Command and control in supply chains - part 1: Why a commanding view matters
In an era of strained supply chains, having the right view and the capability to intervene early and effectively can make all the difference
When disruption bubbles up from the bottom of supply chains, then you need to be ready at the top. This has been a key lesson over the last 18 months. Companies all over the globe have been exposed as not having effective command and control mechanisms to make early interventions that might help reduce risk in supply chains.
That might be ordering components from different suppliers as financial risk of failure becomes more severe for a key partner, or it might be assessing different shipping methods as a port becomes backlogged.
Reuters Events, Supply Chain spoke to a variety of experts from across our sector to understand why a lack of command and control comes with a variety of costs and how to begin to get a handle on supply chain management through visibility, standardisation and technological know-how.
The cost of compromised command and control
If the need for more refined command and control in supply chains was not abundant 18 months ago, it certainly is now. As one crisis rolled into another for supply chain managers it was easy to feel overwhelmed, and many were, with the misses creating big costs for their businesses.
By far the biggest cost of not having proper command and control is in not meeting consumer demand, or subsequently incurring higher than necessary costs to do so
“By far the biggest cost of not having proper command and control is in not meeting consumer demand, or subsequently incurring higher than necessary costs to do so,” says Phil Roe, CCO UK&I at DHL Supply Chain. “For example, air freight is significantly more expensive than sea freight, but it is used to cover where command and control has failed in providing adequate sea freight cover.”
This particular dynamic became even more extreme in the aftermath of COVID-19, which was severe enough to cause long-term changes to shipping routes, and was also highlighted by the recent blockage of the Suez Canal, where those with the right agility in their planning and management were able to find alternative routes to market.
The lack of command and control often leads to overpayment
Bobbie Ttooulis, Executive Director of GFS, a global multi-carrier delivery services and fulfilment provider, agrees that the two main costs associated with poor command and control are “Loss of sales” from failing to “to meet customer expectations”, and “inefficiency in managing carriers and delivery,” where “businesses are unable to fully monitor performance, and therefore unable to assess and make improvements.”
Roe also sees that “The lack of command and control often leads to overpayment,” when it comes to shipping. “For example, if an international business deals with its transportation locally they’re unlikely to ever get a good procured rate, and can find themselves with significant overcharging unnecessarily.”
These issues are currently exacerbated with elevated shipping costs now the norm. According to the Freightos Baltic Container Index the average spot price to charter a forty-foot container was up over 60% from Q1 2020 to Q1 2021, with no sign of prices falling any time soon and, the Federal Reserve Bank of St. Louis has noted consistent inflation in the cost of long-distance trucking in the US since a low point in May 2020.
The industry is reeling from the rises and clearly needs to get a handle on costs but it is struggling to do so against this backdrop and the existing gaps in supply chain planning capability. Over half of the retailers, manufacturers and brands (56%) in the Retail Supply Chain & Logistics Planning Report 2021 said that their number one business goal is to reduce logistics costs, but the research also found significant planning capability gaps and that visibility was frequently lacking.
Logistics is now something that's no longer … a means to an end. It's something that is seen as a kind of differentiator by customers who are operating in any kind of space that is touching logistics
“Without the visibility that command and control gives, it becomes incredibly difficult to compare costs and find savings,” summarises Roe, but with more than half of companies lacking end-to-end visibility, those costs are going to be a stubborn pain point for businesses.
The issues above have to be addressed urgently by business leaders, especially as “Logistics is now something that's no longer … a means to an end. It's something that is seen as a kind of differentiator by customers who are operating in any kind of space that is touching logistics, which is pretty much now every space,” points out Andrew Mukerjee founder and CEO of eLogii, a delivery management software provider.
A 100%, end-to-end, connected decision-making process
The interwoven dynamics of pandemic era supply chains are why the “Data-driven supply chain, [which] is what we have been preaching before the pandemic, [is] now becoming clear to many people,” says Stefan Gstettner, Partner & Associate Director, Boston Consulting Group.
It is tricky to get a hold of this situation, however, as the interconnectedness of supply chains means that considering items in isolation inherently weakens the ability to understand and resolve an issue.
We cannot look into isolated visibility and then make a problem out of a late container if we don't understand the relationship between all those supply chain elements
Consider a late container, “Now the key question is, is that a problem, yes or no?”
The answer: “It depends on how much inbound stock do we still have on our stock management tool? Do we have something planned that needs those parts from this container? And then even further downstream, do we have client orders, which need assembly processes, which in turn needs parts that are sitting in this container? It's automatically a 100%, end-to-end, connected decision-making process to decide whether this late container is a problem…. We cannot look into isolated visibility and then make a problem out of a late container if we don't understand the relationship between all those supply chain elements.”
Every time it gets outside the enterprise … then it becomes cumbersome
This will take not only a focus on internal process, but typically an even stronger effort to understand the external supplier situation, as “Every time it gets outside the enterprise … then it becomes cumbersome,” says Gstettner.
He gives the example of a fashion client he recently spoke to who finds that the workloads associated with getting suppliers to provide “Granular visibility into their capacities and their ability to respond to changes of volumes,” is a major challenge that impinges on the fashion retailer’s entire planning capability. Their visibility gaps in this field mean that “All subsequent planning processes also become cumbersome because they are grounded on a weak basis.”
Information bottlenecks like this can mean “Communication is extremely short sighted,” in supply chains and will require “a proper view on the end-to-end status” of all supply chain elements he asserts.
Keeping it clean
“Gaps also exist in terms of the standardisation of business practices,” warns DHL Supply Chain’s Roe. “For example, command and control might highlight that as a business you’re lacking standardisation across the organisation and perhaps you are missing out on efficiencies as a result.
It is possible to do business a lot quicker and with significant cost savings if a more standardised approach is taken
“While there is always an element of local market customisation required to account for regional variations and regulatory demands, it is possible to do business a lot quicker and with significant cost savings if a more standardised approach is taken,” he counsels.
Ultimately, you can have all the power in the world, but if you haven't got something that's usable, it's useless
This standardisation might be something as simple as using common weights and measurements across a business, but it is also important to go higher and evaluate your business processes and tools and ask how they can be simplified and standardised for users across a business.
“Ultimately, you can have all the power in the world, but if you haven't got something that's usable, it's useless,” points out Mukerjee.
Gstettner agrees and cautions that “There's high risk of getting swamped with information.”
How do we extract value from the data, turn it into information and then turn it into something actionable?
He “Recently talked to a client who said, ‘Look, we had been quite successful in installing … alert mechanisms based on exceptions, based on visibility. Then we were swamped with alerts, and then we have simply cut the alert mechanisms because we weren't able to react to them, because there were too many alerts.’”
Situations like this means that supply chain planners and those managing their IT stack need to always have an eye on keeping things simple and their end goal. At every stage they need to ask “How do we extract value from the data, turn it into information and then turn it into something actionable?” says Gstettner.
Mukerjee says that one of the keys for anyone looking to build out a planning system “Surprisingly, is actually user interface. So, having something that is nice visually, clean, easy to use, etc. by anybody and non-expert users.”
Ultimately, companies need to think through a smart automation approach
Doing so means that the probability of catching the issues early and making the right intervention are improved through the wider access and greater number of eyes that can see the information, but most importantly, also interpret the data to make the right decision.
Technological aids that can be applied across organisations with low barriers to entry will be important to improving command and control in supply chains going forward.
In Gstettner’s opinion “It's already impossible to think that these implications can be handled by humans at any point in time because it's [too much] information. So, ultimately, companies need to think through a smart automation approach. Some system providers are already talking about cognitive automation, which employs AI to make smart decisions in very operational situations.”
You don't want to have systems just operating in silos. You need to be able to connect your technology ecosystems
Mukerjee and his company eLogii are working on one of these solutions with automated routing software.
For him, even though AI and machine learning are “massively overused buzzwords,” they are “the future of a huge number of industries,” with the supply chain no exception.
He advises standardisation is also important when it comes to the tech stacks needed to empower this future, as systems need “The ability to integrate into anything, because actually, you don't want to have systems just operating in silos. You need to be able to connect your technology ecosystems.”
Having an API that is flexible, and extensible is vital in today's world
Here, Application Programming Interfaces (APIs) and webhooks, which allow communication between applications, are going to be key, especially when it comes to dealing with the external supplier visibility issue. This is because they “Allow you to provide a true two-way integration, as well as giving feedback from the from the field” says Mukerjee, which is why “having an API that is flexible, and extensible is vital in today's world.”
He notes that “Even if you don't have a specific plugin, it's important that your API is clean and is basically flexible enough to be able to add things on because, generally speaking, [and] especially in SaaS, when you've got one or 10 customers that want something, you generally will find you've got 100 or 1,000 customers around the world who actually need the same thing.”
The lesson, therefore, for supply chain leaders is to have a holistic view of both the supply chain and the decision-making process. Elements in isolation are inherently weaker. There is a need for a connected approach when it comes to supply chain planning and coordination through unified visibility over supply chains and common systems that can be applied organisation-wide and understood by all stakeholders.
The costs of not truly being in control are becoming increasingly clear, so now is the time to take command of the situation.
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