Current supply chain set-ups are not future-proof! During the pandemic, the vulnerabilities of global supply chains were clearly displayed and became painfully clear to consumers. Shortages everywhere and surging transport prices, both contribute to the current levels of inflation.
Here is how you can increase supply chain sustainability and resilience:
Supply chain sustainability and resilience go together
The business world is full of attempts aiming at supply chain circularity and sustainability. Companies are rolling over each other announcing dates on when they will be CO2 neutral and realize their climate goals. In a world where companies must pay for emitting CO2, redesigning supply chains and optimization of the supply network can make a difference. This raises questions like; can facilities nearby serve the markets? Can we save on transportation and reduce our CO2 emissions?
In parallel, the drive towards circularity asks for integrating return flows into the forward supply chain and building an integral closed loop or circular supply chain. We should avoid creating global flows of disposed products and materials to recover residual value. Regionalization is likely to be the best answer. Recover the value in the region where the product was produced and consumed. Regionalization (or nearshoring / reshoring) is the same solution proposed to mitigate supply chain risks. This movement is gaining traction; according to a recent survey of supply chain managers by Gartner the pandemic has prompted 30% of firms to shift the focus of their supply chains from global to regional.
Drivers for redesign and benefits
Next to supply chain sustainability and risk resilience, there are several other situations where supply network design and optimization can bring additional value to organizations:
- Optimizing an organically grown supply chain to be fit for the future with optimal allocation of supply to markets by balancing costs, inventory, and service. This ranges from optimizing the production and distribution footprint, and the portfolios it supplies to markets, to considering new transport modalities on costs, speed, and environmental aspects.
- Harvesting synergies after mergers and acquisitions by leveraging the new possibilities and removing the doublures. Next to closing locations, a major gain is in optimizing the allocations from suppliers to factories, factories to distribution centers (DCs), and DCs to markets too.
- Preparing for future growth; typically, strategies focus on products and market. The supply base follows. The recent crisis clearly shows the relevance of the supply chain. Proactively developing your supply chain along with your strategy is a good practice.
The benefits of supply chain network design and optimization can be significant. At EyeOn we often see cases achieving single- and double-digit millions of euros savings. And with respect to savings, let us not forget the ‘hidden’ costs of complexity and risk. Many companies have learned this the hard way over the last years.
In times of big data and artificial intelligence, redesigning a supply chain has become an advanced science. Excel models do not fulfill the needs. Considering the amount of data to process, the computational power needed simply isn’t enough to handle moderately complex supply chains. This becomes more evident once multiple scenarios and sensitivity analyses are asked. This is not optional, but a must. The goal is to build a more resilient supply chain. To be successful, you need to combine business expertise and understanding of your strategy with thorough data science expertise to make the calculations. As consultants, we can help!
Keep your supply chain design models live (’Digital twin as-a-service’)
In a fast-changing world, it is worth considering not only designing a robust supply chain for the current dynamics but also assessing its purpose for unforeseen changes. For this reason, we recommend raising the frequency of supply chain network evaluations and building the capability. This can be done in-house but can also be outsourced as a service! After a turn-key project, we offer our clients the possibility to transfer to a service model, where we keep the model live and up to date with the latest data and are ready to run a scenario when needed.
We are here for you!
Are you ready to revise your supply chain network design or optimize it? We are here to help you in this journey. Together we will take the steps towards a more resilient and sustainable supply chain. Contact us now!
This is the time to build resilient, agile, and sustainable supply chains, maximizing the benefits of digitalization and advanced analytics.