Manufacturers and distributors have operated in a state of 'consistent chaos' for several years. A winter storm, a hurricane, a labour strike in a critical industry or a sudden change in government policy all can play havoc with how supply chains function. Not to mention the impact of the ongoing pandemic. It, therefore, comes as no surprise that 70% of businesses experienced supply chain disruptions over the last few years.
This is one of the findings from Syspro's latest research, which explores:
- What technologies manufacturers and distributors have been investing in to remain competitive?
- Whether they built a long-term digital roadmap and have they stuck to that plan?
- What has been holding the industry back and what is projecting them forward?
- And finally, the underlying reasons behind the ongoing supply chain disruptions
Conducted towards the end of 2021, Realigning the links of the disconnected supply chain
assessed the sentiment of manufacturing and distribution industry layers within EMEA. The report reveals key themes and illuminates the need for a long-term digital strategy that incorporates improved customer-centricity, external collaboration, and data-driven decision-making to engineer a bounce-back. Manufacturers and distributors now need to review and consider realigning their supply chain to overcome the ongoing crisis and set themselves up for growth in the future.
"Manufacturers and distributors need to review and consider realigning their supply chain to overcome the ongoing crisis and set themselves up for growth into the future. They need to ask themselves ‘How can I future-proof my operations against the disruptions of today, to bounce-back and thrive tomorrow,” says Mark Wilson, chief executive officer, Syspro EMEA&I.Theme one: The disconnect between the investment in internal efficiencies and external collaboration
With global lockdowns and ongoing disruptions driving increased pressure, it comes as no surprise that 70% of businesses experienced supply chain disruptions over the last few years. Concurrently, 60% of businesses were unable to engage and collaborate with customers and suppliers in real-time. As a result, those businesses were often unable to deliver to their customers.
Pre-pandemic technology investments and outdated business models had been partly to blame for these ongoing challenges. In response to pressures, businesses have invested in short-term technology solutions to address the immediate impact of the pandemic. Even though 65% of businesses invested in business systems aimed at meeting order requirements and 64% of businesses invested in business systems to manage inventory control, the supply of inventory was not protected.
“What we are seeing now is a knock-on effect of the supply chain disruptions. There has been a need to acknowledge that manufacturers and distributors operate within a larger and more connected ecosystem. Ultimately, if they are unable to communicate effectively with their external ecosystem and respond to shifts in the supply chain, businesses may fall behind,” says Wilson.Theme two: Digital roadmaps do not align to execution
In response to the immediate impact of the pandemic, many businesses looked at building a digital strategy. The survey found that while building those roadmaps, 69% of businesses considered a digitalisation strategy aimed at enhancing existing business processes with digital technologies. However, only 29% of businesses committed to a fully-fledged digital transformation strategy.
When exploring the execution of the digital strategy, the survey found a clear disconnect. With 34% of businesses focused on investments to improve internal operations management, quality management and warranty management, and 33% of businesses looking at improving sourcing, procurement and inventory management, only 18% of businesses invested in business systems to improve external collaboration. Additionally, 50% of businesses chose to not invest in any systems at all, and to rely on current systems to keep the lights on.
Despite supply chain disruptions that started long before the pandemic and despite a commitment to improve customer services, only 23% of businesses looked at increasing external collaboration with suppliers and customers as a part of their digital transformation strategy.
“It’s no secret that manufacturers and distributors have been slow adopters of digital transformation. However, the pandemic has created a sense of urgency around starting their digitisation journey, implementing technology and processes to maintain some form of continuity. Businesses now have an opportunity to reset for the future and revisit their digital roadmap with the assistance of trusted advisors and industry experts. Of course, the inclusion of external collaboration solutions will be key,” says Wilson.Theme three: Supply chains are not competing at a global level
Technology selection played a pivotal role in the execution of a digital roadmap. When asked about key technology investments, 47% of businesses had invested in sensors, IoT or IIoT. While these sensors are collecting data, only 20% of businesses invested in data analytics tools to process and analyse the data and only 5% of businesses had looked into AI and ML to draw any long-term benefit from the data collection.
Business models are rapidly changing before our eyes and without data insights, manufacturers and distributors will struggle to compete on a global level. Analytics, artificial intelligence and machine learning are essential to making sense of the mountains of data currently being captured and using that information to adjust business strategies and to further improve operational efficiencies across the entire supply chain.
“What we have seen is that the innovators and early adopters who were further along their digital transformation journey were able to gain valuable insights from their data and ultimately thrive during this period of disruption,” says Wilson.
Theme four: Customers are placed at the end of the supply chain and not at the centre
It goes without saying that while businesses needed to overcome supply chain disruptions and additionally improve customer experience, the outcomes of any digital initiatives or technology tell a very different story.
When exploring the benefits of the digital transformation shift and investment in digital technologies, 49% of businesses had improved cost efficiency, while 35% of businesses improved employee engagement and 31% of businesses improved product quality. But with limited success only 22% experienced revenue growth and only 26% of businesses achieved customer satisfaction.
Some fundamental changes are required if balance across the supply chain is to be restored. It will be key to establish a robust, carefully executed digital roadmap and it will require increased agility, improved communication and investments in internal and external systems.
"As part of any digital roadmap – the customer must also be at the centre. Manufacturers require a 360 view of their customer base and how they purchase products or services. While businesses have improved operational visibility through technological investments such as IoT or even alternative ecommerce sales channels, the reality is that ongoing and real-time external collaboration with suppliers and customers remains vital," concludes Mark.