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Supply Chain Focuses on Matters Within its Control

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The phrase you hear a lot from supply chain executives this year is they can’t control the decisions of their suppliers and customers, nor can they constrain a global pandemic. But manufacturing and procurement organizations can mitigate the impact of such events and are focusing on things they can manage. Gartner outlines three trends that are driving investment in the supply chain’s future.

First is the rise of digital business. Let’s face it —  the digital supply chain is considered a “nice to have” versus a strategic imperative. Evidence is growing that long-overdue investment in digital transformation is finally taking place. Paperwork — POs, bills of material, shipping/trade documents, payments and regulatory approvals– is still rife throughout the supply chain and quarantine has made factories and offices less accessible. Automating such tasks reduces paperwork, expedites commerce, improves transparency and provides data that can be used for forecasting. Additionally, logistics providers say, customers expect e-commerce to play a bigger role in b2b and b2c transactions.

Gartner research shows that many chief supply chain officers (CSCOs) struggle to create a holistic digital supply chain roadmap. At the same time, they are under pressure from CEOs who want to make their business more digital.

“Given the critical role of supply chain in ensuring customer satisfaction and experience, much of the digitalization efforts will be on the shoulders of the CSCO,” said Mike Burkett, distinguished vice president analyst with the Gartner Supply Chain practice. “This is the greatest transformation of supply chain structures in a long time, and it will not be easy.”

The top barrier to a digital supply chain today is culture, said Gartner, followed by legacy tech, usable data and legacy processes. CSCOs must work with partners across the business to overcome those barriers and enable their CEO’s digital business ambitions.

“CSCOs are tasked to design a supply chain organization that fits into this new era,” said Burkett. “While in the past, a good supply chain was efficient and powerful, it must now be agile and fast.”

Trade uncertainty has dominated the high-tech supply chain since the U.S. slapped tariffs on many Chinese goods in 2018. More recently, the Covid-19 pandemic has raised concern about future pandemics, after shutting down global supply chains and trade routes.

For example, global electronics manufacturing services provider Flex found it relied on 10,000 component and materials suppliers located in China as the nation entered its virus-related shutdown. Separately, export restrictions on U.S. semiconductors to Chinese telecom giant Huawei initially hit chipmakers’ revenue.

There is also uncertainty on where the next competitor will come from and what their impact will be, said Gartner. Almost half of CSCOs believe that their business is at risk of being disrupted in the coming years, with the greatest risk coming from nontraditional businesses such as startups.

“The ongoing uncertainty calls for a new approach to supply chain management,” Burkett added. “CSCOs must build more flexible and resilient networks that can respond effectively to global shocks and disruptions – be it caused by nature or a competitor.”

Sustainability, particularly in the area of electronics, has become integral to many supply chain strategies. The circular economy – a model that separates the ability to achieve economic growth from the consumption of natural resources — has only elevated the supply chain’s importance. Supply networks play a critical role in every part of the cycle: make, use, return, recycle, reuse.

The 2019 Gartner Future of Supply Chain Survey found that 28 percent of organizations had already implemented circular design approaches in their innovation strategy – and 39 percent planned to do so within the next two years.

“A supply chain that enables the circular economy has to have strong reverse logistics capabilities. The heavy equipment and machinery industries are already on a good path. However, this is a trend that no industry can miss out on – including consumer products,” said Burkett.

A recent panel of procurement experts recommended companies digitizing their supply chain use the opportunity to integrate sustainability into their operations. Data such as materials used in manufacturing, recycling practices and global environmental compliance can be used to evaluate suppliers and to change vendors if necessary.

Supply chains are in the middle of an evolution that will change completely how chief supply chain officers organize and operate their organizations, Gartner concluded. The terms “unprecedented, risk, disruption and uncertainty” have also become common in 2020.

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