Supply Chain Resilience in the Digital Era

20 Feb 2023

The post-pandemic era has propelled ‘Supply Chain Resilience’ to the top of boardroom agendas across the world. With supply chain risks on the rise, building resilience has become essential for business survival. Macro trends such as globalization and global connectivity are making supply chains more complex and amplifying the impact of disruptions that may have remained locally isolated in the past. Today, managing supply chain risk is crucial for any business. Risk and resilience are two sides of the same coin – while risk is a threat, resilience is an opportunity. When a business invests in resilience, it proactively addresses the critical vulnerabilities in its supply chain that expose thebusiness to various risks.

Everchanging Global Value Chains

Global volatility has made it difficult for businesses, particularly in manufacturing, to source inputs and engage seamless, multistep logistics and delivery management systems across borders. At a country level, this has resulted in shortages in key products and raw materials, leading to an increase in prices that is threatening national security and socio-economic stability. Such disruptions have exposed the fragility and vulnerability of global supply chains and has forced business leaders to think beyond cost and efficiency. While the current supply chain ecosystem places apremium on achieving these two aspects, businesses are increasingly recognizing the merits of investing in resilience to reduce the risks stemming from global disruptions.

The retooling of global networks to make them more resilient will be incomplete without investing in technology and digitization. Going forward, digital supply chain management will be critical for making companies more agile, more flexible, and more resilient. By capitalizing on modern technologies, companies can proactively identify areas of potential risk, or identify and respond more promptly to disruption. The digital supply chain isn’t just about risk mitigation. It can also be a source of competitive advantage, as every node in the supply chain is leveraged for business intelligence and greater collective benefit.

Digitizing Supply Chains

According to a CII Survey on Digitizing Supply Chains, close to 92% of Indian manufacturing companies have already formulated a digital roadmap or are in the process of formulating one. This indicates that business leaders haveunderstood the importance of digitization for transforming supply chains. Having a roadmap in place will make it easier to define digital goals and strategies for implementation to accelerate digital adoption. Digital roadmaps will helpcompanies plan for skill building and infrastructure, improving collaboration, visibility and connectivity, and data management and security, among other things.

While companies recognize the need to go digital, business leaders have been slow to act and seize the opportunities that emerge from digitizing supply chains, especially in the context of building resilience. A new environment requires a fundamental shift in mindset – for example, investing in resilience will be an absolute gamechanger and companies that can leverage this opportunity will hold a tremendous advantage over competitors in the future. However, the pace of change has been slow, at best, with a glaring mismatch between supply chain priorities and risks. In the survey, most respondents have identified poor digital adoption and changing geopolitical dynamics as critical threats to the supply chain.

However, the identified challenges have not been prioritized in the business agenda of companies. Instead, fundamentals such as ‘increasing efficiency’ and ‘managing or reducing costs’ continue to be key priority areas, indicating that goals that can strengthen resilience are still not getting adequate attention. There is a clear indication that many companies are still on the fence with respect to investments in revolutionary measures that have the potential to transform their businesses and are instead choosing to focus on the bottom line in the short term.

What is holding companies back in their efforts to accelerate digitization and eventually, strengthen their overall supply chain ecosystem?

CII survey reveals that integration with existing systems remains the biggest concern, with half the respondents ranking it among their top three challenges. While new technologies are changing the face of supply chain management, factors such as poor information availability and complex interfaces have made integration with existing legacy systems difficult. Many companies, thus, need to invest in a complete overhaul of existing systems which is a costly deterrent. Beyond that, an acute shortage of talent, lack of digital infrastructure, and cybersecurity are other areas that need urgent attention.

If the workforce is not equipped to handle new digital transformation, buying new technology will not yield the desired results. Thus, companies should start investing in the digital upskilling or reskilling of employees. The right kind of digital infrastructure is a prerequisite for building supply chain resilience and improving digital planning and operations. Moreover, employing digital solutions comes with its own set of challenges around privacy and cybersecurity. Hence,securing the supply chain must be a top priority while planning and should typically find its place in the company’s digital roadmap.

Today, business leaders are facing a new wave of unprecedented technological opportunities. Emerging technologies such as cloud, the Internet of Things (IoT), blockchain, artificial intelligence and machine learning are driving anexplosion of innovation in the supply chain space. This constantly evolving technology paradigm makes it difficult for companies to choose where to focus their supply-chain technology investments for creating maximum business impact. Based on survey results, we have identified three broad areas that deserve particular attention and are expected to receive the highest investments in the next 12-18 months – automation, advanced analytics, and theinternet of things.

It is evident that the need for modern supply chain technology will only continue to grow as supply chains becomes more complex. By digitizing their supply chain, business leaders can predict and plan for contingencies and use real-time data to mitigate risks. Companies need to recognize that delaying actions can expose supply chains to serious financial risks and prevent them from seizing the benefits of resilience. While investments in digitization may be costly, but done right, these can turn out to be the most profitable investment a business can commit to in the age of disruption, where the unexpected is the new normal.

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