Restart Michigan with KPMG: Supply Chain Management Series
June 25, 2020< Back to Full Restart Michigan Webinar Schedule
Part I: Future of Supply Chain: Critical Capabilities to Develop
The COVID-19 global pandemic has exposed serious faults in existing supply chains and has accelerated the notion of economic nationalism. The four truths that most supply chains are built upon are no longer true, thus setting the stage for supply chain’s new world order. In this session, KPMG expert, Amit Gupta, principal, advisory, supply chain and operations, covered critical competencies that your organization must build to enable its supply chain in the wake of COVID-19.
Supply Chains Designed for a Different Time and Purpose
The concept of supply chain management developed in the late ‘70s, early ‘80s, but really took off in the ‘90s. The idea was to manage all supply chain-related activities horizontally across different vertical functions within the organization, and around the world to better match supply and demand for goods, improve efficiency, and drive out costs.
The Agenda for the Future of Supply Chain
Supply chains will see a significant disruption as they shift towards customer-centric offerings with demand drive and automated networks.
“The future supply chain needs to be looked upon as a business partner across functions, just like you look at finance or marketing or other functions as a business partner, so that change of culture is going to be required” said Gupta.
There will be some execution challenges but it is important to consider at the beginning how resilient the future of supply chain needs to be. There is not a one-size-fits-all solution when it comes to supply chains.
As a company, you must try to figure out, what are the types of risks do you want to manage against? How do you want to be resilient?
Success Requires Thoughtful Planning and Foresight
There are several challenges with planning this type of execution. This decision-making is full of uncertainty, complexity, risk, and the other involving various execution challenges. What tools do you really need for this execution to be practical? Below are some of the factors to consider.
- Uncertainty and Risk
- High levels of decision-making.
- Market pressure or potential loss of competitiveness.
- Execution
- Integrate strategic, operational, tax, transfer pricing, and other considerations.
- Explicitly consider agility, resilience, and risk.
- Use scenario planning and similar tools to mitigate uncertainty.
Part II: Supply Chain Resiliency: How to Better Prepare and Manage Disruptions
Major disruptions can impact even the most mature supply chain organizations and industries. Over the recent months, due to the COVID-19 global pandemic, organizations have faced extreme supply chain challenges that have stretched capabilities to the breaking point. In this session, KPMG Principal, Rob Barrett, principal, advisory, supply chain and operations, along with, KPMG Managing Director, Kerim Ozbilge, advisory, supply chain and operations, discussed supply chain resiliency in a disruptive climate.
Supply Chain Resiliency and Complexity
Resiliency within the supply chain tends to be incredibly important for short bursts of time, usually in response to an unplanned event, outside of normal complexities.
Even before the pandemic, the auto industry faced a number of challenges driven by the variety of products and suppliers, operational changes, diverse channels, and routes to market.
“[The] typical vehicle launch used to be north of a billion dollars in configuring that supply chain, and many times that resulted in 60% of that supply chain being sole-sourced partners…so, needless to say, auto is one of the most complex supply chains. And therefore, probably more challenging than others to build resiliency into,” said Barrett.
Along with existing complexities, as organizations become leaner, cost-focused, and global, they become more exposed to additional risks and disruptions within the supply chain from major events. To be resilient, companies must address a wide range of risks across the extended supply chain.
Characteristics of Resilient Supply Chains
- Flexibility in the supply chain network.
- Integration and collaboration between organizations.
- Supply chain visibility and continuous monitoring.
- Strong cross-functional governance and control.
- Intelligence and methods of predicting possible impact.
- Automated operations to drive decision making.
“It’s one thing to pull out the playbook when the crisis happens,” said Barnett. “It’s another thing to pull out the playbook periodically with your key partners to rehearse what you’re going to do.”
Predictive Supply Chain Management (PSCM)
PSCM technology platforms utilize analytics tools to accelerate the identification, assessment, and mitigation of risks across the supply chain. Typically, these data platforms provide a digital representation of a company’s network to continuously monitor and use real-time predictive analysis to determine potential risk exposures. The technology options a company should use depends on that company’s distinct needs and strategy.
“Companies that leverage such solutions are typically more agile and responsive to the way they manage their supply chain risks and disruptions…and as a result able to reduce their losses,” said Ozbilge.
The Path Forward
The impact of COVID-19 has demonstrated to companies just how critical the supply chain is, and how much impact it can have on an enterprise if it is not managed properly.
“Supply chains are not static. They continuously evolve, and as a result they should continuously evaluate the weak links within their supply chain…continuously benchmarking and continuously setting improvement targets,” said Ozbilge.
Companies should take stock of what worked well during this time of sudden disruption and use that reflection to further develop processes and better prepare for the future.
Part III: Cognitive Control Tower: How to Unlock Value in the Supply Chain
In this final session of a three-part series, KPMG and BlueYonder discussed the disruptive trends in the automotive industry among Tier 1 suppliers and impact on the aftermarket supply chain.
One of the most critical challenges that suppliers and aftermarket companies are facing during the COVID-19 pandemic is a parts shortage and delayed shipping. This is especially relevant as new car sales decline while consumers drive their current vehicles longer in the face of uncertainty. Based on historical data, automotive aftermarket is expected to continue growing as people repair or enhance their aging vehicles. But what about the parts supply shortage and emerging challenges with overseas shipments? These can be quite costly.
New technology has emerged to help mitigate risk when it comes to these challenges.
“Companies need to continue to control cost and de-risk supply chain, but also need to prepare to return stronger than before by building resiliency,” said Ehap Sabri, managing director of advisory for supply chain and operations at KPMG.
Together, KPMG and BlueYonder propose an effective solution: Cognitive Control Tower.
Cognitive Control Towers are created by an ecosystem of disparate data sources, analytics engines, transactional systems, and cognitive tools. This enables a supply chain control tower to integrate data sources, learn supply chain domain principles, and act as a supply chain expert. What does that mean for your logistics team?
These benefits can be easily derived from cognitive control towers:
- Real-time visibility across suppliers, manufacturers, distributors, and customers.
- Predictive analytics indicating possible shipment delays beyond the promise date.
- Warning of disruptions before they occur.
- Resolution to the problem through a mitigation plan.
Through an active on-screen demonstration by Salim Shaikh, digital transformation executive of BlueYonder, it is clear this control tower concept considers important logistics data such as shipping information, projected inventory, sales orders, and inbound shipments. It is essentially a one-stop-shop for tracking inventory from the warehouse to its destination that cooperates with almost any company system.
Further, it includes predictive analytics, which is key to allowing a company to:
- Identify problems sooner that can result in less cost.
- Reduce costs of expedited freight.
- Lower inventory levels.
- Heighten visibility to other part locations.
BlueYonder partnered with KPMG to deliver a templatized package based on these challenges that can be delivered in a matter of weeks. Check out the video to get a better idea of how a Cognitive Control Tower can increase your supplier resilience.