We are living through global times of unprecedented upheaval, caused by both the culmination of technology trends and the necessities of transformation, with the latter brought about by businesses’ attempts to battle back from COVID.
If we pause to think about what today’s supply-chain conditions would look like if COVID had never happened, we can be certain of one thing: industry experts would still have predicted huge changes on the horizon, and they would’ve been right. COVID, it seems, introduced even more noise and necessity into the pace and character of inevitable change that was already in progress.
For many organizations, Porter’s five-forces model of competition has long held sway over the boardroom. This model has helped them identify and understand the forces that act on their business – hopefully to enhance it – then provide tactics to build strategies to either overcome or exploit these forces.
In today’s shipping environment, thinking of the industry in this way provide us with a snapshot of where we are in regard to a variety of issues, especially:
- Buyers’ lack of bargaining power
- Low threats of substitutes coupled with new entrants
- Limited competition within the industry
All of these realities are leading to higher profits in defensible spaces – but only for this snapshot in time. What happens when the nature of influence and competition is far more dynamic than this? What happens when the threat of substitution is not so easily determined?
The big-picture answer is that the only companies to succeed will be those who address these unknowns with agility and attention. With disruption as the key concept in mind, these organizations will draw heavily on flexibility and the gathering of insights from every facet of the business.
Static models are no longer useful – we are in the era of engineering business models that perceive and adapt more quickly than the competition. Within these models, supply-chain management is a key topic of vital strategic importance, because it acts as the connective tissue among customers, suppliers, and internal operations, which ultimately must convene in order to create value.
So by what means can companies create this necessary type of competitive advantage?
The gist of the messages I’m trying to drive home here is expressed very well by Usama Fayyad, Institute for Experiential AI at The Roux, Northeastern University, in a recent Forbes article. Says Fayyad:
“The issue is not supply chain disruptions in themselves; the issue is that we have optimized supply chains to the point where even small disruptions can have disproportionately big impacts. We need to establish resilience in the face of increasing disruptions. Thus, the use of models that anticipate disruptions and the use of technology to understand impacts and plan recovery need to become routine.”
As I’ve previously noted, constant transparency – even about the headaches – is important to utilize as the foundation of evolving supply-chain needs, coupled with investments in Machine Learning (ML), Artificial Intelligence (AI) arenas which help you to scenario plan, gamify the supply-chain and act based on next best action principles. What is more important however is to invest in the capability to adapt, in the very business models, people and processes that underpin your organisation or where possible partner for growth, leveraging the skills of multiple organisations.
Of course critical to transformation is the sharing of data, breaking down silos of data such as below underpins a shared philosophy of constant transparency:
“During the pandemic, I’ve seen that our retail customers who share data with their suppliers outperform their rivals. By sharing their SKU-level, location-based inventory data, retailers effectively empower their suppliers to ship the right products to the right stores at the right time. The result is a win-win: Retailers have stocked shelves and suppliers maximize their sales.”
All of it boils down to a lesson in tenacity: when confronted with disruption from outside forces, more often than not, the best way to face it is with your own (albeit more planned) transformation (disruption).
Neil Wheeldon is Chief Strategy & Innovation Officer, BDP International. He is an experienced supply chain management practitioner having worked across numerous industries supporting customers in supply chain and digital transformation initiatives to drive growth. He can be reached at [email protected].