Disconnecting investments does not solve supply chain disruptions

Kathy Gibson reports – Supply chain disruption is nothing new, although we have learned to manage it better in the age of globalization. But 2020 has brought a new dynamic, bringing 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 businesses came through the pandemic in reasonably good shape. “They reinvented themselves quite quickly and recognized that technology was needed to meet new challenges.”

A new study, “Realigning the Links of a Disconnected Supply Chain,” examines how well the commitment to go digital has worked.

He found that there is still a big disconnect between internal efficiency and external collaboration; digital skills were not aligned with execution; supply chains are not globally competitive; and there is still a lack of customer orientation.

“The customer tends to be at the end of the supply chain,” says Wilson. “But we suggest that the customer should be at the center of operations, with the supply chain being a consequence of customer requirements.”

The disconnect of investments in internal efficiencies versus external collaboration versus supply chain and ecosystems manifests with around 70% of manufacturers and distributors facing disruptions along the supply chain – and about 60% of them unable to collaborate in real time with customers and suppliers.

Nhlakanipho Zondi, product marketing manager at Syspro, says issues include a shortage of materials, rising costs, volatile supply and capacity constraints in manufacturers’ and distributors’ own operations.

“The study finds manufacturers relying on old ways or not being prepared for supply chain disruptions,” she says. “Some have sought to use technology to mitigate disruption and 45% of them have invested in technology. But that means the majority of manufacturers and distributors have not invested in technology to deal with disruption in the supply chain, focusing more internally.

While most companies (69%) had a digitalization strategy in place, 48% needed to keep the lights on and only 29% were aiming for digital transformation.

The study shows that 58% of companies have sought to optimize operational processes, including staff development; 48% were looking to improve customer services; 46% sought to improve resource efficiency; and 23% were looking to improve external collaboration.

“This indicates that most companies still have an internal orientation,” Zondi points out. “There is a shift, with some trying to focus on the customer and collaborate externally, but the fact that it’s only 23% is a bit alarming. ”

The survey found that digital strategies don’t always align with digital execution.

Zondi explains that obstacles to effective executions included the use of short-lived service advisors; lack of senior 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 enterprise systems.

50% of manufacturers and distributors are not running any solution, 34% investing in operations management and quality and warranty management. Thirty-three percent spend on procurement, sourcing and inventory management; 26% on product design and order configuration; and 18% on service management.

“It demonstrates that investments are internally driven, which means that manufacturers and distributors will not be able to solve collaboration problems,” says Zondi.

There is a need for supply chains to be globally competitive, but there is still a large technological imbalance that means this is not happening yet.

Manufacturers and distributors who invest in technology mainly spend on the Internet of Things (IoT) and industrial IoT sensors (47%), or cloud computing (45%).

Only 27% spend on collaboration platforms; 21% on alternative digital sales and marketing channels; 20% on big data and analytics; 20% on connectors and APIs. Less than 10% of respondents are turning to virtual reality/augmented reality; artificial intelligence and machine learning; or robotics and cognitive computing.

“The technological imbalance needs to be corrected urgently,” says Zondi. “Manufacturers and distributors need to be able to use all the information available, but we don’t see them making the changes they really need.”

The survey concludes with the observation that customers are still not at the center of the economic models of manufacturers and distributors. “They’re always at the end of the supply chain,” says Zondi.

Companies that have successfully implemented digital transformation strategies have realized a number of benefits: profitability (49%); improved employee engagement (35%); improved product quality (32%); improved customer satisfaction (26%); and revenue growth (22%).

“So very little was done to make sure the customer was happy and coming back,” says Zondi. “We know that customers can make or break a business – if manufacturers and distributors don’t focus on customers throughout the supply chain, they will face disastrous consequences.

“Balance in the supply chain can only be achieved if the customer is at the center and the customer experience is not an afterthought.”

The study asked manufacturers and distributors implementing the technology what their near-term plans are.

A majority (66%) aims to optimize operational processes; 54% want to improve resource efficiency and reduce costs; 53% aim to improve customer service; 53% intend to improve the employee experience; 44% increase internal collaboration; 44% are moving their sales and marketing to digital channels; 37% increase external collaboration; 26% increase workforce flexibility; and 25% invest in compliance.

“So external collaboration is still not a priority area,” says Zondi. “They need to start thinking about 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 problem is how to sustain the business?

“There is enough technology in the market to differentiate you, but clearly you need to go digital.”

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