the most value is achieved from the investment.
- Adopt a performance-led approach - Don’t confuse activity with progress. Take an approach that starts with performance to provide a focus on use cases which will deliver the greatest value.
- Blend expertise with analytics - While the vision is a decision center where all decisions are data-led, human judgment and intuition will be important to execution.
6. Micro supply chains
A number of forces are putting strain on traditional global supply chains. Shorter business cycles, rising customer expectations and proliferation in the number of SKUs present significant challenges. As consumers get accustomed to same-day deliveries of highly personalized products, manufacturers recognize the need to produce, assemble and store goods closer to the point of delivery.
Macro trends are also making supply chain leaders question the wisdom in making huge batches in large factories in far-away locations. Volatile interest rates and exchange rates, tax regime change, trade tariffs and quotas, wage inflation and crop failure can all push up costs and interrupt sourcing.
The future-ready supply chain will respond to these disruptions by focusing on
Local production and assembly - To meet changing customer requirements, supply chains will need more local production and assembly to be first to market.
Contracts - Supply chains will be required to be agile and flexible, leading to the death of long-term, locked-in contracts. Short-term value chains will thrive as 4PLs begin act as a key coordinator across environments.
Collaboration - Collaboration across industries and competitors will increase as organizations seek to reduce costs and complexity of their operations. Platforms will be utilized to empower strategic decisions.
Technology - Advancements in technology will allow supply chains to more efficiently and effectively improve last mile, local production and reverse logistics functions.