Why better supply chain performance begins with end-to-end visibility

Here’s our view of what needs to happen to overcome these obstacles, boost supply chain resiliency and welcome the future of logistics:

• Develop a strategy for digital-led supply chain – Transportation companies in the logistics space need to recognize that if their clients start to pivot around resiliency and visibility, they need to play in that world and build competencies beyond logistics and assets. Manufacturing companies are resetting their supply chain priorities. While some are still focused on a global model, others are putting in parallel models to enable different levels of backup supply and sourcing. Whatever the case, the need for visibility and coordination is 10 times what we might have imagined it to be last year.
• Transport companies need to invest big in software – The successful transport companies will be those that build real software capability and become leaders in optimization. It’s not going to be in your traditional IT group, but rather technology as a product. Companies will offer clients more valuable services and therefore extract more from the transportation marketplace. These companies should evaluate their customers and assess the timing by which these changes will impact their particular market.
• Build integrated solutions with ecosystem partners – These solutions will increasingly be sector-honed and sold on a different basis to different buyers. They will expand your value proposition and provide leverage against future market changes that are sure to come.
• Get ready for the next big disruption – It’s never too late to start planning for the unexpected. Talk about scenarios that could occur, from those that are most likely to happen to ones that are more farfetched. Encourage open discussion and address potential weak spots. This is a different discussion from routine stress tests. Those are necessary as well, but an effort should be made to talk about more large-scale disruptions so that in a worst-case scenario, there is at least the framework of a response plan in place for supply chain operating procedures.
• Stress test your supply chain – Business as usual will never be usual and is likely to always be uncertain. There are just too many variables that can change or cause change to expect a high degree of predictability. You’re not going to be able to solve market conditions, but you can respond to them better by applying risk mitigation strategies. Do stress tests to uncover the gaps that could occur in your supply chain so you know what problems you need to solve. Invest in creating added supply chain resilience and identify and reduce key single points of failure (e.g., supply concentration). Look at alternative sources of supply that can be activated, perhaps through investment in excess capacity or additional safety stock. Consider postponement strategies that may be sensible for your business.
• Build transparency around demand forecasts – Work with shippers to better understand business patterns and behaviors. Utilize platforms that allow for collaboration and sharing of supply chain information between parties so that knowledge can be shared between client and shipper. Identify tools that lead to more informed decisions around planning capacity and demand ebbs and flows to enable shippers and their clients to do a better job helping each other.
• Enable supply chain visibility and risk monitoring – Using digital process mining and digital twin solutions can boost your supply chain resilience in an eventual post-COVID-19 world.² Tools such as supply chain control towers, digital twin and EY Supply Chain Extended Visibility can make your supply chain more resilient in the face of unexpected change, providing advanced visibility and early risk detection based on a manufacturer’s supplier topology, a broad variety of data streams, and artificial intelligence for pattern recognition. Another technology, digital process mining (DPM), allows you to map your business processes in extensive detail, giving you greater visibility into your supply chain functions (often with real-time information on the flow of cash and materials) and a deeper understanding of its interdependencies. A good DPM toolkit can enable you to strengthen areas where you see vulnerabilities and to make more informed decisions about how to respond when disruptions occur.
• Stay on top of market trends – The trade lanes that have historically been most active are going to shift, if they haven’t already. Even if container rates settle down, there are longer-term changes ahead in terms of what prices are relative to another. Companies are looking at the value of truly global networks, whether they are owned or ecosystem partnered, that can provide more value to end users due to certainty and resiliency. Businesses will need to keep an eye out for new patterns that emerge and how those might impact their own approach to supply chain function.
• Drive the imperative to reduce supply chain cost – Look for ways to optimize your infrastructure and organization, streamline or simplify current department functions and drive cost savings through operational efficiency. Evaluate the up-front expense of upgrading and replacing aging transportation components such as containers and the vehicles used to move them against the long-term benefits these investments would provide – and the cost of maintaining the status quo.

Jim Morton, Executive Director, Consulting, Ernst & Young LLP, also contributed to this article.