November 6, 2023 How Not to Repeat Supply Chain History

Digital investments – including cloud-based technology – can transform supply chain risk management and create long-term value.

By Marc Waco and Bobby Bono

Supply chain issues might seem like a problem of the past.

In fact, a majority of business leaders are focusing more on basic, near-term priorities and challenges in their supply chains and less on actions and investments that would be transformational and create long-term value.

The problem is, if companies don’t change now, they may repeat supply chain history.

To invest or not to invest?

Mitigating frequent operational disruptions and their consequences in the digital world depends on the effective use of supply chain technologies. Investments help automate and enhance the execution of different areas of the supply chain, and can lower costs, improve efficiency and build resilience.

Yet, despite quantifiable results and an abundant choice of solutions, few companies plan to invest over the next two years, even though most believe they should. A recent industry report shows that 86% of executives agree their company should invest more in technology to identify, track and measure supply chain risk. Nearly as many (83%), however, generally think their existing processes and systems are adequate enough to manage risk in the supply chain.

Only about one-third of executives say increasing supply chain resilience is a top technology investment. Why the disparities? The risk is clear, but when fixing the issues is not directly associated with driving revenue growth, revenue generating investments can take priority.

When a company has limited resources, and it’s trying to determine where to budget, initiatives that accelerate growth usually win. This is despite the fact that, when it comes to supply chain technology, the same solutions that help drive efficiency and cost also help improve an organization’s ability to deliver on time, driving satisfaction and, ultimately, growth.

Unfortunately, these reasons are rarely considered when making the business case, and despite protests of budget constraints, an unclear or poorly articulated business case is often actually the bigger problem.

Overcoming the ROI obstacles

Nevertheless, a sea of change is imminent. Companies that don’t take the time to invest now can soon lose an important competitive edge. The old adage of “right product, right time and right place” still holds true. The good news is, technology has been democratized enough that makes it more affordable to invest. This also means they can’t afford to overlook the opportunities.

Still, companies are searching for ROI. Data shows that only 17% of executives believe their company’s investments in supply chain technology have fully delivered the expected results. Their reasons ranged from needing more time to execute the implementation (21%) to undefined ownership and vision (4%) as well as a widening skills gap between technological capability and worker skill sets.

So while there may be enough resources to create a view of products en route on trucks, for example, that data could be made more impactful with the ability to integrate into business processes and prompt further action. This would involve advanced analytics that are not typically under the purview of supply chain professionals.

In response, some companies are creating centralized analytics teams that work across and help many functions improve symbiotically through data, centering collaboration and agility as changemaking approaches. Building a workforce which can adapt to different ways of working is critical for maintaining resilience in your supply chain.

Consider who can guide digital efforts in different parts of the supply chain — take steps versus going all in — and provide a path to scaling retraining across areas.

It’s what you do with tech that counts most

While working out resources, keep in mind that though cloud-based technology provides connectivity and can bring with it untold productivity in the next decade, thoughtful implementation strategies are critical. Investing in technology alone can’t provide the benefits; the value is in the application, or “use case”.

To get the most out of digital investments, begin with the end in mind. Understand what parts of your business could measurably benefit from real-time information and analytically-derived insights. What specific results can be improved and how can you measure them? You’re not limited to metrics like financial ROI, but can consider if teams truly are working differently, and what the outcomes of that collaboration look like.

A thorough review of your current capabilities can reveal which parts of managing risk would benefit the most from new technologies. Reassess where resilience needs a refresh but move beyond addressing the immediate impacts of a disruption to better understand how that disruption also can affect your overall supply chain network.

It’s also important to plan for expected gains — money saved, freed-up capacity, etc. — and where those can be reinvested in the supply chain well in advance, not after the fact.

Build a foundation that can enable broader success. Driving growth and cutting costs are great goals that can and should be pursued. But putting off other objectives like increasing resilience and exploring new innovations can make it more difficult to accomplish those other goals.

If the business case is still elusive, consider how companies approach cyber security.

Millions are invested in that technology. When there’s an incident, it’s considered money well spent. If not, it’s easy to think about cost cutting. But there are too many events that cost organizations more than just revenue to know that’s a good idea.

Leading companies have learned from history so as not to repeat it, and are turning their supply chains into a competitive advantage. There are many opportunities — predicting, identifying, tracking, measuring, recovering — to reconsider where digital investments can help.

Bobby Bono is an Assurance Partner at PwC who has served a variety of clients from multinational, publicly-traded companies to emerging, development stage companies. His experience includes significant involvement with US GAAP, SEC reporting, and complex transactions. Bobby’s diverse experience gives him a unique perspective on the challenges that affect manufacturers.

With over 25 years of combined industry and consulting experience, Marc, Operations Consulting senior partner, has held numerous positions while growing PwC’s operations practice into the world’s leader.   Most recently, he led PwC’s operations innovation team, which develops technology solutions that help clients understand, manage, and optimize their end-to-end operations.  Marc works across industries but focuses on the unique challenges of manufacturers.

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