09 Sep The writing’s on the wall – but do you know what it says?
If you could sum the past six months up in two simple words, it’d be ‘new normal.’ Everywhere you look there is talk of a different future; one where work, home and social life has been merged and changed beyond recognition. Experts tell us we’re heading towards a new normal, a future where everything is different.
There is no doubt that supply chains everywhere have experienced unprecedented disruption over the past few months. For decades, much of industry has relied on global value chains, with raw materials and intermediate goods shopped around the globe multiple times and assembled in other locations. The final output is re-exported to consumers in developed and developing markets. For most goods, China sits at the heart of the global value chain as both a primary producer of high-value products and components as well as a large customer of global commodities and industrial projects. The shutdown of mainland China and subsequent countries across Europe threw a wrecking ball across global value chains everywhere, breaking down trade relations and immediately throwing manufacturing into survival mode.
The global disruption to supply chains was rapid, unexpected and something that no business was prepared for. As a result, emerging from the other side and taking the first steps towards recovery is to become a trend itself; and one that nobody saw coming. For many manufacturers, the writing is already on the wall, but what does it say and how can you effectively act upon it?
Read the writing on the wall
The writing on the wall is the result of disruptive trends navigating their way throughout industry. McKinsey outlines four stages of a disruptive trend:
· faint signals
· lots of noise
· emergence of a validated model
· critical mass adoption
While we are all facing the challenges of Coronavirus and adapting to disruptive trends right now, several industries are also half way through the emergence of a validated model as they pivot their business to take advantage of pre-pandemic trends that have not gone away; notably electrification, 5G, automation etc. For a lot of businesses, the writing on the wall is identification of the need to change; to accelerate new technology adoption, to innovative business models and to pivot to new markets. For others, the writing on the wall emphasises the need for survival and recovery.
Take the aerospace industry for example. The writing has been on the wall for some time, signalling the contraction of supply chains, with smaller, weaker businesses looking to diversify into sectors with greater opportunity. Those remaining within the aerospace supply chain have moved to pick up the lost capability and capacity. The writing on the wall for weaker businesses was the impending supply chain reduction, heavily accelerated by COVID-19 restrictions. Those that did not address the writing on the wall fell by the wayside, with those remaining desperate for support and risk mitigation as they enter recovery mode.
Addressing the writing on the wall
The best way to address the writing on the wall is with privileged insights. Businesses can gain a competitive edge by looking at their procurement and supply chain management strategies, not just to reduce costs and excessive expenditure, but to better identify risk and opportunity. For example, it’s only when you stop and take a deep dive into your supply chain strategy that you can begin to truly see areas where you are overly-dependent; perhaps you are involved in a global value chain that is highly reliant on China? An economic shutdown in that country could trigger widespread disruption to your own supply chain and affect the flow of goods to customers.
It’s not just businesses entering survival and recovery that can benefit from privileged insights, but businesses that are looking to maximise opportunities and pivot towards new operating models too. For example, one of few industries to grow during the pandemic has been eCommerce, with global online sales growing 76% in June.1 For some manufacturers, transitioning to eCommerce purchasing models can mitigate some of the risks involved in overly-reliant supply chains, enabling them to go direct to customers instead of incurring the costs and processes associated with distributor partnerships. Or for those businesses that have pulled out of the aerospace race, there will be a need to build new supply chains rapidly and effectively. The right data-driven insights can help these businesses successfully mitigate risk and build for the future.
Data is the new currency
At Alliance Procurement Solutions, we recognise that effective procurement strategies are focused around more than simply getting the best price. That’s why we have invested heavily in the development of i-QMN for spend and procurement analytics, a game-changing method to help supply chain businesses identify opportunities for margin improvement, mitigate supply chain risk, improve supplier collaboration, implement lean purchasing processes and successfully build for the future – whatever that may hold.
The platform removes the pain of trying to understand your data by creating interactive cloud based charts which enables us to delve deep into your supply chain, unpack it supplier-by-supplier, PO-by-PO, product-by-product and reap vast pools of data on historical trends. With this insight, we can help you to make small but highly valuable changes to your supply chain that will help you move from survival to recovery, or maximise new trading opportunities in other countries, industries or supply chains.
Whatever the writing on the wall may say for your business, we can help you to address it through privileged insights. Contact us today for a free 15 minute consultation.