The supply chain serves one ultimate purpose — to deliver a promise to a customer. Recent years have seen the supply chain break down as critical pieces go out of sync, due in part to inflation and a scarcity of materials and talent. But what have we learned about supply chain management recently that can help navigate the current disruptions and future uncertainties?
Let’s start with some fundamentals and take a look at how having a unified, digital view of your supply chain can save you money by identifying risks before they become issues and resolving problems faster.
What is supply chain management and the bullwhip effect?
Supply chain management refers to the planning, control, and execution of the flow of goods — from materials to final products. There are five key components:
- Delivery and logistics
Each of these components produces data that could impact any of the other stages. The problem is that it’s often siloed and not visible to the other areas. To have visibility over the entire supply chain, each partner needs to access data from one central place.
Proactive service is key
Going digital with your supply chain saves money in the long run by helping you stay prepared for whatever comes your way. These tips will help you get started.
One step further is managing the quality of that data to provide the visibility and insights you need — we refer to this relevant data as an engagement layer. Every supply chain creates many data streams, but an engagement layer helps gather them in one central place with analytics and insights.
This allows internal and external teams to resolve problems, share solutions, and coordinate around regulations quickly. With that in place, it’s possible to add automation and alerts to make the chain stronger and smarter throughout.
With quality insights in hand, supply chain management becomes more intuitive. Companies gain a clearer picture of their supply chain and can work quickly to protect against events like shortages. One thing that shows a disruption in the supply chain is called the bullwhip effect.
The bullwhip effect is named after the shape of a graph that shows the increase in production in relation to demand. The bullwhip effect occurs when a weak, but loud, signal for more demand leads a manufacturer to produce too much.
For example, what looked like a toilet paper shortage early on in the pandemic was actually the perception of scarcity. This started with a weak signal: people seeing empty shelves on social media, then hoarding toilet paper. This led many to think there was a shortage.
We never actually needed more toilet paper — it was just in the wrong locations. In some cases, availability differed by location; inventory was not low for the entire region. Toilet paper manufacturers have different production lines for residential and commercial customers. Some were able to redirect supplies meant for restaurants, for example, to residential customers.
Trying to produce more than is needed can stress the supply chain. It is not always possible to produce more of a product due to machine and material limitations.
To achieve balance again and smooth out the bullwhip curves, you need more reliable signals and better data.
Why is supply chain management important for businesses?
Smart supply chain management can increase efficiency and profits while reducing costs. Elements of this are already in place for most businesses, but it’s not always treated as an end-to-end process.
A common response to a supply chain problem is to create a task force or additional dashboards. But this is a short term solution that just makes more work for employees. Only with full visibility and an engagement layer that interprets data can you create a more efficient supply chain that saves money.
Collaborating with a tool like Slack can enable supply chain professionals to make decisions faster, leading to better product quality, faster problem solving — and ultimately happier customers.
These conversations can also be available for later reference, rather than relying on memory and phone conversations. Teams may also see patterns in past conversations that can be fixed with new processes or automation.
Sharing data across the supply chain decreases risk and costs while keeping everyone on the same page. When multiple stakeholders share insights, it’s easier to detect the next bump in the road and respond with agility. Ultimately, it leads to better planning and smoother operations.
A complete data picture includes the shipping index, price index, tracking data, weather data, inventory, suppliers for each component of the product, and more. All this data would be available for manufacturing, procurement, production, and sales teams to view.
With automation, the right data can be shared in the right intervals, negating the need for manual sharing and phone calls.
Adding an engagement layer, or digital supply headquarters, can make sure that the relevant data is shared with the right teams. This removes the friction data silos create, without disclosing any business secrets.
Upgrading your technology can also help ensure all partners are aligned with environmental, social, and governance (ESG) requirements. Having a way to account for carbon emissions is a necessary part of the supply chain. Better technology can help you do this efficiently.
Incorporating automation into your supply chain management can automatically sync carbon footprint data, and digital communication tools help you share ESG updates with partners.
This makes it easy to report on your company’s carbon footprint and helps the supply chain operate more sustainably.
Improving your supply chain — what’s possible?
With digital tools and an engagement layer to help share and interpret data, it’s possible to:
- Improve demand planning
- Reduce risk with more accurate forecasting
- Reduce disruptions and product shortages
- Pivot between suppliers and distributors
- Improve customer satisfaction by providing order status on demand
By using artificial intelligence, you can also get live insights into inventory and alerts with recommended actions. This knowledge helps streamline selling further down the chain. All of these improvements can benefit the customer experience — and your bottom line.
A digital view of the entire supply chain can help you understand shortages and who to contact. And it can help you choose the most reliable suppliers for future orders.
You can share more data and use automation in your supply chain management, so all partners — operations people, truck drivers, and warehouse managers, for example — see the same connected data. This will make it easier to solve problems and deliver for the customer.
Improve your efficiency to survive delays
The pandemic was a stress test for supply chains around the world. Here’s what we’ve since learned about strengthening your operations so you’re prepared for the future.
Transparency in the supply chain
To realize the digital future of manufacturing, rethink how you collaborate and communicate with suppliers and customers.
For example, when your supplier knows that you are reducing production capacity, they can make adjustments that benefit customers. This could include placing additional orders to restock and ramp up production again.
Transparency leads to opportunities to sell more. Sharing information on transport capacity could mean we fill trucks up more efficiently and increase delivery rates to stores. On the other hand, a lack of visibility could create hoarding and artificial demand if manufacturers reduce production due to fears about inflation.
Supply chain visibility and insights can also help with marketing and sales. You can proactively contact customers about their order or communicate about related products.
When supply is short, visibility allows you to make predictions of when stock will be available again for a customer. This could lead the customer to stay with your brand rather than leave for a competitor with more availability.
Customers also appreciate seeing where their order is in the supply chain, especially for a big purchase like a car. If there’s a problem, a salesperson can tell them where it is and what they need to move forward. This builds trust and loyalty with the customer through transparency.
Solve supply chain problems in minutes rather than days
Companies want a full view of data from multiple supply chain operational systems to get real-time insights, and the ability to make decisions based on them.
But, many have siloed data and existing analytics cannot provide the visualizations they need. By creating a digital supply HQ, it’s possible to reduce the time it takes to create supply chain data visualizations and analysis from days to minutes.
The end result of cutting back on several days of inventory? Saving huge amounts of working capital.
Taking this collaborative mind set seriously, and committing to the right set of tools will give you a huge competitive advantage and help keep your customers happy. Instead of losing days resolving an issue, you could redirect a shipment, or find another supplier, heading off the problem much earlier.
That’s what happens when you have a well-rounded view of your supply chain management, powered by data shared in a central location. By incorporating these practices, you’re able to turn outdated processes into a true digital supply headquarters — saving time and money.
What’s next for supply chain management?
Find out more about how a digital supply HQ can help your business succeed in this Dreamforce session on Salesforce+.