How supply chain planning can help you through the coming recession

(© Gerd Altmann - Pixabay)

The ongoing impacts of COVID-19 have left many companies not fully recovered, and with a global recession now looming two and half years later, the prospect of a worldwide economic downturn is especially concerning. Our supply chains, in particular, remain vulnerable, disrupted to the point of disorientation. While supply chains are built to handle disruption, the current scale is so unprecedented that many experts believe there will be no return to 'normal' (ie, a return to pre-pandemic times) — change is necessary to adapt.

There are simply too many factors and dynamics at play, all of which exist on top of an interconnected web of suppliers, manufacturers, and distribution networks. Given the outlook and current state of affairs, supply chain leaders must explore new ways to increase their agility as a way of improving resilience against constant disruption. The solution? Supply chain planning capabilities that empower all stakeholders across the supply chain ecosystem.

Accurate forecasting is not enough

Accurate forecasting is a critical capability in modern supply chain management however, it is not a silver bullet. Forecasting becomes more challenging during periods of uncertainty and instability and needs to be supplemented with other supply chain capabilities.

Along with investing in forecasting capabilities, leaders should be thinking about how to make their supply chain operations more efficient, adaptable, and agile. Being able to quickly pivot when circumstances change is a different muscle from forecasting. When demand moves in unexpected directions, how well does the enterprise react? Can the organization scale up capacity to meet customer needs? Can it scale down capacity and reallocate inventory during demand downturns? These are the questions that need to be answered as we navigate the latest stretch of instability. They are also the same questions that many have been asking since the start of the pandemic.

Fortunately, the solution does not require reshoring or reconfiguring supplier networks, although those approaches may be helpful. What we need is more real-time transparency across the supply chain ecosystem. Supply chain planners and operators should know what’s happening across their supply chain network at all times, including at external partners (contract manufacturers, suppliers, testing labs). Furthermore, they should be able to use this information to improve the speed and quality of decision-making and collaboration across the board.

How to increase supply chain transparency

As previously alluded to, supply chain transparency is immensely improved by more sophisticated supply chain planning technology. We need these tools to accelerate and automate how data travels throughout the supply chain.

Far too many organizations still rely on asynchronous methods for communication – emails, physical documents, spreadsheets, siloed systems, etc. In these businesses, people must proactively reach out to colleagues to update information. By the time they receive the data, it is likely already outdated, leaving these teams operating in silos with inefficient interactions. This is especially the case when it comes to engaging with external partners.

While sensitive data must be protected, it is no longer viable for teams to work in complete isolation. It also doesn’t make sense for operational data to be inaccessible to those who need it. The modern approach to supply chain planning replaces asynchronous record keeping and data-sharing with a connected software platform that extends throughout and beyond the internal supply chain. Companies can start building those connections to data available in ERP systems and other platforms, steps that don’t require massive digital transformation or heavy capital investments. Teams can implement the software, configure user permissions, and distribute access as needed, even to contract manufacturers.

When all supply chain stakeholders have access to the same set of information on a single connected platform, collaboration flourishes. For example, inventory managers can work closely with contract manufacturers to adjust delivery schedules or logistics that may have changed as a result of a recent disruption. Operators can monitor capacity across many facilities and work with demand planning analysts to update and execute short and medium-term plans. Beyond these examples, the list of potential benefits is extensive when supply chain stakeholders can all work and collaborate from a single source of truth.

The business benefits are far-reaching

What’s the bottom-line impact of having more agile and resilient supply chains? Companies who can reallocate capacity and inventory faster than their peers capture more sales opportunities and do a better job of controlling inventory and cost. They can also decrease time to market and boost top-line revenue for new launches, which is becoming increasingly important as product lifecycles are getting shorter.

Moreover, teams can plan transparently and concurrently across all nodes of the supply chain and with external partners. This results in efficient collaboration, faster and higher quality decision making, and improved job satisfaction. Companies can start with their current digital footprint and grow as this footprint expands.

Perhaps most important, given the threat of a global recession, adopting a supply chain planning solution is not as capital-intensive and distracting as it once was. The right solutions leverage existing ecosystems and share externally with other service providers. They simplify the onboarding process and streamline key workflows along the way.

Digital supply chain planning tools will allow companies to navigate the uncertainty ahead. And should we avoid a global recession, supply chain planning technology will still be critical as we adapt to a post-COVID world.