Connecting with the Future of Supply Chains

There’s nothing like the trauma of a hard drive crashing to remind you how dependent you’ve become on technology. I gather based on the IT response of, “We’ve never seen this happen before,” that the sudden crash of modern solid state hard drives is a rarity—but my failure to have backed anything up in months didn’t even raise an eyebrow.

We see something similar in our supply chains. The Ever Given’s blockage of the Suez Canal reminds us of how interconnected the world really is, and that can’t be undone. By some estimates, Apple’s supplier network sprawls across 43 countries. That’s at least 43 opportunities for something to hold up Apple’s supply chain. I have considered living without my smartphone, but it too also died this week after five years of faultless service in a series of events involving a dog, a car door, my left boot heel, and the phone landing screen-side down atop a well-placed rock. My glee at being rid of “that infernal device” lasted all of seven minutes as I realized that I couldn’t communicate it to anybody. Less than two hours later, I was powering up my new phone.

Supply chain managers suffer the same addiction: the ability to connect. Of course, we’re terrible at it. Have you seen the news in New Hampshire? I can’t get a COVID vaccine in Rhode Island because they’re gone before I can make an appointment, but New Hampshire got so many vaccines that the state now offers them even to non-residents.

It isn’t really accurate to say that we’re terrible at connecting—we do it a lot, and we’re very good at connecting. The problem is that we aren’t strategic about it. The mere ability to connect is powerful. It allows “combinatorial” solutions, meaning we can mix and match capabilities until we find a workable solution. But just as I hadn’t put enough thought into backing up my hard drive, not putting thought into how to connect your supply chains can land you in avoidable trouble.

Our addiction to connecting is intensified by the repeated successes of supply chain managers at making the whole messy global sprawl of supply chains work so well.

No matter how much people talk about risk mitigation, supply chain resilience, and developing alternatives such as near-sourcing, the addiction to a global, interconnected world of possible competitive advantages assures that, with few exceptions, business will continue as usual. The alternative is allowing the competition free rein to take the risk to grab those competitive advantages out there in the wide world.

If we want to avoid scenarios where a single ship can stopper a significant portion of global trade, and where one state has too many vaccines while another has not enough, or where global chip shortages happen, we need to think differently about how and why we connect.

• Think more purposefully about your supply chain design. Have you mapped your supply chain? Toyota is managing the chip shortage well because the company has a tradition of looking deeply into its third and fourth tier suppliers. You can’t manage your extended supplier network until you know what you need to manage.
• Look at how you share information. This is easier said than done. A lot of information is not entirely trustworthy, and once others see your supply chain map, sharing also creates cybersecurity vulnerabilities. Look at technologies like blockchain to increase transparency while still controlling vulnerabilities.
• Collaborate with customers and suppliers to develop forecasts that are realistic and based in reality. This prevents “gaming” such as has happened with COVID vaccines and in the famous “Beer Game”.
• Improve operational efficiencies especially in warehousing and logistics so that you can achieve the “perfect order”. Learning from the COVID year that you needed stockpiles of PPE and other goods is the wrong lesson—the real problem in many cases wasn’t lack of goods, it was re-organizing quickly to respond to the new demand environment. That’s easier when you have more responsive logistics and warehousing, including use of warehouse robots.
• Supply chain management classically has replaced inventory with information. This can be taken a step further with 3D printing and additive manufacturing. Imagine having improved resource use while also reducing inventory costs to raw materials that get fed into printers that make exactly what’s needed a short distance from where it’s needed.

We’ve entered an era of stagnant productivity and cheap money. Finding ways to improve productivity is the best way to thrive during the next few years.

Having an important percentage of your productivity reside in specialized outsourced suppliers half a globe away means that taking back control will require a different way of thinking. We’re all part of an inter-connected system, and those who manage supply chains that way stand to gain substantial competitive advantage.

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