The condition of the supply chain worldwide has felt a little like whack-a-mole for the past two years. The start of the pandemic created a run-up on products that was unprecedented due to closures and conditions; so many firms could not keep up with demand. Just when we would solve the toilet paper crisis, for instance, we would see a large goods issue, then a food issue, and so on. The list seemed to go on and on, with even headstones and chocolate impacted earlier this year. The best of these enterprises dug in early and used every advantage available to find solutions. Often, though, these were band-aids, such as paying more for supplies, moving supplies around differently, or changing their ingredients.
Most manufacturers were, in fact, thwarted by their own efficiencies born by years of cost and supply chain efficiency work. “Just in time” manufacturing, which companies had refined over many decades, meant tighter inventories that could not be made into products fast enough to meet demand. This caused material backlogs that could not be fulfilled quickly, often due to labor shortages and congestion at ports and on rails. You could say this supply chain crisis has challenged even the most resilient enterprises to innovate far beyond business as usual.
Additionally, they continue to do so because even as shipping logjams and raw material shortages have lessened, the continued issue of unfilled jobs and high turnover is preventing many companies from meeting the demand for their products. Now, these very same enterprises are turning towards technology partners to help them solve beyond the short-term fix for these and many more supply chain issues. This is where partnering has proven to be a boon for these innovative enterprises. Let’s look at what is happening.
Technology, Technology… Where Are You?
There is a myriad level of solutions to help solve several of the problems with the supply chain. Not the least among them, AI and robotics begin to overcome the staff shortages vexing the world’s top manufacturers. Even so, these solutions require a significant investment, data accuracy, deployment expertise, and integration specialization.
Oftentimes, these projects are tied in with very dated or bespoke IT programs, many of which were homegrown over decades by the enterprise. The design and adoption of these solutions is rarely something an enterprise can “handle” on its own. After all, there are so many solutions to choose from and so many paths that can be taken with that technology that you would almost require a Ph.D. in supply chain technology to figure out the best path forward.
Enter the partner. This is where smart enterprises are bringing in a strong seasoned partner, such as Accenture or other GSIs (Global Solution Integrators), to solve the issue of complexity and determine a path forward.
The partners are taking notice that this issue exists and investing in a big way to be the “go-to partner” for the supply chain. Just consider the recent investment by Accenture, which acquired technology partner Inspirage for the supply chain. Focused on supply chain management and automation, this acquisition firmly puts Accenture in the game to be the go-to partner for its enterprise clients. Others will not be far behind; in fact, this analyst would opine that the next decade will be paved with partnerships in the ecosystem designed to redefine the supply chain in the enterprise and eliminate former gold standards, like “just in time,” to ensure competitiveness and survivability for the enterprise.
Innovation at a Cost
But where will the money come from for all this innovation? That’s the million-dollar, or should I say, the multi-million-dollar, question for most firms. IT budgets already under pressure are now having to find money to overcome staff shortages on manufacturing, shipping, and warehousing floors in a way they previously never deemed possible. While the technology is now in the realm of possibility, the budgets may not be. Again, this is where smart enterprises are working with partners to overcome the budget challenge in several ways; let’s look at two common models below:
TEM Grows Up
For many decades, TEM (Telecoms Expense Management) has helped enterprises save on their telecom expenses. This proven approach to evaluating all spend and negotiating better deals with the carriers is serving as a roadmap for application and cloud bloat in enterprises. Several partners are now springing up that offer technology expense evaluations and negotiations that are saving enterprises significantly with their budgets — budgets that can be spent elsewhere. For example, these budgets can be used on supply chain innovation.
Talk to your current partner about sizing your enterprise IT spend in total, looking not only at the cost but also at pricing models — innovations in per seat vs. per usage and other pricing models can help your budget in the year. If they can’t do that, identify a partner who can. With our current economic uncertainty, there are deals to be had on renewals of technology spend alone that can help savvy IT pros identify some repurposed budget to spend on innovation.
Shared Cost Models
Some partners are offering at-risk fees for helping the enterprise with its most vexing supply chain issues. While there will be some fixed costs, some of these firms are offering up a variable rate structure that allows you to launch an innovation and then pay the partner a small percentage of the firms’ savings (less headcount in manufacturing as an example) or results (faster supply chain throughput). Challenge your current partners to offer these variable costs or shop around to find a partner who will.
The bottom line is that partners can’t find you more raw materials for your supply chain, but they can help you identify and deploy the technology that will allow you to better manage your raw materials into final products in the timeliest and most cost-effective manner possible. If your current partner ecosystem of suppliers isn’t up to that challenge, then it doesn’t comprise the right partners for your enterprise long-term. Now is a great time to consider who you should be working with and hold “open auditions” for the partners who can help you solve your most pressing supply chain issues while preserving your IT budgets.
Want more tech insights for the top execs? Subscribe to the CXO channel: