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Supply Chain 360

Supply Chain Hero

Key to organizational resilience

For decades, lean supply chain management has been the norm for most organizations. Lean dates back to the 1940s when Toyota launched its groundbreaking Toyota Production System, a just-in-time approach to manufacturing and logistics.

It’s not an exaggeration to say that Toyota revolutionized the way we do business internationally and accelerated globalization. But ironically, because of our global interconnectedness, organizations are now exposed to risks throughout their supply chain.

Multiple simultaneous shocks to the system can have a cascading effect on business operations, leading to delays, shortages, and skyrocketing costs. We first saw this in 2008 during the global financial crisis and again in 2020 at the beginning of the Covid-19 pandemic.

Understandably, organizations want their supply chains to become resilient to external shocks and internal dynamics, such as shifting business strategies. Yet, despite this goal of resilience, most organizations still struggle with being proactive regarding their supply chains. Instead, they continue to operate in a reactive mode while using an outdated approach to supply chain management.

The solution is to switch the playbook for supply chain management from Lean to a “Supply Chain 360” approach, which is a circular system with data availability, transparency, insights, and information gleaned from that data shared up and down the chain.

This modern approach will yield greater financial rewards because your organization will operate in an environment where resiliency and risk pose greater downsides and upsides than the continuous cost reduction of everyday business.

Supply Chain 360 explained

Within the Lean approach, the modern problem has become the concept of the “supply chain” itself. Traditionally, the “chain” in supply chain describes the linear sequence of events and locations a product must pass through to end up with the consumer, i.e., the final link. The way that links connect in a chain is very similar to how information has always been shared in the supply chain.

Inside a traditional supply chain, a series of entities focus on just what they need to do. These entities can include people – i.e., buyers, analysts, engineers, farmers, and makers – and places, i.e., farms, factories, ships, warehouses, and stores.

When the traditional supply chain works correctly, it functions as a series of Lean transactional handoffs dependent on the one right before it. A pure end-to-end Lean approach delivers consistent cost savings but limits an organization’s agility when a shock to the system hits.

What happens when there’s a shock to the system, such as a Covid outbreak, a devastating drought, or skyrocketing inflation? As we’ve seen in recent years, traditional supply chains and their linear processes are not set up to withstand multiple unexpected shocks.
Supply Chain Hero

Supply Chain 360 is the North Star for digitally transforming the traditional supply chain. It means having a 360-degree view of your total supply chain data that is harmonized and accessible just-in-time to all your organization’s entities.

With this data-driven platform, your colleagues and vendors can work off one version of forecasts, plans, and actuals for every node on the supply chain. When your organization works off of the same source of truth, you can pivot quickly and timely.

The benefits of Supply Chain 360

Regarding resilience, Supply Chain 360 enables your organization to be agile and act competitively in an unpredictable environment. Here are some of the outcomes you can anticipate:

  1. You won't make too many products and then have to discount them. Overestimating demand and not having a clear view of end-to-end inventory can lead to a supply surplus, as famously happened to Peloton in 2022.

  2. You can efficiently adjust the flow of products when demand spikes due to unforeseen events. Imagine capitalizing on a sunny St. Patrick’s Day in Chicago by diverting sunscreen marked for Florida or diverting much-needed building supplies due to a hurricane in Florida from Chicago.

  3. You can stock up on supplies if you detect an upcoming shortage or slowdown in production. Toyota, the originator of Lean concepts, learned from the shocks of the Tōhoku earthquake and tsunami of 2011 to move away from a purist view of just-in-time inventory. To increase resilience, Toyota diversified its suppliers and stocked up on parts vulnerable to disruption — including microchips. As a result, in 2021, Toyota fared better than most of its competitors and passed General Motors to become the top seller in North America in 2021.

  4. You can understand what alternate parts or materials can be used when one runs out. The global supply chain crisis during the pandemic made building houses a nightmare. Imagine if architects and builders had a clear view of alternate materials that could be easily swapped out.

Ultimately, Supply Chain 360 is about having a coherent, shared understanding of where things are, where they can go, and what's available to go where. With these insights, you can sharply reduce the time it takes for a demand and supply cycle, regardless of your operating situation.

Where to start? Demand forecasting

If digitizing your organization’s supply chain feels impossible, you’re not alone. Most companies store some information about their supply chains in spreadsheets, and a majority of them have multiple conflicting sources of product data.

Demand forecasting is the most critical aspect of the supply chain to focus on first. Specifically, do you know what people want to buy, where they want to buy it, and how they want to buy it? This is a slight distinction from what they actually buy, typically determined by what’s on-shelf in front of them and the price tag.

If you know what and where people want to buy things, it solves a lot of your organization’s problems in the supply chain. With the correct forecast in hand, your organization can solidify a plan that details exactly what will be produced, how much of it you’ll create, what materials you’ll use, where those materials will come from, when and where the product will ship, and how the customer will receive it.
Supply Chain Hero

When you become good at demand forecasting, your organization can anticipate positive outcomes like:

  • You have less inventory.
  • You're better able to serve your customers through order fulfillment.
  • You're better able to turn over products into cash.
  • You have higher profit margins because now you're way more efficient, and you're not losing demand, either.
  • You reduce the amount of lost sales because inventory wasn’t available.
  • You realize a higher average price.

To set your organization up for demand forecasting, you must first focus on harmonizing all the sales and demand data. Only 6% of chief sales officers are confident they will hit their numbers, and much of that concerns the question, “Where is my demand coming from?”

For example, is the demand from how people act on a website, in a store, from their preferences, or loyalties? Also, am I selling it directly to customers, or somebody else who is selling it to customers?

The answers to all of these questions are in your data, which is why you need to get it organized into a platform so that you can learn from it and produce the best demand forecast. With demand forecasting in place, your organization can look at the data holistically and know precisely what sold, what you forecasted would sell, and what you planned on selling.

Once you have that foundation, you can start including other data components needed to create your digitized supply chain. For example, your supply chain must have only one version of each product you sell. Key to this is a product master data management capability that details how your organization will govern the product from its inception to sale to decommissioning.

Another critical issue is getting the correct location data into your digital supply chain. In traditional supply chains, locations often don’t mesh with each other. It is difficult to pivot when location data on factories, distribution centers, retail stores, and geographies exist in different systems and formats. When location data is interoperable, flexibility and agility can be truly maximized.

Revamp your supply chain with visibility and predictability

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What’s possible: The Connected Forecast

With Supply Chain 360, your organization will ultimately have the capability to connect forecasts for what people want to buy with forecasts for what you can produce. I call this a “connected forecast,” and it’s key to creating supply chain resilience.

For example, in working with a global CPG company, we leveraged autoML to identify opportunities to increase accuracy in SKU-level demand forecasts by 12%, which resulted in savings of $2.7B over eight months. Additionally, the forecasts were used to improve pricing + promotion calendars within the marketplace.

Creating a more agile and resilient supply chain requires more than simply digitizing existing analog processes. Organizations must anchor on the business outcomes + current pain points to develop innovative solutions. Supply Chain 360, and other digital innovations like it, are focused on transforming the people, processes, and technology to drive the best return on investment.

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