Navigating the logistical challenges posed by natural disasters, unpredictable geopolitical forces, and disruptive trade wars is not new territory for supply chain managers. But as Executive Director of Supply Chain and Operations Programs and Executive Director of the Global Supply Chain Institute, Shay Scott notes, rarely have supply chain managers (SCMs) had to navigate so many potential roadblocks simultaneously. Take, for example, the final week of August 2019-a week when China announced $75 billion tariffs on US goods; hurricane Dorian turned toward the Bahamas; typhoon warnings were issued as tropical storm Padul hit Vietnam; wildfires raged in the Amazon; protests brought Hong Kong to a virtual stand-still; and President Trump tried to order US manufacturers to pull out of China.
Alone, any one of those events could create global supply chain roadblocks. Together, events like those of late August create what’s known as the VUCA world -volatile, uncertain, complex, ambiguous. Modern supply chains often have hundreds of suppliers and multiple manufacturing sites all around the world, so any disruption carries the potential for impact. Scott, though, is quick to point out that while pessimists may find our current era of supply chain management challenging, optimists see unparalleled opportunity.
This opportunity is created by proactively anticipating turbulence and preparing solutions that will not only mitigate risk but offer a better solution. To do this, supply chain executives at high-performance organizations (HPOs) are turning to innovative practices identified by Mike Burnette, Mike Policastro, and Timothy P. Munyon of the Global Supply Chain Institute (GSCI) at the University of Tennessee, Knoxville. These innovations are responding in particular to the following trends:
- Generational change
- Digital world
- Customer revolution
- Consumer “personalization”
When companies understand the effects of these forces on supply chains, they gain an inherent competitive advantage. For example, Scott explains that President Trump’s decree urging US manufacturers to stop doing business in China was, for high-performance organizations, a moot point. Even before the US-China Trade War began heating up, many supply chains had already started the process of turning their risk-management strategies away from cost-centric models and toward regionalization, which reduces transit times and increases pressure at supply nodes. According to Scott, the customer revolution gives consumers “increasing choices and demands.” He goes on to say, “[Customers are] increasingly unforgiving. So, there’s more of a commercial reason to have a supply chain with more resiliency built into it, because if you don’t deliver, customers are gone.” Regionalization should already be taking place.
The supply chain process was once understood primarily as a way to mitigate risk, but now top companies see the supply chain as a vital way to deliver profitability. Research conducted by GSCI suggests top companies need holistic supply chain leaders with an end-to-end understanding of the supply chain that drives growth strategy. By learning to see the supply chain as a whole-from the supplier’s supplier to the consumer’s buying experience-and understanding changes in the next decade of supply chain management, supply chain managers can take Scott’s advice and make disruption an invitation for innovation.
Importance of innovation in supply chains
Not unlike our current rapidly changing geopolitical and environmental landscape, the early 1980s were a similarly tumultuous time, marked by globalization, offshoring, new product categories, an energy crisis, the escalation of the Cold War, and higher shareholder expectations. During this period, the supply chain industry reacted by recognizing that organizational thinking needed to evolve. In 2000, the industry again evolved, this time to focus on not only the global supply chain but, more specifically, the end-to-end supply chain.
Today’s supply chain managers are working within the most complex landscape in terms of both challenges and opportunities, and this is a period in which supply chain management must adapt and innovate. If you are not innovative in your supply chain, you’ll lose out on having a competitive advantage. It’s important to constantly innovate and to do this you first need a keen understanding of the trends shaping supply chain management. As we look forward to 2025, supply chain executives will need to watch out for several important shifts:
1. Generational change
Baby Boomers were born between 1946-1964. In the next decade, the youngest boomers will turn 65, aging that generation out of the workforce. While not all people within a generation behave the same way, there are certain general differences between Boomers, Gen-Xers, Millennials, and Gen-Zs that employers need to consider if they want to get the most out of their workforce.
For example, Baby Boomers implemented and supported the end-to-end supply chain strategy like standardization. New generations, though, question practices that can seem to limit flexibility. Benchmark companies are asking younger employees to “standardize what we know” and to present innovative flexible solutions for problems that have yet to be solved.
As the workforce demographics shift, supply chain executives will want to ask themselves:
- How can the supply chain leverage Gen X’s results-focus and self-starting abilities?
- How can the supply chain leverage Millennials’ strong ethical and social responsibility?
- How can the supply chain leverage Gen Z’s technical skills and expectations of a dynamic environment?
2. Digital world
We are in the midst of the fourth industrial revolution, which is being driven by rapid advances in technology. Almost any manual task can be innovated with the correct application of new technologies. GSCI partners with top businesses, including Fortune 100 companies, who have used technology to innovate across the supply chain. High performance organizations are growing revenue with innovations such as:
- Deploying drones to perform inventory cycle counting and maintenance and safety inspections
- Investing in massive training to shift technological resources to managing digital systems
- Equipping workers with virtual reality glasses in plant and warehousing operations to access videos/data at the point of execution to help with maintenance procedures, operational problem-solving, order picking and packing, and other training/resource needs
3. Customer revolution
Sub-trends like online shopping, the rapid invention of new retail outlets, and the consolidation of food and mass-discount retailers such as Walmart, Target, and Kroger have all helped propel the customer revolution. Overall, when it comes to shopping, customers expect shorter shipping times and quicker replenishment of sold-out inventory. These expectations place high demands on service and quality while pressuring manufacturer margins. But, as Shay Scott explains, chasing lower costs with fewer factories and cheaper labor only increases complexity and decreases supply chain visibility.
To innovate within the customer revolution, Scott suggests companies look at new technologies that can help move the global supply chain suppliers into regional structures. This will help meet customer expectations by increasing supply chain visibility and agility. Regionalization can ultimately save money by aiding companies in retaining happy, satisfied customers.
4. Consumer “personalization”
Coupled with the customer revolution and generational changes, today’s consumers increasingly expect personalized products, which increases complexity and requires innovation. Coca-Cola, for example, now offers sodas that have your name written on the can. This one change means that the supply chain for Coke has gone from one sku to hundreds of skus-as each name requires a different code.
Supply chain innovation is critical to the success of your business, and these trends help identify areas for growth and change.
What drives supply chain innovation?
These developments in supply chain management are driven by the changing internal and external expectations placed on the supply chain. Externally, technology has changed the ways customers order products and services. Internally, technology has changed almost every operational process including manufacturing, hiring, training, quality control, and transportation.
To take advantage of the drivers of supply chain innovation, GSCI case study recommends five new best practices:
1. Thrive on speed:
Speed underpins changes in supply chain practices, and embracing speed offers one instance of using disruption to drive opportunity. Rather than being rattled by the many challenges of the VUCA world, benchmark companies use speed to effectively engage their workforce and accelerate their growth. When coupled with supply chain visibility, speed offers a competitive advantage. It lets supply chain executives eliminate non-value-added work, standardize repeatable tasks, and reduce self-induced variation.
2. Look at project- vs. role-oriented career progression:
HPOs have found success organizing work around projects in a merit-based system rather than roles in a tenure-based one. This model also takes advantage of the generational differences in employees by empowering individuals to effectively solve business challenges.
3. Embrace generational differences:
Diversity, including generational diversity, helps companies by bringing a multitude of ideas to address complex challenges. When solving a problem together, established employees will bring a wealth of knowledge to the situation, and younger employees will bring both new skills and a new point of view.
4. Establish virtual networks:
With today’s technology, global supply chain teams are no longer defined by shared corners of the office. Many teams today don’t even work in the same time zone, let alone sit on the same floor. Virtual communication platforms enable social connections that bring together team members who have never met in real life, letting them collaborate, bond, and share ideas.
5. Focus on supply chain lean innovation:
Supply chain executives can use lean innovation to keep up with the demands of changing market needs. Lean innovation focuses on letting leaders create supply chain management environments that facilitate the creative solutions necessary for today’s VUCA world.
Supply chain executives should strive to respond as quickly as possible to the key drivers of supply chain innovation. If there’s one overarching value, it’s speed. Innovation now happens in real-time. It spans virtual networks of employees across the end-to-end supply chain, from the first vendor you contact all the way to final delivery.
Examples of supply chain innovations
A study by McKinsey and Company found that recent examples of innovative supply chain management rely on using new technology to maximize speed, flexibility, and efficiency. The challenge, according to McKinsey, is not that our world is too complex, but that companies must act swiftly to implement solutions and be the first to gain new competitive advantages.
If a new innovative technology doesn’t yet exist, McKinsey’s research suggests supply chain professionals take advantage of customizable software. On-time in full (OTIF) is a common metric supply chain managers use to measure how often customers receive a correct order in the estimated time of delivery. One consumer packaged goods (CPG) company McKinsey spoke to explain how they merged a new analytical system with their existing system to increase supply chain visibility and raise their OTIF to 95 percent. The custom software analyzed raw materials down to the SKU level. It looked at more than one terabyte of data per day-a task that would be impossible for a human to complete-and delivered optimized suggestions. Critically, the company developed and deployed this system all within just three months.
Successful supply chain innovation
For research on how high-performance organizations innovate, GSCI case study featured 14 benchmark companies across the beverage, equipment, technology, automotive, chemical, food, and CPG industries. Their findings suggest supply chain innovation unlocks business growth through a cycle. Innovation begins with people. It means empowering supply chain professionals-from entry-level supply chain managers to seasoned supply executives-to pursue their own personal growth within an organization. By doing this, all employees then begin innovating in their roles and adding value, which produces top-line growth.
To successfully implement new supply chain innovations, you’ll need to:
- Be aware of the challenges to the global supply chain Understand the changes that will shape supply chain management into the next decade
- Be prepared to implement established and new best practices Above all, act quickly, and remember supply chain management challenges are opportunities for growth
Innovation in education
To innovate successfully, supply chain managers must be adroit. They must be well-versed in the principles of leadership, and they must be able to navigate a quickly changing landscape. Debbie Hodges, a supply chain executive at Walmart, says, “High-performance teams that deliver top-notch results will need to have top talent who bring a broad perspective to the decision table. Diversity and inclusion in the supply chain and logistics industry will help strengthen those decisions that are made in business meetings and board rooms.” In fact, GSCI found companies with above-average diversity leadership scores reported nearly double the revenue tied to innovation as companies with below-average scores.
GSCI is careful to say university programs alone cannot solve systematic diversity issues, but programs like the online Master of Science in Supply Chain Management at the University of Tennessee, Knoxville’s Haslam College of Business play a meaningful role in developing talent across all levels of industry.
Home to one of the most well-respected supply chain programs in the world, Haslam is consistently ranked as a leader in supply chain management education, and their faculty are highly regarded for their cutting-edge research and commitment to teaching. Online learning works like virtual networks in the supply chain. With new technology, Haslam is empowering students who are either working or cannot relocate for graduate school to pursue an advanced degree. If you’re interested in advancing your career as a supply chain manager-or pursuing a new career as a supply chain manager, learn more about Haslam’s online MSSCM.
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