Three Keys to Riding Out Economic, Labor, and Technology Risks
Inflation is cooling, but will that last? Consumer confidence is up, but will that last? Much of the pandemic-related labor shortage and supply chain disruption has been mitigated, but will that last?
SGS Maine Pointe’s Supply Chain Trends Report predicts upcoming economic, global, labor, regulatory, and technology risks to companies in every industry vertical. The companies that will be riding out those risks will have prepared themselves by focusing on more than one goal, effectively maintaining new strategies, and keeping their eye on the entire plan-make-buy-move supply chain.
Those three keys to riding out risks will also enable companies to increase productivity, sustainability, customer service, cost savings, EBITDA, and profit.
Focus on more than one goal
Often companies faced with a challenge, such as meeting 2030 and 2050 Carbon Neutral targets, overlook the opportunities for strengthening their supply chain at the same time. A battery manufacturer that took a wider perspective not only reduced greenhouse gas emissions 75% but also captured annualized savings of $19.2 million, in part through CAPEX planning and vendor negotiations.
Any challenge presents an opportunity for a company to strengthen its overall resiliency, profits, growth, and EBITDA by considering more than one of the following goals:
- Free up working capital
- Achieve supplier optionality
- Manage energy
- Deploy due diligence
- Initiate operations excellence (OpEx) and design for excellence (DfX)
- Build leadership and organizational maturity.
Effectively maintain new strategies
Recognizing that new strategies are needed in the face of change is clearly important. Defining those strategies, ensuring they are adopted, and keeping them viable long-term is more difficult.
The executive team of a global supplier of branded automotive products disagreed on the approach that would de-risk their operations, release cash, and improved EBITDA performance. They lacked the data, KPIs, and capabilities they needed to define and, more importantly, execute on the strategies they needed. Once the company had the right data and tools, they achieved a 12% EBITDA improvement and reduced carrying costs 15%.
A company that aims to maintain its strategies long term needs to:
- Conduct a capability, capacity, and cost (3C) assessment to identify and fill gaps
- Involve key leaders in planning, procurement, operations, engineering, and logistics
- Clarify owner, responsible, consult, inform (ORCI) roles
- Establish clearly defined KPIs across the enterprise aligned with goals
- Engage in leadership and organizational improvement (LOI)
- Set up continual feedback to make course corrections as needed.
Keeping the end-to-end supply chain in sight
With the right data and advanced analytics, the best strategies become clear. But often data is inaccessible, late, incomplete, or ignored. Total Value Optimization™ ensures that every part of the end-to-end supply chain is engaged in providing data and establishing a single source of truth.
A contractor for a mining company fell a year behind schedule with no understanding of why the project was taking so long. Equipment utilization and availability were analyzed, a critical path timeline was established and coordinated with other contractors on site, and a visual management board was built. As a result, the contractor was able to attain a 30% improvement in productivity and quickly identify and fix variances to plan.
To ensure that the supply chain is visible, companies should:
- Open communications between functions and between the company and its suppliers
- Establish consistent metrics and trustworthy data
- Use data analytics, simulation models, and deep learning among other tools to find data and ensure continual access
- Create a uniform, mature sales, inventory, and operations planning process
- Build an executive dashboard.
Some of the challenges that companies face in the future will vary by industry and location but all companies will benefit from strategies that keep them resilient and agile. By focusing on more than one goal, effectively maintaining new strategies, and keeping the end-to-end supply chain in sight, companies can ride out economic, global, labor, regulatory, and technology risks whenever and however they emerge.