Completely digitized trade arenas, expected immediate supply times, declining brand loyalty. Due to a series of far-reaching changes in all aspects of the organization, titled – disruption, the field of supply chain management changed from a background supporting actor to a leading player. How does that reflect on organizational culture and what must management do?
Until a few years ago, the field of supply chain management was perceived by many as dull and uninteresting. A field that belongs in the background and willingly lets sexier functions like marketing or R&D take center stage. However, even before the Covid hurricane hit, this perception began to change. The pace of activity all over the world, in all facets of life, has risen, and storage, transport, and distribution capabilities completely changed market dynamics. If in the past the market moved linearly, and you could plan, produce and distribute based on clear predictions of demand, now the world entered a disruption vortex that mixes everyone and everything.
In the recent past, demand from the field was directly translated to orders, which were turned into work plans. The world turned upside down. Goods amounts and scale had significantly risen, the chaos does not allow reliable, organized planning and the phenomena called “disruptive innovation” caused us all to recalculate.
The “disruption” – a series of far-reaching changes in all aspects of the organization, has become a permanent fact. With it, organizations need to change and make adjustments to strategy, structure, processes, procedures, and in fact, all familiar organizational aspects. Welcome to a disrupted world.
Disruptive Innovation Dynamics
The multifaceted challenge is apparent in all legs of the consumption process. Both for organizations and for private consumers. We buy things online and expect immediate delivery, focused buying options, and the ability to quickly hop from one website to another. Following the consumption revolution, the whole operational function and supply chains become critical factors and require taking complicated risks. It used to be a reactive world that now needs to be proactive. It was a sleepy field that woke up in a roar. Whoever does not wake up now should probably quit while they are ahead because the competition is challenging.
For example, the consumer goods market is an almost completely digitized, accessible marketplace. That means declining loyalty to brands, in favor of accessibility and availability of similar products. Leading to the conclusion that if in the past the supply chain was a supporting function, assisting core functions, today the supply chain is strategic and has business significance. We need to change thought processes and work methods of supply management, central location, distribution and provide a high agility level.
The holy combo of strategy and technology
As well as the meteoric rise in importance of the supply chain, with the rise in importance of digitization. The ability to recognize the location of warehouses and distribution centers in real-time, supply levels, where demand rises, and what kind of demand as well as addressing different quality control incidents have become critical and hold huge financial importance.
Here we see new innovative big data and analytics platforms and tools entering the field- collection, processing, and analysis of the meaning of data that is constantly collected and can be available at the best time for decision-making were meant to minimize direct and indirect damages. Full digitization of the field makes “we’re advanced and cool” the basic requirement to survive and thrive. Most organizations today have local digitization projects and don’t necessarily “speak” between themselves and so the organization cannot see the full picture.
The supply chain requires a strong, complete, and stable digital layer. When it is not there, it is impossible to translate strategy to work plans, which are a direct execution of business plans.
Inventory surplus vs. demand levels, transportation cost, or quality malfunctions- all consist of information critical to success, and it all happens extremely fast, so fast that it does not allow for human organized planning the way we are accustomed to.
The combination between strategy and technology has become the holy grail and balancing it correctly is the key to bottom-line sucsses.
Engaged, committed leadership is required
Like any other transformation process, it is not possible to perform the required alterations without committed and dynamic leadership by management. Organizational changes are difficult to accept and resistance to change is natural, but if management is not bought-in, resistance to change will usually overcome the winds of change. If that happens it requires extreme steps to heal the organization and correctly lead it to adjust to the environment. It requires understanding the level of organizational maturity as well as crafting a work plan that accounts for the organizational level of readiness for the required changes in organizational structure and digital platforms.
Smart management knows to take calculated risks and understands the cost-benefit of each step of the transformation process. It is impossible to carry out all the needed changes without cost and losses in time, manpower, and more, but lack of action is much more expensive.
The ability to move fast is critical
due to the rapid pace of change in the market on the macroeconomic level. Each strategic plan needs to become flexible enough to pivot often. Each decision is subject to change and basic assumptions which are the basis for decision-making should be reexamined every once in a while
If we used to say that “the enemy of good is great” we now need to contain mediocre performance for short timeframes, since they cost less and are easier to fix than not maintaining timeframes and opportunities facing demand and storage and transportation challenges.
The differences between successful organizations to ones that will go extinct will be understanding the disruption and changing the rules of the game – full digitization of the supply chain and the ability to move quickly when facing changes in the market without falling in love with any idea, structure, plan or process. The world will belong to the bold, the fast, the creative, and to those that even when they are at their most successful, constantly come open-minded to new opportunities, constraints, and recalculating the route. Speed is the name of the game.
CEO of NGG Group