The following guest perspective was authored by Michael O’Donnell, Chief Revenue Officer, Digital Supply Chain, SAP North America.
Supply chains have changed.
For decades, business leaders viewed them strictly from a cost control perspective—as something to be restricted and restrained as much as possible, so that businesses could maximize margins. This meant low-cost suppliers to drive savings, fewer suppliers to drive volume discounts higher, and longer lead times to drive lower costs.
This strategy worked adequately for a long time, but its flaws were exposed in 2020. With no margin for error, there was no way to keep up, during or after the pandemic, as our entire understanding of the supply chain was turned on its head and disruption became the norm. For years now, businesses have been trying to rebuild supply chains in response.
However, even today, only 12 percent of companies are sufficiently prepared for future global value chain disruptions. Just as concerningly, more than half of supply chain executives are not involved in crafting company strategy.
So, how can you ensure your business decisions are fully integrated in 2024—and that they fully incorporate the supply chain from end to end? Start with these three strategies to ensure you are prepared to embrace the latest technological shifts and innovations. Together, they’ll help you connect your entire process, from design to planning to manufacturing, delivery, and continuous operation.
1. Use Change Management to Build Resilience
Today’s enterprises must place one trait above all others when it comes to supply chains: resiliency. Without this, you have nothing.
The most important element of building a resilient supply chain is a comprehensive change management approach. Simply put, enacting a resilient supply chain is about far more than just implementing the right software or solution. It’s about creating fully integrated practices and processes that transform complex businesses from the bottom up. This means diversifying suppliers, creating contingency plans, and investing in risk management strategies to address unforeseen disruptions.
More broadly, this means breaking down the siloes complicating your operations; the supply chain must be one piece of your end-to-end business process. From a bird’s-eye view, consider how supply chain and related technology fits into the enterprise’s overall IT roadmap. What about one, five, 10, even 20 years from now? How are you—and how can you—execute around that larger strategy?
The companies that most deeply understand the technological levers they’re pulling, along with the impact those levers will have, should see the greatest success when it comes to the supply chain. Your technology landscape, the data that feeds into it, and how that all works together is essential to your future.
2. Focus on Supply Chain Sustainability
Where the supply chain is concerned, doing the right thing is also profitable. A more resilient, efficient, fully integrated supply chain can help with ethical sourcing, carbon footprint, and environmentally friendly business practices that meet consumer and regulatory expectations. This won’t just drive a more streamlined operation for your enterprise and improve your bottom line; customers are, in fact, more likely to choose the sustainable company when given a choice.
How can you make this happen? It starts with embracing advanced analytical tools that help you gather, analyze, and act on data in a powerful, decisive, enterprise-wide fashion. Too often, today’s actions are reactive and based on anecdotal, infrequent, or outdated data. Creating a sustainability portfolio with factual, objective, up-to-date data will help you drive green results—both environmentally and monetarily. A once-a-year sustainability report just isn’t going to cut it anymore; if you want to reach carbon neutrality, a sustainable supply chain strategy is essential.
As you continue embracing additional sustainability initiatives in your portfolio, the importance of knowing the cost associated with implementing each one will rise. This will help you fully understand the change you’re making, the related measurable benefits, and the overall return on investment. So, whether you’re shifting toward wind, solar, hydro, or some other form of green energy, your technology will help inform your strategy and decision making.
3. Embrace AI as a Transformation Tool
In my role at SAP, I get to see first-hand a number of prominent enterprises utilizing artificial intelligence (AI) in innovative ways to better support supply chain-related initiatives. For smart businesses, AI is not about replacing humans; it’s about enabling them to focus more deeply on critical analysis, speeding up scale and eliminating slow, repetitive tasks. The opportunities are endless.
Take Blue Diamond Growers, an agribusiness focused on almonds and almond products, which used AI to automate its manual processes and accelerate planning, eliminate bottlenecks and shortages, and cut response times in planning and customer support functions. The company was able to improve delivery assurance, reduce shortages and enable quicker response to disruption—in the process saving over $1 million in annual transportation-related supply chain costs.
Or look at Patterson Dental, a wholesale distributor for dental health products and equipment that embraced AI-enabled field service management software to improve route planning for field technicians and to better coordinate customer appointments for repairs. Streamlining its processes and improving support for its dispatchers made a massive difference in the overall optimization of work and revenue. In the end, Patterson Dental reduced its carbon emissions by 40 metric tons per year due to better routing and reduced fuel use.
All these strategies are meant to work in unison, from end to end. The objective is to build a business and IT landscape that functions effectively, from the design stage all the way to the operation stage. That’s what we’re focusing our energy on in the SAP ecosystem: Thinking broadly and strategically to create meaningful business outcomes for our customers. There’s a lot of risk when things are disjointed; alter your thinking today so you can bring it all together for a more successful and resilient future.
Michael O’Donnell is Chief Revenue Officer, Digital Supply Chain, SAP North America.