Though the global supply chain ecosystem entered 2020 with plenty of challenges to overcome, COVID-19 cast a long shadow on all of them before completely shutting down production in many supply chains worldwide.
Organizations watched their business grind to a halt due to factory closures and localized outbreaks; others, due to an inability to monitor quality and sustainability initiatives crucial to maintaining their bottom lines.
“Intricate production networks were designed for efficiency, cost, and proximity to markets but not necessarily for transparency or resilience,” writes McKinsey & Company. The problem is that disruptions of this scale are increasingly likely going forward — and prioritizing supply chain resiliency will remain the primary means of taking action when they occur.
COVID-19 may be one of the most devastating crises in living memory, but it is hardly a lone wolf in terms of supply chain disruptions. It follows in the wake of events like the 2004 Indian Ocean tsunami, the 2011 earthquake in Japan, the flooding in Thailand in the same year, and 2017’s Hurricane Harvey, all of which sent shockwaves through global supply chains. 2019 saw 40 weather disasters passing the $1 billion mark in damages. On average, McKinsey & Company writes that 1-month or longer disruption occurs every 3.7 years, with a 40% or higher annual loss in profits likely every decade.
Taking this broader view of disruptions, it is clear that no supply chain is immune — and the need for resilience and nimbleness have never been higher. The following are 5 of the most significant challenges currently facing the supply chain industry:
1. A lack of supply chain visibility
When disruptions occur, an organization’s power lies in its ability to react quickly and effectively. This requires a clear view of the current state of its supply chain. Conventional supply chain management has created the following problems:
- A lack of trust between brands/retailers and supply chain partners. Instead of collaborative partnerships based on mutual assurance, a “control by policing” dynamic often develops.
- No accurate data on vendor/factory activities. When brands and retailers have no means of knowing what is happening inside their production facilities in real time, they are unable to effectively calibrate when the unforeseen occurs.
- A reactive approach to quality control and sustainability. Instead of proactively managing these initiatives, enterprises get stuck in a cycle of constantly putting out fires.
- A severe informational lag due to manual reporting. Pen-and-paper reporting, transcriptions, and large time zone differences prevent information from arriving in a useful timeframe.
- Inability to send inspectors to factories. Sending inspectors to factories is often impossible when natural disasters, pandemics, and other disruptions occur.
To maintain the real-time visibility necessary to effectively navigate crises, brands and retailers can now harness technology for collaborative visibility among all stakeholders. With the right amount of transparency over complex supply networks, organizations can more easily identify flaws and areas of high risk. They are also able to rearrange resources and scale back production as needed to minimize loss. In times of crisis, this allows for targeted actions and a high degree of agility and preparation.
2. No centralized source of real-time data
Real-time data is only useful if it is reliable and available to all parties who need it. Too often, data silos form within supply chains and form a barrier to information — whether it is conflicting facts or simply awaiting a reply from the party with the data. This leads to a number of issues:
- Duplicate data collection efforts. Without a high level of connectivity between all involved parties, duplicate efforts are more likely. This not only wastes resources, but can create contradictory results that serve to confuse more than help.
- Wasted time chasing down data. Stakeholders in need of data may have to spend time tracking it down from other departments.
- Inability to make a concerted effort based on real-time data. In order to manage risk and maintain a high level of collaboration, all stakeholders must be able to capitalize on real-time data as it is collected — something that is only possible with a centralized network solution.
By leveraging a single source of truth across the supply chain, organizations can now improve the flow of information among all stakeholders. Having all data in one place is the first step toward making it actionable and interpretable, and allows brands, retailers, suppliers, and factories to be proactive in their decision-making.
3. A lack of production planning capabilities
As supply chains grow increasingly lean, production planning is more important than ever. Organizations must know all the businesses involved in their supply networks, what each party’s capabilities are, and how efficiently they deliver.
Effective production planning reduces wasted resources by letting organizations know exactly how many pieces they are going to produce, what stages are involved in that production, and when and from where the raw materials will be arriving. This also provides a metric for the sourcing director to know how they performed in seeing orders through to completion.
In the new normal post COVID-19, organizations will rely on an increasing amount of data to aid their production planning and to mitigate problems when things don’t go to plan.
4. The need for full-supply chain collaboration
True collaboration between brands, suppliers, and factories is a cutting-edge practice that has been nearly impossible until recently. When their supply chain is siloed, brands tend to find out about production problems long after the problem could have been addressed. The conventional dichotomous relationship between brands and their supply chains has its own set of problems:
- Brands policing their suppliers. When problems arise between brands and their suppliers or factories, many resort to increased scrutiny as a risk mitigation tactic. This can build resentment and fosters an atmosphere of mistrust, as well as requiring increased expenditure and resource allocation.
- A lack of accountability. Brands want their manufacturing facilities to hold themselves accountable for production mistakes — however, the proper system of incentives and mutual understanding must be in place for this level of autonomy to work.
- Weak standardization across the supply chain. Standardized supply chains operate more efficiently and avoid costly, disaggregated reporting and inconsistent data formatting.
By enabling facilities to conduct self-inspections, brands/retailers can empower their suppliers and factories to become more autonomous within the supply chain. This shifts the tone from one of policing to one of collaboration. COVID-19 has highlighted the need to empower self or ‘remote’ inspections within the supply chain, which allow factories to continue producing and monitoring for quality assurance even when travel is prohibited.
5. The need for data and analytics at every level of the supply chain
Gone are the days of data collection occurring several times per year. Today’s supply chain is an increasingly dynamic environment wherein data is gathered continuously. With this growth comes a greater need for advanced analytics and automation, which allow decision makers to understand all perspectives of the data in seconds without having to rely on a dedicated team to pore over spreadsheets.
In keeping with digitalization across all industries, the supply chain will eventually become automated and will be powered by data collection and advanced analytics. Organizations will rely increasingly on artificial intelligence and machine learning to identify anomalies, assess risks, and alert stakeholders to changes in the environment, allowing them to make better decisions in a fraction of the time. The ability to reroute components and flex production dynamically across sites can keep production going in the wake of a shock. This requires robust digital systems as well as the analytics muscle to run scenarios based on different responses.
Inspectorio Radically Simplifies Supply Chain Management
Digitization remains the most important step in moving supply chains toward resiliency. According to McKinsey & Company, “technology is challenging old assumptions that resilience can be purchased only at the cost of efficiency.” With Inspectorio, brands and retailers can connect every part of their value chains through robust data, dramatically reducing inertia and making themselves more agile.
“Most companies are still in the early stages of their efforts to connect the entire value chain with a seamless flow of data. Digital can deliver major benefits to efficiency and transparency that are yet to be fully realized.” (McKinsey & Company)
New challenges require innovative solutions. Inspectorio provides novel visibility, analytics, and collaboration across even the largest supply chains. By distilling complex data trends down to actionable insights, Inspectorio empowers organizations to act immediately on real-time analytics, allowing them to switch from reactive to proactive decision making.
Organizations can also manage their inspection program amongst multiple stakeholders (factories, vendors, 3rd party, internal teams) on one platform. As partnerships grow stronger, high-ranking factories can begin performing verifiable self-inspections and assume more responsibility and accountability, creating a more synergistic relationship. This also saves organizations resources by removing the need to hire external inspectors, and allows them to continue inspecting and shipping throughout crises in which travel is restricted.
Inspectorio’s advanced machine learning algorithms are assessing the risk of every supply chain partner 24 hours a day. The platform automatically predicts defects, assigns a risk score to each facility and automates the allocation of inspections and protocols tailored to each facility’s risk level. This allows for the maximization of resources and creates the right incentives for good quality across the supply chain. Reports, CAPAs and robust analytics insights are automatically generated, alerting supply chain managers of potential problems without burdening them with repetitive work.
The less that stands between stakeholders and a clear view of their supply chains, the better. Inspectorio levels the playing field and allows the entire industry to work together toward a brighter, more resilient future. Read more on how Inspectorio can be the transformation your business needs here.