Building a resilient supply chain through digital innovation

For today's companies, supply chain resilience is mission-critical. Global interdependence is only increasing, and businesses have to keep their logistics performance strong to maintain continuity and drive overall success.

In the face of the COVID-19 pandemic and geopolitical conflict flaring around the globe, organizations are realizing the vulnerabilities in the global supply chain. Massive fluctuations in the Federal Reserve's Global Supply Chain Pressure Index (GSPI) began in 2020 and are still ongoing. In an era where the next unforeseen disruption may be right around the corner, resilience has never been more essential.

Understanding Readiness, Responsiveness and Recovery

Supply chain resilience comes down to a few simple concepts, defined variously in research journals and industry publications, which can be summed up as "3 Rs."

• Readiness: This priority consists of proactive preparation, anticipating problems and building resiliency into the supply chain. This can involve modeling and testing various scenarios, as well as preparing failsafes such as alternative suppliers. Companies that pursue these activities will be better prepared for disruptions to labor, manufacturing or delivery service.
• Responsiveness: Once a disruption does occur, there are measures companies can take to mitigate the resulting damage. This could involve having scheduling or workforce management practices in place so it's easy to ramp production up or down on demand in the wake of an issue.
• Recovery: Rebuilding in the wake of disruption and turning that into new growth and momentum is another essential piece of the resilience puzzle. Having the capacity to build out systems that have been damaged can increase a business's competitiveness in the face of large-scale disruptions.

On top of these principles, supply chain resilience relies on reducing complexity and uncertainty wherever possible. Companies that can run such streamlined, high-visibility supply chains will be better prepared to guard against disruption.

Building resilience by identifying key vulnerabilities

One early step in a company's journey to supply chain resilience involves understanding current chokepoints and vulnerabilities.

Today's global supply chains are precision-tuned to deliver reliable operations at the lowest possible cost. These interconnected, lean supply chains are vulnerable to outside forces, including trade wars, new tariff levels and shipping incidents.

The main sources of supply chain uncertainty boil down to three categories: suppliers, production and customers. Most of the danger produced by these groups manifests across four areas:

• Raw materials and supply networks: When companies are too dependent on a single supplier or region for materials, global events can lead to sudden, unexpected disruption.
• Transportation and logistics systems: Breakdowns among shipping, overland trucking or other transportation methods can create long lead times and escalating costs.
• Production planning and operations: A rupture in the supply chain can come on the production side, with productivity losses at plants and factories.
• Customer fulfillment: An inability to reliably ship finished products to buyers can cause a supply chain to fail to reach its potential.

Organizations need real-time visibility across all their processes at all stages of the supply chain. This enhanced level of insight will allow them to detect and correct disruptions wherever they arise.

Today's priority: be proactive, not reactive

While major global disruptions and "100-year events" may seem too rare to plan around, recent history has shown that there is value in being proactively prepared to handle worst-case supply chain scenarios.

A disaster anywhere in today's interconnected supply chain can have a wide-ranging impact, and these large-scale events are worth planning around. In just the past few years, those events have exposed supply chain vulnerabilities, with losses reaching elevated levels. Every day that the container ship Ever Given blocked the Suez Canal in 2021, $9.6 billion in global shipping value was wiped out.

Executives have to deal with the tough task of quickly handling crises while also trying to make their supply chains stronger for the future. Transparency can be hard to attain and supply base diversification, while critical, is resource-intensive. These problems make strengthening supply chains a slow and difficult process, but the process is something leaders should consider. For supply chain companies, the opportunity to gain a competitive edge has recently expanded with the ability to leverage innovative technologies. 

Digital innovation is an imperative

Digitization is a key to empowering supply chain leaders to find better solutions to their problems. Resilience plans and decision-making in today's logistics operations should leverage the vast amounts of fast and reliable data.

Digital transformation is a vital component in building durability and reducing complexity, and can specifically address a variety of issues:

Transparency and predictability

Digitization has delivered new ways to track supply chain status with high precision and real-time speed. This allows companies to detect potential disruptions early, allowing them to plan ahead and withstand the negative effects.

• Internet of Things (IoT) sensors have enabled more accurate readings on the position of items, adding new possibilities for visibility and data analytics. 
• Big data: Companies are dealing with more data points than ever before can identify patterns and insights in supply chain operations, leading to better decision-making and predictive strategies.
• Artificial Intelligence and Machine Learning: AI and ML, along with a solid data strategy, can predict market trends, optimize inventory, and improve demand forecasting, leading to more efficient and responsive supply chains.
• Digital twins: Creating digital replicas of physical supply chain assets allows for simulation and analysis of what-if scenarios, helping to optimize processes and predict potential issues.

Repurpose and ramp-up capabilities

When market demand drops, increases or shifts rapidly, what can companies do? Companies faced this question directly during the early days of the COVID-19 pandemic as governments urged businesses to retool their production capabilities to fill the need for critical items, including personal protective equipment (PPE).

In today's digital business climate, it's possible to build highly flexible supply chains that can change based on rapid demand changes. The mentioned modeling tools help businesses map out their next steps, while digital twins and cloud computing enable high-level planning and scaling up or down as demand dictates. Furthermore, with 3D printing, companies can change their production strategies without expensive, time-consuming retooling.

Overcoming implementation challenges

The path to improved supply chain resilience often involves passing through several challenges or issues to deliver value. These include:

• Change management: Carrying out effective digital transformation means embracing change in organizational processes. Businesses need to embrace change planning, align their tech with their business objectives and adopt new methods of measuring progress. Any of these evolutionary aspects can be affected by process inertia, as highlighted in our business transformation eBook. When employees are used to performing tasks one way, they may resist efforts to change. Keeping them engaged and providing meaningful incentives to grow can help them see the value of the new solutions.
• Dealing with data security and general cybersecurity: Digital supply chain systems can become attack surfaces. Companies must step up by enforcing cybersecurity best practices, optimizing digital architecture and implementing DevSecOps principles for their software teams. Just one cyberattack striking a software vendor can damage hundreds or thousands of businesses relying on that system in question. In 2023, businesses publicly reported 3,205 breaches, affecting over 350 million people — the data compromise numbers are 78% higher than in 2022.
• Coping with regulatory hurdles: Supply chains often span multiple countries, each with its own regulations. Ensuring compliance with these diverse regulatory requirements while implementing digital solutions is a significant challenge.
• Integration with existing systems: Many supply chain operations rely on legacy systems and codebases. Integrating new digital technologies with these systems without disrupting ongoing operations is a major challenge.
• Data management and quality: Effective digital transformation requires high-quality data. The quality of data largely determines the quality of AI/ML outputs. Gathering, cleaning, and managing data, especially in large and complex supply chains, is a significant challenge.

Organizations that plan for these issues in their supply chain digitization plans will be better equipped than their competitors to stay effective in an era of high-level risk and global interconnectedness.

Implementing digital solutions: the roadmap

Digital transformation as a concept goes beyond the supply chain — businesses should be thinking about all their operations in these terms. Applying these principles to logistics is a way to lay strong groundwork for flexible, high-visibility supply chain operations that can respond effectively to crises.

The road map to transformation consists of a few distinct steps:

1. Set clear goals. What is the change intended to accomplish, and what does success look like for the organization? It's important to set those expectations during the early stages of transformation.
2. Leverage data. There are more data sources than ever before within today's organizational structures. That means it's worth narrowing them down and ensuring the company is harnessing the right data for meaningful analytical purposes.
3. Focus on value. Digital trends come with hype, in supply chain technology and beyond. IT leaders need to see through the noise, implementing systems based on their current capabilities and users' needs rather than their name recognition.
4. Build meaningful incentives: Getting user buy-in helps digital transformation initiatives have the maximum possible impact. There should be effective messaging and formalized incentive plans to get both leaders and rank-and-file employees to use the new systems.

Read our eBook on business transformation to see the process of successful transformation laid out in detail.

Achieving lasting supply chain resilience

There's a need today for flexible, adaptable supply chain resilience strategies that will deal with both current and future issues. One of the key themes of today's industry is that global-scale disruptions can strike at any time. Readiness for the unexpected should be built into businesses' digitization and modernization plans.

For an example of a recent, successful supply chain transformation, you can observe what Transcenda accomplished for BNSF Logistics. The organization wanted help following its digital-first product roadmap without compromising the quality or security of its systems. As part of this effort, BNSF and Transcenda built out new customer-focused booking capabilities for non-standard loads.

Organizations around the world are focused on digitizing their supply chains and pursuing a more resilient, flexible future. To learn what that could mean for your business, contact us.