Amidst all the COVID-19 supply chain disruption, TMT businesses are also planning the future for their supply chains. In the first part of this year, TMT businesses needed to navigate disruption to their supply chains like never before. Problems included shortages of parts from third party suppliers, unavailability of usual transportation routes and movement restrictions. These often resulted in delays to production, inability to deliver goods as contracted and changes to demand. Adding to the disruption for TMT businesses were changes to the way we work. People began working from home on a large-scale basis. Many businesses also needed to find ways to get things done without travel, such as inspection of goods. One result of these new ways of working is that, looking forward, businesses have been reviewing what roles will continue to be carried out on-site (e.g., physical inspections) as opposed to using IoT connected devices or other technology (e.g., use of blockchain to support creating trust in the origin of goods to verify them).
How do the challenges of this year feed into the supply chain of the future?
Many TMT business are embarking on their own digital transformation supply chain projects. Digital transformation refers to using data and digital technology to transform how a business operates. For example, some businesses are looking to implement robotics to replace manufacturing, warehousing and transport activities. Many businesses are also looking to better utilise data in their supply chains such as in IoT devices to monitor production or to receive quick notification of a supply chain hold-up.
Practical tips for success in digitalizing your supply chain
While the pressure is on to digitally transform, there are also costly traps for going down the wrong path. Issues for TMT businesses to work through as they digitally transform their supply chains include the following:
- Moving successfully from the pilot stage. Many businesses have been undertaking innovation pilots to test how they can utilise digital products (e.g., using manufacturing process data to improve efficiency in making the finished product). Often pilots are conducted with a partner and contract terms appropriately reflect a pilot or proof of concept project. For a full deployment, there will likely be additional issues to map out in implementing appropriate contract arrangements that address commercial, trade secrets, intellectual property, liability and other risk issues.
- Beware of limitations in relying on data. There certainly seems to be a rise in the availability of supply chain related apps and other tools. These products can assist with a range of activities including compliance (e.g., to identify modern slavery risk factors with suppliers) and identifying potential supply chain disruption and alternate delivery routes. If looking to utilise these data-based products, it is important that businesses understand how they work. The data sources used and accuracy of app outputs (i.e., predictions) are important considerations. The effort and data needed to train up the tool are also important issues. Accordingly, if using new data products in the supply chain, businesses should consider what human checks and other data sources will additionally be utilised to verify the accuracy of the product and inform important decisions.
- Take particular care if data sharing. Many apps and tools available to assist with the supply chain draw from several data sources (e.g., from government and corporate sources to predict potential disruption). Data sources may also include customer data. Additionally, supply chain systems are becoming increasing integrated with the systems of business partners. A business considering making data available for a supply chain app needs to assess the risks in data sharing including, whether the data is theirs to share in the first place.
- Make sure all relevant parts of the business are ready for the new solution. How often do we hear about a new technology tool being deployed, but the business elects not to really use it? It may seem an obvious point, but personnel using the new technology need to be properly trained how to use it and see the benefits on using the new rather than the old system. If the business wants its partners in the supply chain to also use the new technology, they also need proper training so full benefits can be realised and the tool can be used properly.
- Ensure transfer of data complies with any strategic controls requirements. A digital transformation supply chain project may involve starting to work across borders in a different way. For example, technical data about manufacturing may start being transferred between the third party manufacturer’s factory and the product owner, with each located in different jurisdictions. The due diligence for this type of project should include whether any data to be transferred might be subject to strategic “export” controls needing a licence or permit.
- Review and update supply agreements. Unfortunately, one issue we are sometimes seeing with supply chain transformation projects is businesses overlooking updating supply contracts. For example, for the project, regional distribution arrangements might be moved to a new location and a new group entity structure implemented. However, it may be that terms between group entities and third party providers and customers are not updated for the intended new supply structure. To fully utilise the benefits of the new structure, it is important that all relevant agreements in the supply chain be brought up to date.
Conclusion
Alongside COVID-19 challenges will be the opportunity to move ahead with some amazing supply chain transformation projects and technologies. These projects and technologies will have the best chance of success where businesses devote sufficient planning and implementation resources, and in particular, integrate the new solution with all relevant parts of the business.
