The new supply chain problem cannot be dealt with the old way

January 27, 2022

Source: Jan Burian, Senior Director, Head of IDC Manufacturing Insights EMEA | EMEA | Build tomorrow

Supply shortages, cybersecurity threats, and workers’ lack of digital skills are the top three challenges facing manufacturers, according to an IDC survey in November 2021.

These challenges overlap to some extent. However, and most importantly, they are all linked to a huge problem that manufacturers are now facing: disrupted supply chains and factory operations.

Let’s paint the big picture. A recent McKinsey survey found that over the past 12 months, companies have responded to supply chain disruptions by increasing inventories of critical products, implementing dual sourcing of raw materials and increasing inventory throughout the supply chain.

Let there be no doubt: as both surveys show, shortages are crippling supply chains.

To solve this situation, or at least improve it significantly, we must go well beyond traditional approaches such as inventory dynamism or multi-sourcing. These old approaches could even be seen as prolonging the problem. Organizations should not assume that because they have taken these steps, they have their supply chain risks under control.

In today’s global economy, supply chains face similar issues to OEMs. In the long term, inventory increases are not sustainable in a world of minimum security stocks in the distributed supply chain network. Organizations also continue to prioritize minimizing financial resources related to physical inventories.

Devil in the details

The use of digital technology as an enabler of supply chain resilience is inevitable. Networks of digital supply chain platforms have been available for some time. But what makes these systems work effectively is the presence and availability of reliable data.

The more organizations share data and actively participate in the network, the greater the transparency, flexibility and sustainability of the results.

IDC predicts that by 2024, to improve long-term supply chain profitability, 70% of manufacturers in global supply chains will invest in software tools to support sustainability and circular economy business models.

This of course raises challenge #2: cybersecurity. As we move from direct customer-vendor connections to platform-enabled on-demand sourcing/manufacturing models, the IT environment becomes even more vulnerable.

Securing end-to-end visibility across the entire value chain requires the meshing of IT systems and physical devices. There are heterogeneous and inherited systems. Networks include various assets, often comprising multiple connected architectures. Yet the convergence of IT and operational (OT) technologies further complicates an already complex IT infrastructure.

Supply chain network stakeholders need to take a holistic approach to hybrid, multi-cloud permission management, and they need to leverage advanced analytics to track identities across the network.

But here lies challenge #3: the lack of digital skills among the workforce. It’s no news that working in a digital environment requires skills and experience. The question is how successful organizations are in meeting this challenge. Upskilling/retraining are frequently mentioned approaches.

However, rapid large-scale upgrading/requalification is unrealistic for most large manufacturing companies.

the the commitment of time/resources is just too great. This is where IT vendors, device OEMs and app makers play a key role. They are increasingly providing employees with tools that can be used intuitively or are AI-based. In many cases, employees need very little digital experience to use these tools effectively.

The use of personalized and ergonomic digital tools begins with their creation, either internally or via a third-party developer. The use of low-code platforms will become essential to rapidly deploy such tools.

IDC predicts that by 2025, more than 60% of organizations will rely on low-code platforms and tools to build intelligent custom applications capable of meeting connected manufacturing needs. Using low-code tools should reduce application deployment cost/time by up to a third.

Consequences

The scale of the supply shortages companies are currently facing is beyond the professional experience of most supply chain managers. Managing the consequences of disruptions through proven methods and approaches makes sense. Unfortunately, this is insufficient.

Short-term actions must remain short-term. In the long term – in the “new normal world” of the pandemic in which we find ourselves – bring transparency to the complexity of the supply chain through market intelligence tools, chain control towers procurement and extensive collaboration with supply chain stakeholders and technology vendors will be winning combinations.

Supply chain transparency is achieved through extensive connections between logistics providers, warehouse operators and other service providers (e.g. last mile delivery). Of course, each new link in the chain increases vulnerability to cyberattacks. Careful attention to IT and OT cybersecurity is crucial for manufacturing organizations that orchestrate these ecosystems.

The human factor keeps it all together. There is a need to upgrade/re-skill the workforce, blue-collar and white-collar, for these systems to work optimally. Organizations should ensure that this improvement maximizes the use of digital tools and solutions that enable intuitive and user-friendly control by the human operator.

In summary: work with technology providers to facilitate the transition to the converged human-digital interaction environment!


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