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Tier-1 Supplier Disruption More Visible but Tier-2 Equally Important
Much has been said and written already about the impact of COVID-19 on manufacturing powerhouse China and thereby the world. Although large Tier-1 suppliers typically hog the limelight akin to the companies they serve, less attention has been paid to Tier-2 and Tier-3 suppliers. A recent study indicates that almost all Fortune 1000 companies have one or more Tier-2 suppliers in Wuhan itself. While Tier-1 suppliers are certainly the most visible to organizations, they are insufficient to effectively manage supply chain disruptions. Even companies without a direct Tier-2 supplier presence in Wuhan bore the brunt as it is strategically located less than 1200 kms from other manufacturing hubs Shanghai, Beijing, and Guangzhou.
Brutal Emphasis on Cost-Cutting Has Torn Down Supply Chain Walls
Supply chains have become extremely sophisticated cogs and vital to the survival of organizations in a cutthroat market. However, their interlinked, globalized nature makes them particularly vulnerable to numerous unforeseen risks such as COVID-19, with more points of failure and minimal margin to absorb delays or errors of any kind. In the past few decades, supply chain optimization has meant a laser-like focus on reducing cost and inventories while improving asset utilization, resulting in the elimination of buffers to withstand disruption and delay. COVID-19 has demonstrated in stark terms how organizations are unaware of their supply chain vulnerability and can be caught off guard, bringing the whole system to a virtual standstill overnight.
Digital Supply Networks Allow Companies to be Proactive and Not Reactive
Thankfully, new supply chain technologies are on the horizon that can significantly improve end-to-end visibility and boost supply chain resiliency and agility, sans the conventional ‘overheads’ typically linked to risk management techniques. The traditional view of linear supply chains in order to optimize your business is now transforming into digital supply networks (DSN) where functional silos are made as per the organizational requirement and seamless connectivity is possible. This ensures full end-to-end visibility, agility, responsiveness, optimization, and collaboration. Digital supply networks are built to anticipate any delays and reconfigure themselves adequately to minimize the damage caused and resume business as soon as possible.
‘Expect the Unexpected’ Mantra for Global Supply Chain Networks
Rapid innovation in Information & Communication Technology (ICT) is making supply chain evolution the norm of the day. Emergent technologies such as cloud computing, 5G, IoT, robotics, 3D printing, and AI are key to enabling future digital supply chain networks. A volatile business environment makes it all the more imperative. This could take the form of a terrorist attack, declaration of war, labor disputes, regulatory and legal uncertainty, demand spikes in specific countries, or black swan events such as COVID-19. In the 21st century, the mantra companies must take to heart is ‘expect the unexpected’.
Artificial Intelligence Slowly but Steadily Making DSNs More Resilient
Naturally, the intricacies of creating a DSN vary from industry to industry and could even differ from one company to the next. Yet, the DSN must not only be aligned with the overall business strategy but also be integral to its very conception. Risk management must be a critical component of the design, as business continuity plans (BCP) and risk management play a huge role in setting business strategy. In terms of risk management, it is important to create a robust DSN that reduces risk while enabling a quick recovery from unforeseen supply chain disruptions that the organization encounters. Acquiring this extended supply chain visibility will need a more digitized approach that most companies are used to. New approaches are emerging in the market that harness Machine Learning and Artificial Intelligence-powered resolutions, by including both structured and unstructured data, through subscription-based and proprietary databases that illuminate supply chains to a level previously thought to be impossible.
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