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In a challenging business environment, supply chain resilience is critical for future-proofing your company.
The Covid-19 pandemic was the biggest disruption to supply chains in recent memory. As suppliers and buyers faced significant business conditions, they flexed to keep up with shifting demand—and, in the process, revealed the critical nature of a resilient supply chain.
For manufacturers and distributors, a resilient supply chain remains essential for daily operations and long-term success. When a supply chain issue arises, it doesn’t just grind production to a halt. A disruption can also cost an organization 45% of one year’s profits over the course of a decade, according to McKinsey.[1]
Figuring out how to live with these disruptions is key, as a global economy built on clear predictability is not viable, at least for the foreseeable future. In terms of supply chains, another study found that companies can expect disruptions of one month or longer to occur at least once every four years.[2] Manufacturers and distributors that build resilient supply chains capable of withstanding disruption will not only survive but thrive in this landscape.
Today, the foundation for a resilient supply chain is advanced digital technology. For supply chain managers, the modern global supply chain can look sometimes like little more than data points. As raw materials are moved around the world, creating parts that pass into manufacturing production lines and are eventually distributed to stores, every item and every part of the process can be tracked and traced.
No matter where your company lies on the chain, this flow of information is far too voluminous to manage with Excel spreadsheets and legacy ERP systems—and that would be true even in a perfectly stable environment. When you factor in the looming disruptions, which can come from anywhere at any time and send ripples up and down the supply chain, you end up with an infinitely complex web of relationships.
“The move to the cloud has been a game-changer for us. ... We can share data freely and get it up and running as a supplier to our other sites, which has alleviated supply chain issues.”
Nicholas Mueller, director of ERP systems at Enjet Aero
Cutting-edge digital technologies already exist to address these issues. The best supply chain management solutions make every link in your chain completely transparent in real time, so that you can account for every element that affects your operations.
This level of clarity is possible because modern supply chain solutions connect your systems, taking your information out of silos and into a centralized location. This allows you to be proactive in reducing inefficiencies, improving productivity, and planning ahead. When a supplier experiences a supply chain disruption, your system flexes to account for the change in information, enabling your decision-making process.
Underpinning these solutions are Industry 4.0 technologies like cloud computing, Internet-of-Things, and artificial intelligence (AI). With the ability to automate core functionality and collect and analyze big data, advanced technology can help you keep up with your suppliers’ technology while staying ahead of your competition.
Resilience involves quick responsiveness, something that’s best achieved when your supply chain management is part of a connected organization.
A connected organization is when you have fully integrated information systems designed to give the right person the right information at the right time, in an easy-to-read report or dashboard. This enables you and your employees to diagnose and resolve supply chain problems in a timely, accurate manner, whether you’re on-site, on the road, or at your home office.
This dynamic functionality exists when you deploy enterprise resource planning (ERP) in the cloud. Your ERP system brings together all aspects of your business into one centralized location, so that all information, from suppliers to customers to sales, is connected.
ERP systems were once deployed on-premises only, meaning that data servers that held your systems and data lived at a company’s physical location, where IT departments spent valuable time managing them. With digital technology, cloud computing emerged to give enterprises the freedom and flexibility to store information on servers geographically distributed and backed up, where IT professionals keep data safe, secure, and available around the clock.
In the global digital economy, cloud ERP is the fastest and most flexible way for business teams to work. It helps them achieve resilience by allowing them to plan for and respond to disruptions more quickly than their on-premises competition. Something that was most evident during the pandemic.
Before the pandemic, companies understood the importance of cloud technology, but they tended not to feel urgency around implementation. In our 2019 survey of more than 1,250 technology decision-makers in five essential industries:
That contrast between expectation and reality helped explain why only one-fifth of them believed that cloud would directly impact their company's growth in 2020, and why just only 25% set cloud as a strategic priority for the year ahead.
A few months later, the pandemic arrived, and 36% of businesses felt a negative impact (the rest felt some or no impact). Of them, the companies fully on the cloud suffered the least, and the ones that utilized hybrid solutions also felt significantly less pain. But nearly half of businesses with mostly or entirely on-premises ERP suffered.
With hardly any cloud ERP functionality, these businesses were:
The pandemic seemed to have changed the cloud ERP outlook for manufacturers, distributors, and other essential businesses. By 2021, our survey found that 81% of decision-makers deployed hybrid ERP solutions, and that 93% now deploy at least some cloud-based solutions, numbers that show no signs of reversing.
As enterprises dealt with the pandemic, they simultaneously had to contend with everyday threats. Internet and power outages, cybercrime like ransomware, natural disasters—these are so prevalent that only 8% of businesses say they’ve never experienced them (yet).
When disaster strikes, resolving it takes valuable employee resources. And if the company can’t ship or deliver on time, everyone up and down their supply chain can be delayed. All told, after a disaster:
But businesses shouldn’t build resilience solely to avoid loss. They should double it as a tool for embedding long-term value. This has quantifiable payoff: a 25-year BCG study of nearly 1,800 companies showed that “resilience in unfavorable periods accounted for nearly 30% of long-term outperformance.”[3]
The study is from before the pandemic, but its results are uniquely applicable to the post-pandemic world of continuous disruption of unknown depth. According to the authors, “as the depth of a crisis increases, so does the contribution of the corresponding quarter to long-run relative performance.” In other words, when disruption occurs, the deeper the crisis, the greater the value of resilience to your bottom line.
Once you’re deploying ERP in the cloud, you’re ready to take advantage of its capabilities. But building a resilient supply chain doesn’t happen overnight. It starts with strategy.
Massive shock events like the pandemic can drag companies into a chaotic muck that can supply cycles of reactive decision-making. To get away from this tailspin, you want to focus on a strong structure for your supply chain.
Modeling and testing are key to structure. Simulate how your products and processes will need to change if your suppliers experience disruption. The more data you have—for instance, you should know the entire material flow up and down your supply chain—the more accurate your models.
Developing “what if” scenarios promotes data sharing among suppliers. Not only does it help everyone identify weakness and vulnerabilities, but it helps develop end-to-end structural resilience and strengthens every link in the entire chain.
As we noted earlier, a supply chain is less of a single-track path than a complex web of interactions. Seeing the whole structure clearly is a great start, but only with advanced analytics can you get actionable insights.
Modern supply chain resilience emerges out of AI capabilities like machine learning (ML), where data solutions move beyond descriptive analytics to predictive analytics. The ability of ML to spot patterns in massive datasets can make your forecasting more accurate and increase your confidence in planning and logistics.
Advanced analytics also help you remain agile. As your systems accumulate data, they flex, scale, and grow. Instead of slowing down from too many new information sources, they process data quickly and automatically. This helps relieve you of manual data operations and frequent troubleshooting, so you can focus on business growth and success.
Resilience is a concept focused on the long-term. But it can be tough to weigh those considerations when faced with yearly uncertainty and quarterly volatility.
When you experience success in one period, you may be tempted to grow indefinitely. But that can have its own cost by stressing supply chains. For instance, some retailers that increased their online sales during the pandemic eventually had their profitability eroded by high fulfillment costs and new supply chain pressures.[4]
In building supply chain resilience, there is no magic solution or crystal ball. But you can get out ahead of the changes by leveraging tools that help you make the most informed decisions about how to create and manage success now and in the future.
For manufacturers, delays in raw materials and other supply chain issues can slow down production and divert employee resources, which can help create compounding problems given the manufacturing labor shortage.
The best supply chain management solutions have multiple high-impact capabilities to withstand these disruptions and build resilience. Demand management uses statistical forecasting to help you improve fill rates, while purchase management allows you to streamline purchase order writing while improving order accuracy.
With advanced material management, you can then monitor raw materials in real-time from a mobile device. As situations evolve, your system evolves with it.
For distributors, a resilient supply chain means having the continuous ability to simplify workflows to more easily satisfy customer demand. With inventory and warehouse management features, you can automatically monitor customer inventory and transfer products from your warehouse to their locations.
Critical warehouse activities, like receiving, cross-docking, put-away, picking, inventory adjustments, and cycle counts, are easy to manage. Demand forecasting helps take the guesswork out of ordering by identifying unique demand patterns of your items and automatically detecting seasonal or trending ones. When you have this level of visibility into your supply chain, you can feel more confident in handling any situation.
Learn more about Epicor industry solutions in manufacturing and distribution.
[1] “Supply-chain resilience: Is there a holy grail?” McKinsey, December 8, 2021
[2] “Risk, resilience, and rebalancing in global value chains.” McKinsey, August 20, 2020
[3] “Becoming an All-Weather Company.” BCG, December 9, 2020
[4] “Supply chains: To build resilience, manage proactively.” McKinsey, May 23, 2020