The supply chain of tomorrow

This audio was created using Microsoft Azure Speech Services

Supply chains are in the spotlight. Following the crisis, there is speculation on how they will adapt in the future. In recent years, with efficiency as a constant driver, we have been experiencing a transformation defined by four key trends: digitization, sustainability, customization, and regionalization. It was these trends that underpinned Schneider’s Supply Chain Strategy Tailored, Sustainable, Connected 4.0, implemented four years ago.

Today, resilience is at the top of everyone’s agenda – but what does it mean for supply chains?

We can expect these four existing trends to accelerate.

Customization evolution

Supply chains must adapt to different types of customers. Customization is the new normal: tailored requests, speed, and local engagement are necessary. A “one-size-fits-all” approach to supply chain inhibits growth and broadly leads to dissatisfaction. Embarking on our own journey, we have developed five Supply Chain models to reflect the expectations of our different customer segments, including integrators, electrical distributors, and end-users.

Digitization of operations

Digitization provides the answer to building a customer centric supply chain.  All are looking for efficiency, productivity, and quality. Unless operating processes are connected, systems and tools cannot truly support the needs of customers or the business.

Connection allows us to control, monitor, and optimize every part of the process. It creates the desired end-to-end view, which can be visualized at control towers located at key points around the world, to provide on-site, real-time knowledge driven by data analytics. Such connectivity creates the ability to make better sense and predict demand with customers, triggering a reaction along the links and activating frontline teams to address needs more efficiently. Together, connectivity and artificial intelligence can eliminate downtime by continually running tests to improve performance, detect issues and create diagnosis before outages occur. This enables predictive and preventative maintenance.

Thanks to digitization, suppliers can be fully integrated into an “extended supply chain”, encouraging transparency and traceability. Digitization becomes a foundation for circularity. It opens manufacturing to all shareholders and changes the relationship between suppliers.

Of course, the human component is key. Digital allows for agile management, augmenting and empowering field operators and enabling unmanned operations to ensure their safety. Digitization breaks down silos and builds collaboration and trust.

At Schneider, we deploy our own technologies across our Global Supply Chain footprint of 300 Connected Factories and Distribution Centers, 100+ of which are “SMART” Certified. We have sites in Asia, China and Europe designated as World Economic Forum advanced manufacturing “Lighthouses”.

Sustainable momentum across the chain

While the headlines have increased in recent years, sustainability in supply chains is not a new trend. Supply chains are major contributors to environmental impact. Since the early 2000’s, many sustainable initiatives have been undertaken.

Our actions focus on three factors:

1. Zero-carbon to reduce our CO₂ footprint, reducing emissions and de-risking operations.
2. Circularity in both our design and end-of-life processes to minimize resources.
3. Conserving biodiversity through minimizing water and resource use.

While the momentum was already underway, it will be accelerated going forward. The need for sustainability to address primary threats such as Climate Change has been reinforced by COVID-19 and will be a priority in recovery plans. Governments and businesses alike are focusing on a green future.

Greater regionalization

The past twenty years have seen the supply chain footprint shift. In early 2000’s, the footprint was highly concentrated in mature markets. By mid-2000’s, to align with customer footprint and optimize costs, it shifted to an industrialized footprint with international production lines. Today, the risks associated with long chains, along with growing trade tensions and geo-politics, are causing many organizations to again re-evaluate. Globalization will probably not disappear, but going forward, we can expect greater regionalization.

Over the past ten years, we have implemented a multi-local and balanced footprint approach, complemented by tight global coordination. This will increase – we need to further build our local resilience through shorter supply chains, rooted in local communities. Our local operations can understand better, adapt quicker, reverse logistics, and repair locally. This is not a shift from globalization, merely a new form – global players connected in shorter chains.

None of the trends are independent from one another. Digitization drives sustainability – it is critical for efficiency, circularity, and decarbonization of energy. Sustainability is a driver for regionalization – reducing mass transportation significantly reduces climate impacts. Regionalization allows tailored supply chain solutions through flex centers bringing even more value to customers. And as we see an increase in digitization across supply chains, regionalization will be facilitated.

Building the supply chain of tomorrow

There are many questions circulating about to what extent COVID-19 will change or accelerate these trends. There is no denying that the crisis was a supply chain crisis (caused by lockdowns, borders closing, country-by-country specifics…). COVID-19 has not changed the fundamentals; rather it has acted as a catalyst that is forcing all organizations to rapidly adopt these trends. This builds resilience, and those who embrace it quickly will set themselves up for success.

A multi-local approach. A purely local footprint is not feasible – one disruption can bring down the whole chain. To overcome, organizations need to regionalize, with a form of redundancy, and empower the local level, with a tight coordination of local sites. Of course, such reorganization will impact costs. But it will be in both ways – increased CapEx for redundancy and relocation, and reduced costs due to decreased inventory and working capital from shortening the supply chains, as well as higher sustainability.

Resilience requires an end-to-end vision. It should be considered at the level of the interconnected partner ecosystem. It requires visibility and transparency from both Tier One and Tier Two suppliers all the way to customers.  Business continuity plans need to reflect this end-to-end value chain.  

A step change in efficiency can be achieved through integration across four axes: the integration of energy and automation to achieve both energy and process efficiency; the vertical integration of end-point to cloud, so all data from the shop floor upwards is visible; the lifecycle integration, capturing data from design and build, all the way to operation and maintenance, to eliminate the inefficiencies in the transition from CapEx to OpEx; and the integration of all sites and workshops into One Unified Operation Center for a big-picture view of energy and resource consumption.

Technology is the answer. We need digitization across every aspect of the chain. Automation can support event response and day-to-day operational management, predicting and mitigating risks to customer demand and shaping scenarios to delivery optimal efficiency and agility.

The good news is the technology to build a resilient, agile, and collaborative supply chain already exists.

We can build the supply chain of tomorrow, today.