SAP Digital Supply Chain : Moving Through The Pandemic Covid-19
- October 30, 2020
- Posted by: Equine Global
- Categories: Articles, SAP
The term “digital economy” has existed for a number of years now as a concept that is meant to empower both consumers and companies to better connect and engage with each other. At the center of that exchange is the supply chain, which keeps goods moving, global economies bustling, and the world turning.
As the business landscape has been reshaped by a global pandemic, this has caused
supply chains to either work overtime or come to a screeching halt. Now it is more
important than ever for technology to play an essential role in this essential business function.
High-level overview digital supply chain
First, a digital supply chain is connected. That means it’s connecting people within your organization and connecting companies within your network so that you can collaborate across customers, suppliers, contract manufacturers, logistics, providers, and so on.
Second, a digital supply chain is automated. We now have access to technologies such as the Internet of Things (IoT), machine learning, and artificial intelligence (AI), and this provides access to real-time data across the supply chain. It helps companies leverage that information to drive agility and resiliency across the supply chain.
And third, a digital supply chain is intelligent. With information and intelligence, you have visibility across the end-to-end supply chain, which means you’re able to predict things that will happen. I can predict when a machine in my production line will go out of calibration and may need to be maintained. I can predict the quality of products and make changes during production if necessary. I can predict where vehicles are and if they’ll be on time or late based on traffic patterns. And I can also predict whether the goods in that vehicle are of good quality.
All those things—connection, automation, and intelligence—are part of digital supply chains. The supply chain fits in after the full product life cycle, from design through manufacturing and logistics, to their operation at customers’ locations. And of course, the related planning processes that span the end-to-end supply chain apply to the digital version too.
There is some of the challenges supply chains are facing today and how would a digital supply chain help address those issues.
Today is much different than four months ago. We’re seeing a very unstable supply of raw material and intermediate, as well as finished products, as manufacturing and borders shut down and start to reopen.
At the start of the pandemic, we saw a lot of volatile demand for vital commodities such as bread, milk, eggs, hand sanitizer, and toilet paper. They weren’t in the stores, or, if they were, they were at marked-up prices and available in limited quantities. At the same time, nobody was buying luxury products or discretionary items, and their demand dropped off. Volatile demand—whether that’s increased or decreased demand—is a supply chain challenge.
We also had constraints regarding logistics capacity and the actual workforce being
able to go to work. Even as facilities begin to reopen, it’s in a different world where the health and safety of everyone in the supply chain are top of mind for companies. This translates to a reduced number of employees in a factory or a warehouse, and more money spent to install plexiglass shields to separate workers. It means more cleaning in between shifts, as well as other measures. All of this has increased the need for improved planning, scheduling, and environmental, health, and safety (EHS) processes.
Both of these challenges can be addressed with a digital supply chain, which would
provide the visibility and data to make informed decisions. A digital twin, for instance, would allow a company to do simulations to see how what-if scenarios would help.
Some of the trends/lessons learned that you’re seeing coming out of a COVID-19
business landscape as it relates to the supply chain.
One of the lessons learned is that we need to balance cost and risk. Over the past 10 to 15 years, everything has been outsourced because it was cheaper to make it
somewhere cheaper. COVID-19 showed us the inherent risk this could bring. When
China, which has a huge percentage of goods going through it, shut down, so did many supply chains. So, we know that we need to think about alternate sourcing strategies as a key risk-mitigation strategy.
Another lesson is around inventory optimization and planning. I think some companies will move from “just-in-time” manufacturing to a “just-in-case” strategy. Inventory optimization means keeping the right inventory at the right quantity at the right place in the supply chain. For example, keeping key components and parts close to the manufacturing facility. We’re seeing lots of pop-up warehouses appearing at different companies for that very reason, to hold the inventory closer to where it’s needed.
And the last lesson learned is that supply chains need to be much more resilient. That partly means having risk strategies in place, but also having the ability to take action when something happens. It’s the ability to sense—or, even better, predict—when something’s going to happen, but also be able to respond to it in a timely manner.
Three predictions you can make about supply chains and technology in a post-
The First that supply chains will become more resilient. They are all now operating in the new normal and must be able to respond to change.
The second is sustainability. It was a huge issue pre-pandemic, and it has not gone away. Unfortunately, and rightly so, it has taken a back seat in the past few months because, quite frankly, we’ve had much bigger short-term challenges to take care of. But the reality is that the pandemic has actually had positive impacts from a sustainability standpoint. It has shown that we can make a difference when we reduce manufacturing or transportation emissions. We’ve seen the air quality improve. I read recently that the Centre for Research on Energy and Clean Air reported that carbon dioxide emissions in China reduced by 25%. That just shows that we can make a difference, and so I believe sustainability will be huge moving forward.
And the third prediction is that the supply chain will have a seat at the table in the boardroom. It is practically a presidential topic at the moment, and I don’t think I’ve heard the supply chain mentioned as much as it has in just the past few months. Supply chains have long been considered a way of reducing costs, but now I believe we have to balance the cost and risk continuum. I also think that with all of the data now available across the supply chain, supply chains will also become an area of business innovation and revenue growth.
Muhammad Noviarman Adiputra
BDM at PT Equine Global