What if I told you that when managing supply chains for social-benefit enterprises and NGOs, optimization and cost-effectiveness aren't enough?
Looking back on the pre-pandemic world, supply chain strategists' laser focus on these two goals was deceptively limiting. Even if an organization's main suppliers are operating at maximum output, there's no guarantee that they'll continue this way if, for instance, a key factory has to shut down for two weeks while all employees quarantine. In other words, pre-pandemic supply chains didn't focus enough on resilience. Social-benefit enterprises and NGOs tend to be vulnerable supply chain-wise because they either aren't solely focused on profit or are literally not-for-profit. Holly Spicer, Director of Finance & Operations at Save the Children, sums up the problem well: "Orders that used to be able to take days can now take months due to production shutting down or reconfiguring operations around the world."
So if resilience is the new holy grail in supply chain management, how can we achieve it? George Bailey, Executive Director and Chief Research Officer of the Digital Supply Chain Institute (DSCI), has some ideas. As an intern at the Center for Global Enterprise, I've coordinated with the DSCI to help advance its mission of translating often-overwhelming theory into actionable advice. Whether you're a raw-materials company at the start of supply chains that serve social-benefit enterprises or an NGO on the receiving end, the pandemic is a critical time to rethink your role as supplier or customer. In this interview, Mr. Bailey speaks from both perspectives to help suppliers and customers better understand each other's needs and in turn, amplify their social impact.
First off, what does it mean to call a supply chain “digital”? What kind of new technologies are at the core of the digital supply chain?
Like most things in life, simple labels are never enough to describe reality. When I say digital supply chain, many think it means taking your current manual processes and automating them; in other words, making the current supply chain process digital. The reality is that a digital supply chain is much more than that. It is a process that starts with deep knowledge of the customer and concludes with creating a supply chain that delivers new value to the customer. In order to make that happen, you need digital technology. For example, one big trend we see is shifting production to locations that are closer to the customer. That way, customers get what they want, quicker, and there is less risk than in a more global footprint. I also see a lot of progress being made using algorithms to understand customer needs and decide production volumes. And we see more 3D technology being used to shift supply locations while controlling cost. A digital supply chain optimizes all of the things that make a customer happy and controls cost. Our research indicates that the supply chain should, on average, increase revenue by 10%. Member company Under Armour provides a good example of how the supply chain can do a “Frontside Flip” [the name of a major DSCI research initiative and white paper] and turn a traditional back office supply chain function into one that delights customers.
What steps would an organization need to take to perform a successful digital transformation? What benefits would digitization provide them?
The first step is doing a deep dive on what the New Customer [also the name of a major research initiative at the DSCI] wants. We use the term New Customer because our research shows that there's a growing set of customers with a very new set of expectations. For example, people want much quicker delivery, they want to know how their peers experienced the product or service. Just look at how Uber changed the world by offering customers the car transportation supply chain on their phone! A digital supply chain will operate at lower costs, gain customers, and boost revenue. Dell is one of [the DSCI's] members and they have done an outstanding job of digitizing their supply chain in these challenging times.
If you had to pick three major trends to describe supply chains during COVID-19, what would they be? Are these trends totally new, or do they trace their roots back to somewhere in the pre-pandemic world?
First trend: laser focus on the customer. Some of our member companies are in the tech space and they have had trouble keeping up with demand. Other companies are experiencing a big drop in demand. Making your target customer happy through superior customer-focused supply chains is more important than ever.
Second trend: getting the right people with the right skills in the right position. We need more data scientists, more customer-knowledgeable staff, more people who make decisions based on data and analytics (and market knowledge). COVID showed us that we don’t have all the right people and we need to hire and train the new team. Of course, this is not easy especially when we are holding costs down.
Third trend: digital transformation. Companies that were further ahead in automation and technology [pre-pandemic] did much better than those that were not.
I really liked your Forbes article from August about Fortnite's unexpected status as a supply chain lesson. What are the main takeaways for businesses and NGOs on supply chain engagement?
The goal is not to make supply chain people professional gamers. The goal is to use the lessons from how gamers work to improve our supply chains. There are three lessons that Fortnite can teach us. First, leadership is rotational and delegated. You are playing against 96 other competitors on an island filled with danger and treasure. Things happen so fast that each player on your team must have the ability to make decisions without team oversight. No one can ask permission when they are being attacked! When the game calls for shooting, then the best shooter rises to the top. When the task is navigating the island, then the best navigator takes over. My father used to say “horses for courses,” and that means that you always want the person with the best skills for the moment leading. Second, collaboration with a purpose is the only way to win. A team with great talent that does not help each other will fail. And third, data drives decisions. There is a wealth of data available in real time to each player. You know everything about your skills, the skills of your teammates, and your opponents. You access this information while you play. A quick toggle to look and then back to the action.
What advice would you give to social-benefit enterprises and NGOs in particular about how to conceptualize and manage their relationship with supply chains?
NGOs and social-benefit enterprises should do two things. First, they should recognize that their own organization has a supply chain and they should understand and manage it. Second, they should welcome, support and encourage major companies to locate parts of their supply chain in areas that need jobs and development. Working conditions have to be fair and wages adequate, of course. And the supply chain will lead to new jobs, skills, and an economic boost. The digital supply chain is not the evil, global capitalist enemy; it is the friend that you always wanted and needed!
Through my conversations both with Mr. Bailey and leaders at NGOs and social enterprises, it has become clear that supply chains are no longer a concern only for multinational corporations. The pandemic has disrupted operations for organizations of all shapes and sizes, and resilience is all the more important. Whether it's a worldwide NGO making sure students in its Head Start programs continue to receive their school supplies or an emerging social-benefit startup improving medical care for vulnerable senior citizens, effective supply chain strategy is what makes it all happen.