Why Future Supply Chains Must Sense and Pivot

Even today’s most sophisticated supply chains still try to predict what will happen, then optimize performance against plan. The problem is, the world is not predictable.

It is filled with the unforeseen. To meet soaring customer demands in this erratic world, companies need to build a whole new kind of supply chain, fast.

Supply chains are under tremendous pressure to meet soaring customer expectations.

Just a few years ago, supply chain performance was all about batch quantities, timetables, and lead times. Now companies are shipping millions of packs a day, each with just one or a few items. A handful of trailblazers are even inviting customers to order multiple sizes and colors of the same item, choose the one they like best, and return the rest.

The cumulative demands on your supply chain are staggering. Expanding product portfolios. Channel proliferation. New competitors. Technological upheaval.

It’s not a stretch. It’s a revolution.

You Need a Supply Chain that Pivots

The path forward will mirror the advance from paper highway maps to the modern GPS systems now commonly used by drivers worldwide. Today’s GPS programs continually gather data to reveal changing conditions along your planned route, and apply embedded intelligence to offer you the best options and alternatives, so you can effectively navigate around adverse conditions that would slow your progress.

Don’t Just Digitize

Early GPS systems were essentially a digitized map that led you through a pre-determined route faster and with greater ease than a paper map. But as early GPS could not account for traffic jams, road hazards, or other unplannable variables, it did not tell you when or how to pivot. If you simply digitize your supply chain, you will face similar limitations. You may achieve great improvements in speed and efficiency, but your supply chain is still not built to nimbly adapt.

In truth, you cannot build the supply chain you need solely by modifying the current state. Rather, you must begin with a fundamentally new set of questions. While you continue to anticipate what will happen based on all that you currently know, you must also understand what actually is happening as events unfold, and how to pivot in response. Only then can you make the intuitive, technological, and operational leaps required to build a hyper-responsive supply chain.

Build a Supply Chain for the Digital World

This more expansive mindset adds a new axis to your supply chain strategy: as you digitize and automate to execute against plan, you also prepare to perform against the unplannable, by building in the ability to sense and pivot. Each axis complements the other. Digitizing and automating your supply chain can eliminate many of the more mundane, frustrating activities (friction) that drain supply chain resources day in and day out. You can then refocus those assets on making your supply chain more dynamically responsive.

Sales and operations planning (S&OP), for example, makes a determined shift away from the traditional linear process of ad hoc demand forecasting and supply and production planning toward a new approach grounded in smart sensing and dispersed in-the-field decision-making, supported by fact-based “what-if” decision analytics. The net result is a continuous S&OP approach that nimbly adapts to changing conditions and priorities. Similarly, manufacturing moves from a scale-based box that efficiently fills orders on time and at low cost to modular units that enable greater product customization, produce close to customers, and are highly attuned to customer experience.

Vigorous pursuit of comparable reinventions across your supply chain moves you from the current state—where you “plan and pray” that events unfold as you anticipated—toward a pivoting supply chain that continually adapts to the unplannable. You will then welcome rather than dread uncertainty and complexity, because both now fuel your sustained competitive advantage.

Check out our companion article “Why Supply Chain Must Pivot” at MIT Sloan Management Review

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