Layer 2

Building your Supply Chain Network

MicrosoftTeams-image (1)-Sep-27-2022-01-26-21-05-PM

George Lawrie (Guest Speaker) from Forrester provided his take to the questions related to the ongoing disruptions, global supply chains face unprecedented challenges. As the modern supply chain is no longer an ordinary organizational function but a key driver for accelerated business growth.

1. Supply chain disruption across the globe reveals a lack of agility in the processes and systems (of enterprises) to adapt to the new changes. Do you think, all or most of the businesses today have started realizing this issue and what they should do today to mitigate these challenges?

Forrester runs a quarterly survey about the investment plans of its global large enterprise clients. We publish the business technographics results and use them to decide research priorities. For years now enterprises prioritized customer facing investments in commerce or sale force automation as they sought to engage B2B as well as B2c customers more directly. More recently we’ve seen their planned investment in ‘supply chain’ eclipse plans for further investment in CRM as they scramble to fulfil the (extravagant) promises they are making to their impatient (online) customers. The real problem though is that they need to also improve coordination of product lifecycle, sourcing, and logistics to place inventory ahead of anticipated demand. We’ve seen the huge spike in transportation costs because enterprises sometimes fail to anticipate changes in demand and rely too heavily on the spot market. You can see that some enterprises are trying to integrate demand planning and transportation planning to mitigate transportation cost inflation here.

2. Why should the technology leaders today consider investing in the tech that could bring the whole organization complete visibility into their supply chain network – In addition to resolving the supply chain disruptions, what are the long-term benefits to this kind of visibility?

As cars become more sophisticated, they embed satellite navigation and LIDAR for increased adaptability to traffic conditions and resilience to, for example, road closure. Real time or at least timely visibility of inventory in the distributed network helps am OEM to adjust the rate of production to real consumption. More importantly it can resolve apparent shortages. Take the semiconductor shortage on everyone’s mind at present. Semiconductors reach OEMs through a complex multi-tier distribution channel. How much (surplus) safety stock is at each level? How exposed might the semiconductor manufacturer be to price protection claims when these same semiconductors – un such urgent demand today – become obsolete in a few months’ time?

3. What does a modern supply chain network look like?

Forrester researched last year the types of supply chain applications that Forrester clients rated most highly for maturity and business value. Our clients described their vision of a collaborative supply network that senses and responds to changes in risk and in demand and potential bottlenecks in supply, proposing role-relevant corrective actions in each planning horizon to mitigate risks boost sustainability and offer improved agility and resilience. They described the capabilities they need at each level of maturity.

4. By achieving complete visibility of the supply chain network, could businesses better manage (or maybe even take advantage of) fast-moving consumer behavior shifts triggered by inflation or an increasing preference to omnichannel purchasing etc?

Yes! Our clients tell us that each customer is special, but actually each order is special too. One of the reasons for the rise of intelligent order management is the need to fulfil orders from the best source taking into account availability, transportation and landed costs and of course the client’s order urgency. More importantly we’ve seen our client look to continually replan their distribution network to capitalize on the availability of on demand warehousing and the rapidly changing pattern of online demand.

5. Identify short-term supply chain weaknesses and investments to achieve short-term gains (agility and speed) while also investing in long-term, end-to-end, real-time transformation.

Earlier this year we worked with Forrester clients to create and publish a template for supply chain gap analysis and calculating the ROI of selective supply chain investments. In general inventory turnover measures an enterprises success in synchronizing supply and demand. We published some years ago a tool using public data to track against selected peers changes in ratio of inventory turnover against changes in revenue and margin. Priorities though and value depend on the physical properties of the supply chain. And the structure of the target market

  • Physical aspects of supply chain. Usually enterprises that offshore to remote locations or work with long lead time inelastic supply, for example silk or semiconductors, benefit most from improved demand management and then from improved visibility of order and inventory status.
  • Structure of the target market. Brands and global CPGs serve traditional trade consumer markets through distributors. Manufacturers of pumps, valves, semiconductors also often use a distributor network too. These enterprises need visibility of inventory as it progresses through the network to adjust channel incentives and production to achieve the expected sell through and margin. They also need visibility of inventory to reallocate between channels or distributors and to monitor warranty, returns, and price protection exposure. In some (branded goods) cases they use this kind of visibility to guard against counterfeiting and or so-called ‘gray market’ leakage.

You can download this Q&A  session here or watch the full webinar on-demand