The Importance of Proactively Managing Your Supply Chain

We have written before in this blog and the press about the strategic value of understanding your global supply chain using process mining technology. And, we’ve shared the success Celonis customers, such as Siemens, have had in managing and improving their order-to-cash (and other) processes globally. But there are important geopolitical shifts occurring which will move proactive global supply chain management from “important” to “mission critical.”

Over the past 30 years or so, trade barriers have been steadily torn down, resulting in an increase in global trade. Subsequently, business built their supply chain strategy on the underlying assumption that we should expect more, and freer, trade in the future.

The result of this uptick in global free trade is a massively interconnected global supply chain in which finished goods may involve raw materials, parts, labor and services sourced from tens, if not hundreds, of unique individual locations. Business operates on the assumption that this supply chain will flow reasonably unimpeded, especially once it’s been established. To the extent that these flows are interrupted, the assumption is that supply lines can easily be rerouted and reestablished to a backup supplier or service provider. And, most critically, business assume that over time these global relationships will change because business terms change, not because free trade has fallen out of favor.

And yet, recent events have begun to call into question these assumptions. The two most obvious events are Brexit and the current US conflict around trade and tariffs (China and Canada/Mexico most notably). The major symptom of these events is that these nations are moving towards fewer open border policies and increased restrictions on trade.

These changes are forcing businesses to evaluate their global supply chain relationships and strategies. To do this effectively, business must elevate the importance of proactive global supply chain management. Specifically, businesses need to:

• See the up-to-the-minute reality of their supply chain. Understanding reality is the first step to improving it, and, its critical to understand not only the most common paths through the supply chain, but every variation and detour that costs you time, money and agility. You never know when that uncommon path through your supply chain will save the day when trade breaks down with your preferred vendor’s country. Of course, this is a key strength of the Process Discovery capability in the Celonis Intelligent Business Cloud – gathering data from all your operational systems to let you visualize your as-is supply chain process.
• Have a deep understanding of supply chain risks and opportunities. It’s critical to understand where costs and revenue are hidden in your supply chain. Calculating the business impact of changes to your supply chain lets you proactively plan for disruption, and implement important contingency plans. It is critical to be able to conduct this analysis in the context of the supply chain process that drives your business, because important details get lost when you look at flat sums and averages in reports and dashboards. Again, the Process Analytics capability in the Celonis Intelligent Business Cloud can give you all the metrics and data you need to drive a deep and clear understanding of every variation in your supply chain process.
• Most importantly, plan and act for the future. Knowing your supply chain processes and what metrics matter within it is useful, but business need to engage everyone in the company in the daily work of making your supply chain hum. Especially if we expect disruption and unexpected changes in geopolitical relationships, we need to be able to react quickly and efficiently when things change. This is where the Action Engine capability in the Celonis Intelligent Business Cloud shines. The Action Engine builds an AI model on the historical data from your supply chain and evaluates new data as it arrives (new orders, inventory items, or part shipments, for example) and uses its model to indicate which actions can be taken to maximize the efficiency of that supply chain process.

The world may not be quite as flat as Thomas Friedman had opined. Success in the modern era will come not from assuming a smooth global supply chain which is only made smoother by decreasing trade barriers, but by proactively managing your global supply chain to react quickly to changes in the global trade landscape.