Kathy Gibson reports – Supply chain disruption is nothing new, although we have learnt to deal with it better in the age of globalisation. But 2020 brought a new set of dynamics, resulting in extreme stress and disruption.
These issues are not yet resolved – and may never be – says Mark Wilson, CEO of Syspro EMEA.
In 2020, a Syspro survey found that 70% of South African business got through the pandemic in pretty good shape. “They reinvented themselves quite quickly, and recognised that technology was required to meet the new challenges.”
A new study, “Realigning the links of a disconnected supply chain”, looks at how well the pledge to going digital worked out.
It found that there is still a big disconnect between internal efficiencies and external collaboration; digital skills were not aligned to execution; supply chains don’t compete at a global level; and there is still a lack of customer focus.
“The customer tends to be at the end of the supply chain,” Wilson says. “But we are suggesting that the customer needs to be at the centre of operations, with the supply chain a consequence of the customer requirements.”
The disconnect in investments in internal efficiencies versus external collaboration versus the supply chain and ecosystems shows up with about 70% of manufacturers and distributors facing disruptions along the supply chain – and about 60% of them unable to collaborate in realtime with customers and suppliers.
Nhlakanipho Zondi, head of product marketing at Syspro, explains that issues include a shortage of materials, rising costs, volatile supply, and capacity constraints in manufacturers’ and distributors’ own operations.
“The study reveals that manufactures are relying on old methods or are not ready to deal with supply chain disruptions,” she says. “Some have looked at how to use technology to mitigate disruptions and 45% of them invested in technology. But this means the majority of manufacturers and distributors didn’t invest in tech to address supply chain disruptions, focusing instead internally.”
While most companies (69%) built a digitalisation strategy, 48% of these were to keep the lights on and just 29% aimed for digital transformation.
The study shows that 58% of business looked to optimise operation processes, including upskilling staff; 48% looked to improve customer services; 46% looked to improve resource efficiency; and 23% looked to improve external collaboration.
“This indicates that most businesses still have an internal focus,” Zondi points out. “There is a shift with some trying to focus on the customer and to collaborate externally, but the fact that it’s only 23% is a bit alarming. ”
The survey found that digital strategies don’t always align to digital execution.
Zondi explains that the barriers to effective executions included reliance on fleeting service advisors; lack of top management support – with only 44% of C-suite executives supporting digital strategies; and a skills gap, with only 38% of respondents upskilling their staff to use business systems.
A massive 50% of manufacturers and distributors are not executing solutions at all, with 34% investing in operations management and quality and warranty management. Thirty-three percent are spending on sourcing and procurement and inventory management; 26% on product design and order configuration; and 18% on service management.
“This demonstrates that investments are internally focused, so it means manufacturers and distributors won’t be able to address the collaboration issues,” Zondi says.
There is a need for supply chains to compete on a global level, but there is still a big technology imbalance that means this isn’t happening yet.
Manufacturers and distributors that are investing in technology are mostly spending on Internet of Things (IoT) and Industrial IoT sensors (47%), or cloud computing (45%).
Just 27% are spending on collaboration platforms; 21% on alternative sales and marketing digital channels; 20% on big data and analytics; 20% on connectors and APIs. Fewer than 10% of respondents are looking to virtual reality/augmented reality; artificial intelligence and machine learning; or robotics and cognitive computing.
“The technology imbalance needs to be urgently addressed,” says Zondi. “Manufacturers and distributors need to be able to utilise all the information available, but we are not seeing them making the changes they really need to.”
The survey concludes with the finding that customers are still not at the centre of manufacturers’ and distributors’ business models. “They are still at the end of the supply chain,” says Zondi.
Businesses that have successfully implemented digital transformation strategies have realised a number of benefits: cost efficiency (49%); improved employee engagement (35%); improved product quality (32%); improved customer satisfaction (26%); and revenue growth (22%).
“So very little was achieved in ensuring the customer was satisfied and a returning customer,” says Zondi. “We know customers can make or break a business – if manufacturers and distributors don’t focus on customers across the supply chain, they will face dire consequences.
“Balance in the supply chain can be achieved only if the customer is at the centre and customer experience is not an afterthought.”
The study asked manufacturers and distributors that are implementing technology what their short-term plans are.
A majority (66%) aim to optimise operational processes; 54% want to improving resource efficiencies and cost reduction; 53% aim to improve customer service; 53% intend to improve employee experience; 44% are increasing internal collaboration; 44% are moving their sales and marketing to digital channels; 37% are increasing external collaboration; 26% are increasing workforce flexibility; and 25% are investing in compliance.
“So, external collaboration is still not a key focus area,” Zondi says. “They need to start thinking of their supply chains in a broader sense or they won’t be able to mitigate supply chain disruptions in the future.”
Wilson concludes that supply chain disruption is inevitable, and will continue to be a challenge. “The real issue is about how do you future-proof the business?
“There is enough technology in the market to allow you to differentiate yourself, but it is clear that you have to digitalise.”