COVID-19 has exposed many supply chain vulnerabilities and risks. In a rapidly evolving environment, businesses have had to reassess their operations, redefine supplier relationships, and pivot activity to minimise disruption.
Yet while New Zealand now enjoys a favourable position, with key supply chain indicators such as our Purchasing Managers Index (PMI) holding steady relative to the world, local operations haven’t been immune. Throughput has been squeezed, seen in bottlenecks at ports, access to materials and labour restrictions. Continued pressure will in turn impact New Zealand’s productivity and further expose risk.
Supply chains as an organisational priority
The Deloitte 2020 Chair’s Report, ‘Past experiences, future impact’, presented insights from New Zealand’s leading board chairs. It found that many are evaluating their ability to serve demand in a post-COVID world, with a belief that fit-for-purpose supply chains are key to ensuring a flexible and resilient response. The shop floor echoes this sentiment— one global survey found that 73% of Supply Chain leaders are planning major shifts in their approach.
Meanwhile, modern supply chains are becoming increasingly complex. Digital enables sophisticated and dynamic activity, but unwinding the legacy operation isn’t straightforward. Heightened expectations among consumers, suppliers and society alike are also placing pressure on traditional supply chain management models. The trends underpinning these existed before the pandemic and will continue to endure long after.
However, opportunities to build resiliency into post-COVID supply chains can arise through three broad areas, addressing questions around responsiveness, collaboration, and visibility:
In a series of posts, we’ll explore some key factors at play in relation to these opportunities, starting with the customer-driven supply chain.
A customer-driven approach
Deloitte’s Tech Trends 2021 report asks an interesting question: ‘How can the supply chain become a tool for engaging customers, turning it from a traditional cost centre into a value creator?’
Modern consumers expect a dynamic response to their demands, wanting the goods they need whenever and wherever it suits them. Companies must determine how they respond to shifting signals but we often find that the traditional, linear flow of ‘Plan–Source–Make–Deliver’ holds the supply chain back. This is confounded by issues such as insufficient visibility across channels and suppliers, organisational silos, and legacy systems with limited capabilities.
However, linear supply chains are trending toward integrated, digitally-enabled models that prioritise information flows. These aim to break down barriers, increase collaboration and enable greater responsiveness across the supply chain and through to Marketing, Sales, Finance and other functions. In short, they allow operations to sense and meet fluctuating demand through a coordinated enterprise approach.
To meet customer expectations, insights from buying behaviour must seamlessly feed back into the supply chain, and vice versa. Capturing customer information in real-time to feed supply chain decisions is critical — this goes beyond isolated supply chain analytics that optimise inventory volume, procurement or replenishment. Now, future-focused organisations are extracting more value from the data they collect, analyse, and share. Many are accelerating their digital efforts to not only streamline operations but respond to dramatic demand shifts. Customers can be then segmented into groups based on a rich understanding of location, preferences, and service expectations, along with the cost to serve each.
Where to start?
In a world of uncertainty, supply chains are evolving into customer-driven value creators. But determining the capabilities for success and then understanding how to configure them is no short order. The questions below can act as a rough guide to test the readiness levels of the business:
If not able to make a wholesale transformation, consider ways to make the transition a manageable one that acknowledges constraints but moves the organisation toward a customer-driven supply chain. Such initiatives could include:
Taking steps in this direction will start you on a journey towards being a customer-driven business. Key will be to ensure ongoing alignment between supply chain efforts, the wider operating model, strategic objectives and customer need.
Want to learn more? Explore our insights on disruptive supply chain changes, and how your organisation can respond.
I take immense satisfaction from working alongside clients to help them achieve more and be better tomorrow than they are today. From improving service delivery and enhancing the customer experience, through to reducing operating costs. I work with clients to design and implement changes to the way they operate in order to increase enterprise value and to deliver better results. I specialise in strategic cost transformation, sourcing and procurement, and service outsourcing, across both the public and private sectors.
Scott White is a Senior Consultant in the Operations Transformation team at Deloitte New Zealand.