Improving Supply Chain Strategy, One Step at a Time
The supply chain is a highly complex, highly dependent, dynamic entity. It encompasses everything from product development and inventory to distribution networks and logistics. Because every link in the chain network is dependent on the previous link, the supply chain strategy must be transparent and focused on cross-functional relationships with partners, suppliers and customers.
Its goal is more than delivering a product to an end customer; it is about translating corporate strategies into executable deliverables that improve customer satisfaction and brand value. Consumers care little about how a product makes it to their hands. Their primary concern is whether the product(s) they want are there when they need them. We can look at the COVID-19 pandemic for evidence of the interdependencies that predict how well a brand can deliver on its promises.
Grocery stores are proving to be prime examples. A grocery chain’s ability to deliver the right volume of product at the right time to customers is dependent on the store’s supply chain strategy they established prior to the pandemic. Hindsight may be 20/20, but those without an agile supply chain strategy have no doubt lost market share.
Consumers may have initially understood empty shelves as being caused by pandemic panic, but they expected the stores would figure out their supply chain issues quickly and adapt to the increase in demand of certain products. Continuously empty shelves only spurs fear and distrust that everyday items will be available any time soon. Shoppers find alternatives, going online or to the competition.
Again, consumers don’t care about how a lack of paper towels isn’t necessarily the grocery store’s fault, and that the store relies on suppliers who rely on other suppliers all the way down to the paper mill and raw materials supplier. All the consumer sees is that they’ve risked their health multiple times over the past week or two to purchase paper towels at their neighborhood grocery store and the shelves are always empty.
San Antonio-based H-E-B, named the nation’s favorite grocery store in 2020, received accolades in how it has handled its supply chain during COVID-19. Learning from the H5N1 virus and Hurricane Harvey, the chain knew it had to act proactively as soon as the COVID-19 virus became an issue in China back in January 2020. With its supply chain dependent on China and other countries, improving its supply chain strategy became a priority.
Leaders at H-E-B began communicating with its retailers and suppliers around the world who experienced the pandemic earlier and were ahead in their response. H-E-B mirrored those countries’ experiences to the U.S. and modeled how they would be able to serve communities in spite of lockdowns and product shortages if the virus made it to our shores.
The grocery chain became creative, early on, on how and where it sources, warehouses, and ships products when its supply chain is under extreme pressure. In a story written and published by Texas Monthly on H-E-B’s ability to adjust its supply chain strategy in response to COVID-19, Craig Boyan, president of H-E-B, is quoted as saying, “Any experience, you learn from and you continue to get better. The way we focus on pushing our business is to try to adapt as quickly as humanly possible, as we talk about the daily adjusting of our supply chain and our store operations.”
A supply chain strategy is never static. It should not be set on a shelf to collect dust. For brands who want or need to improve their supply chain strategy, the first step is to ensure it can easily and quickly adapt to changes in the market, in demand, and in unforeseen influences, such as a pandemic. Companies require an agile supply chain strategy as never before.
Technology and The Supply Chain
Companies need to focus on making their supply chains flexible to meet whatever challenges and opportunities come its way. One of the best ways to improve supply chain strategy is to incorporate technology that is purposely built to minimize risks and revenue loss. By gaining insight into timely and accurate data across the supply chain, leaders can make smarter decisions earlier on to preempt disruption threats. H-E-B did this beautifully, proactively modeling scenarios to inform business and supply chain strategy.
The key to this data insight is integration. Businesses can operate hundreds of business applications and systems, many of which are siloed and inaccessible. Integrations, however, ensure systems speak to each other, sharing data to provide a more holistic, 360-degree view of the supply chain and all of its moving parts.
For example, companies use ERP software to centralize inventory, purchasing, and production data. They typically utilize a transportation management system (TMS) to help them plan, execute, and optimize their logistics, as well. When they integrate these systems with supply chain risk management software, they have an accurate picture of the current and potential status of every one of their shipments across the globe. They move beyond seeing inventory and logistics planning to being able to predict weather or climate events, infrastructure outages, or social events that threaten to delay shipments or compromise product quality.
Having a comprehensive view enables leaders to understand their risks ahead of time with data-driven insights that support decisions with a high level of confidence. Manual, mundane tasks are automated to save resource time but also risks for mistakes and omissions. Data shared between systems removes the human element and provides instant insights that only predictive analytics and machine learning can provide.
Let’s continue with the grocery store example. The world is still reeling from COVID-19, and while supply chains have had some time to recover, they are still struggling to keep up with demand. Now that we are heading into the coldest months of the year, grocery stores must manage not only their supply chain and product availability, but now they also must contend with the weather. Extreme temperatures, icy conditions, and snow storms will further threaten grocery store shelves. How does a chain improve its supply chain strategy to ensure necessary products are available to consumers when they need them?
With the rest of the supply chain perhaps under greater control now, grocery stores need to focus on logistics – bringing those products to their shelves on time and in good condition. Predictive analytics software can help. By analyzing potential risks and their severity and overlaying that data onto known shipment data from the ERP and TMS, grocery stores and shippers can see exactly where the most risk lies along any given route. They can model scenarios to see what best next action to take.
Instead of waiting until the day of shipment to change plans, leaders can use the data gleaned from their integrated systems to make adjustments 10 or more days before a scheduled shipment. They may determine that simply by rescheduling a shipment by a few days alleviates the risk. Perhaps a change in the mode of transportation or equipment type will suffice. A lane change that reroutes a shipment around a storm may prove the best alternative. In any of these situations, the software is able to predict the risks, where they may occur, the probability and severity of those risks on a particular shipment, and the best options on how to mitigate those risks.
With this kind of data in hand, leaders can make faster, more confident decisions that lead to increased revenue and brand loyalty with greater customer satisfaction. Are there additional ways to improve supply chain strategy? Absolutely, but utilizing integrated technology to get a complete view of the supply chain to minimize and mitigate risks is a great starting point.