The fundamental outcomes of an adaptive supply chain are improved speed, cost, efficiency and customer experience. In its simplicity, an adaptive supply chain reduces the reaction time for a distributor to respond to market demand and satisfy the end-customer. This supply chain model will require both dynamic adaptability and structural adaptability.
Dynamic adaptability extends the organization’s limits of its abilities utilizing current resources and processes. Dynamic adaptability, if stretched, will allow the organization to better respond to variations in the internal environment.
Structural ability reshapes, modifies, or even completely redesigns current resources and processes. It provides the capability to adapt and re-design the entire supply chain when changes occur in the external environment, specifically as it impacts demand and supply. A great example of this is assessing ‘economies of scope’ vs. ‘economies of scale.’ This can lead to a fundamental reassessment in the manner of approaching global supply chain design and application.
Technology will always be essential in the supply chain, but it can be both overwhelming and, often, quite daunting. According to Bain, “Companies are struggling to keep pace with an onslaught of digital trends that are disrupting traditional supply chain management, slashing response times and raising customers’ expectations. The speed of change is overwhelming.” Still, 77% of executives expect digital innovation to have a significant impact on their supply chains during the next five years, according to a recent Bain survey, up from just 63% in 2016.
The fundamental adoption of technology in the supply chain is indisputable. However, a modern and adaptive supply chain shouldn’t rely on technology alone. Distribution supply chain leaders must be comprehensive about how to leverage all stakeholders, reconfigure and refresh current resources and, in the end, deliver the best possible customer experience.
To be successful, an adaptive supply chain doesn’t rely on big technology investments in a vacuum. Its success is derived from creativity and awareness in tune with the customer’s needs. When this occurs, distributors can be proactive and adapt to customer changes at a moment’s notice, not when it’s too late.
An adaptive supply chain builds connectivity between people and data. This provides real-time visibility into inventory, product flow and potential hazards. Ultimately, a committed customer-centric organization doesn’t differentiate itself through marketing slogans or hashtags. It does it by achieving a level of customer intimacy that takes the guesswork out of, “What does great look like?”
Globalization has undeniably impacted the global supply chain, underscoring the need for distributors to be more adaptive, regardless of their industry or geography. As we are witnessing, uncertainty in the geopolitical landscape, new trade agreements and tariff instability have the potential to bring a distributor’s supply chain to a grinding halt.
Historically, organizations operated permanent vertically and horizontally integrated supply chains. This model is straightforward in form and allows access to both the direct and indirect resources required to produce products and services. Its methodology has been successfully proven and demonstrated; but it was built with a predetermined process map that is not necessarily reflective of changing customer expectations or variations in the ecosystem. A modern shift to outsourcing, digital transparency and supply chain “sharing” now demand a fresh approach of managing and coordinating domestic and global supply chains.
It’s increasingly critical that “one source of truth” must exist for vendors, distributors and customers; as truth and transparency are rapidly becoming a critical part of establishing and securing a trusting relationship with your customer. More than ever, customers, both B2B and B2C, expect companies to adapt to their expectations, not vice versa. That expectation will be achieved and sustained by leveraging an adaptive supply chain.
Dave Kipe, COO & SVP, Supply Chain for Systemax, has led multiple organizations to unprecedented and sustained success through a customer-centric supply chain strategy. At the forefront of the digital supply chain movement, he is widely recognized as a thought leader and regularly shares his insight and experience with the others in the supply chain community.