Are the current disruptions in supply chains true standstills, or are the supply chains adapting? Is the soaring container price genuinely astronomical, or is it more realistic than pre-pandemic levels? Is the automotive industry truly struggling due to semiconductor shortages, or was there a planning error that led to prolonged production halts during the pandemic? Is the shortage of labor in all industries a supply chain issue, or was labor in logistics and manufacturing underestimated prior to the pandemic? Is it really the incapability of supply chains to meet demand, or is demand inflated due to consumerism? Is it necessary to relocate production entirely from Asia to Europe and the US, after already sharing knowledge and skills with distant countries?
“Fortunately, we’ve built our company as an agile learning organization based on trust, credibility, respect, and responsibility, promoting self-esteem and enthusiasm. These values enabled us to react promptly to the new situation. Essentially, one needs to think more creatively and possess diverse skills to survive. I believe nothing tragic has happened to the supply chain. The ways we operated before the pandemic can be forgotten. We need to change.” says Dorotea Effenberger, MSc. in Economics, CEO and owner of Tahograf d.o.o., and the winner of the “Inspirational Entrepreneur of the Year” award for 2020.
“Most of the problems existed before, and the pandemic accelerated or intensified these issues. Over the last decade, we got used to a stable environment, and business operations were relatively straightforward, leading to neglect of certain segments. Furthermore, planning was much easier, and procurement operational plans were often created and adjusted until the last moment. Actually, even though we were consistently working to improve processes, there wasn’t as much pressure for delivery delays. Now, lead times have extended, and long-term planning is needed.” states Mirjam Kasapović, MSc. in Economics, Director of Procurement at Maistra d.d.
Assuming that the current situation is an excellent opportunity for awareness and positioning the supply chain as a vital player in the business environment, the following trends are outlined in the rest of the text to contribute to resolving the current situation more rapidly.
End-to-End Visibility in the Supply Chain To ensure visibility across all processes and data within the supply chain, digitalization plays a crucial role. However, in today’s context, the significance of digitalization is understood. Therefore, it is not listed as one of the trends. When processes are digitized, data can be easily collected. The challenge is that these data are often not effectively utilized for decision-making. Additionally, due to a lack of collaboration within the chain, and the unawareness that the supply chain should act as a whole on the supply side, there isn’t proper information exchange among chain members. Conversely, consumers want real-time information about product whereabouts. Transparency and traceability have become competitive advantages. Utilizing data and appropriate software support enables optimal decisions in a short period, facilitating quicker and more agile actions.
Supply Chain Agility
Everyone agrees that business operated in an environment of stability for quite a while, causing us to be comfortable in our own zones. Planning, production, and delivery were straightforward. Numerous scenarios didn’t need to be developed, processes ran smoothly without interruptions from external factors. Some even went so far as to have only one supplier and/or one client. Just-in-time models were implemented, inventory levels were minimized, and the whereabouts of those inventories in the chain weren’t a significant concern. Then the pandemic created a situation where alternative suppliers needed to be found, communication intensified, and collaborating with not just the first supplier, but also the second or even third, became necessary. Companies even formed collaborations with competitors to fulfill product or service delivery to their clients.
No single generic approach exists for solving problems anymore. Companies and supply chains must cultivate creativity and innovation, adapt and change more quickly. Some companies even develop a start-up culture within their cumbersome systems to encourage dynamism in their processes. Mindsets and thinking must change for both employees and employers. Each, within their environment, should implement continuous small improvements wherever possible. This leads to cost reduction, and price increases won’t be necessary.
Supply Chain Resilience To make the supply chain resilient to internal and external disruptions, visibility throughout the entire chain needs to be established, data experts should be hired to analyze data and propose suitable solutions, and digitalization should be adopted. Alongside these technological components, alternative suppliers, materials, and components need to be considered, as well as alternative production processes and transportation methods. Sharing responsibilities and collaboration among partners in the chain is also necessary. Transparent, well-built, respectful, and considerate partnerships with suppliers and clients contribute to increased resilience.
Digital Twin
Even though we’ve mentioned not listing digitalization as a trend, we will discuss its applications. The current uncertainties in demand, transportation, climate change, and geopolitical turbulence urge supply chains to develop various scenarios to address potential issues. In this context, digital twins of real supply chains are being developed. For example, if a company with distribution centers across Europe has to close one due to flooding or political tension, the digital twin will quickly find an alternative solution to redistribute and organize distribution to remaining centers while maintaining service levels. Algorithms that find alternative solutions take cost minimization into account based on new constraints. The more advanced the tools and methods (such as machine learning), the quicker optimal solutions are generated, allowing companies to react faster.
Risk analysis is facilitated with a digital twin. How many safety stocks should be created? How many alternative suppliers should be considered? How should the production schedule be designed to ensure flexibility? How often should a machine switch from producing one product to another? How often should orders be placed considering delivery time uncertainties? What are the alternative transportation routes in the event of traffic disruption? Since risks are analyzed in advance, companies can respond more rapidly to challenges as they already have developed scenarios.
Human Resources in the Supply Chain
We are witnessing a shortage of labor in supply chain processes, especially in truck drivers and port employees. Additionally, due to digital transformations, there is an increasing need for data analysts and programmers.
Certain processes can be automated and robotized. Companies are shifting production to Europe and the US, which will reduce delivery times but increase product costs due to higher labor costs. However, there’s a solution here too if processes are digitized. Robots will take over many jobs, and human capital will be redirected to new roles.
Therefore, employee education is crucial, a vision and clear goals need to be set, taking into account new jobs that don’t currently exist. We are also witnessing the import of labor from distant Asian countries, bringing in new cultures and mindsets, both to companies and society.
