Supply chain disruption has been a recurring theme through the COVID-19 pandemic, and companies’ levels of success in responding to the crisis have varied widely. While success stories emerged among businesses with leading supply chains, other organizations failed to cope with the pandemic and have struggled or fallen behind.
As noted by panelists in a supply chain webcast (via EY.com US), hosted by Ernst & Young LLP, those enterprises that can successfully balance cost, agility and resiliency have a clear opportunity to improve their market position. Thus, transforming to a digital supply chain has become a major C-suite and board-level topic as companies explore how to make their supply chain an engine for growth.
Views from the C-suite
The shock of the COVID-19 pandemic and the threat of future disruptive forces have underscored the need for agility and resilience in the supply chain, which may be the single biggest differentiator for businesses. With more people working from home and managing through extended lockdowns, e-commerce has surged, and some companies are grappling with this significant change in how people buy and order products. Companies need to re-imagine their overall operating model and strategy to successfully navigate disruption. Bob Nardelli, founder and CEO of XLR-8 LLC and former CEO of The Home Depot and Chrysler, described what business leaders are confronting as the “certainty of uncertainty.”
Nardelli expressed optimism that businesses have learned from the pandemic and will be better prepared for future disruptions. Especially in the aftermath of COVID-19, CEOs are well aware of the imperative to “innovate or evaporate,” Nardelli said. And all of this comes as companies face increasing demands to focus on long-term value and serve a wider group of stakeholders, including shareholders, customers, suppliers, employees and investor groups.
The P&G experience
The experience of Procter & Gamble (P&G) provides a case study in the benefits of investing in technology and placing centrality on supply chain, which allowed the company to keep its huge array of products on store shelves and in the homes of consumers through the pandemic. “If we thought of supply chain as a side issue, we couldn’t have coped and supplied our brand to the consumer,” said Fares Sayegh, the company’s Senior Vice President Supply Chain – Europe and Global Supply Network Operations. He cited the company’s work almost a decade ago in launching its productivity program, an ambitious effort to reinvent the business and focus on doing right by the consumer. The endeavor was built on the principles of “the zero” — consumers should pay nothing for any losses or inefficiencies in the supply chain — and “the hundred percent” — everyone in the organization is valued and looks at losses as an opportunity to do better every day.
Sayegh described what followed as a successful supply network redesign journey that was key to the company’s success during the pandemic. The journey focused on three components: the physical, the digital and the portfolio. The physical aspect involved assessing whether the company was well-positioned geographically to serve consumers in the most cost-efficient and service-efficient way. This required reviewing all factories, replenishment and distribution centers in North America and Europe to ensure they were in the right locations. The digital component involved asking whether P&G had the right digital ecosystem to process a seemingly endless number of stock-keeping units. Ernst & Young LLP worked with the company on selecting the proper digital tools. The portfolio assessment involved choosing where the company had proper technical capabilities in place and getting an accurate understanding of consumers’ thoughts and expectations.
P&G’s efforts resulted in an incredibly bold move in its supply chain planning, as leaders embarked on a plan to reduce the number of planning locations from which the company managed its supply chain from 300 to 6. While this move seemed daunting at the time, it has paid off immensely. “When COVID-19 hit, I reflected on what we would have done if we would have had to stand still at 300 locations,” Sayegh said. “Thanks to the bold step we took 10 years ago, we were able to manage very well during this pandemic, and we continue to do so.”
Supply chain risk and resilience
The EY webcast also addressed other aspects of risk and resilience in the supply chain. Examples included the recent experience of life sciences companies, particularly biopharma manufacturers. These companies often bring lifesaving products to market and thus place heavy emphasis on the resiliency of their supply chain. Melody Blanchford, EY Americas Consulting Health and Life Sciences Leader, said that to respond more quickly in their supply chain, many pharma manufacturers have invested significantly in digital approaches, including blockchain, artificial intelligence, machine learning and digital twins. A continuing challenge going forward will be for these businesses to focus on keeping their people safe as they accelerate their digital solutions.
The vaccine race demonstrates the industry’s impressive ability to innovate on the scientific front but also spotlights the supply chain challenge: being able to scale so that everyone who needs the product can get it. Care providers also have had to consider how they must evolve to serve a care model that is likely to take place more in the home than it did before. For life sciences companies as well as other industries, the pandemic has emphasized the importance of end-to-end visibility in the supply chain. “Being able to understand where those products are in the life cycle really was highlighted as a key pillar for building resiliency into the system,” Blanchford said.
Making it work
Supply chain transformation requires technological investment, and selection of the right digital tools will be essential to success. “It all starts with an empowering business vision tied to clear business outcomes,” said Sachin Lulla, EY Advanced Manufacturing & Mobility Global Digital Strategy & Transformation Leader. “You also need the mindset and the skill set to scale digital innovation.” Achieving a digital supply chain at scale will require eliminating some components while simplifying and standardizing others. But with a clear vision, proper planning and artful execution, the resulting supply chain transformation can produce the type of resilience that organizations need to withstand the storms of today and to flourish tomorrow.
Melody Blanchford, EY Americas Consulting Health and Life Sciences Leader, and Sachin Lulla, EY Americas Advanced Manufacturing & Mobility Leader; EY Global Digital Strategy & Transformation Leader, also contributed to developing this article.
