Fewer empty shelves thanks to faster access to data

Many retailers in the UK are struggling with empty shelves due to a ‘perfect storm’ of supply chain shortages, ranging from goods to drivers. One Network Enterprises advocates the creation of digital social networks for businesses where all stakeholders can immediately gain access to information about disruptions. During Webinar Wednesday, Shirell James from One Network explained: “The best way to get rid of the bullwhip effect is to eliminate the lead time for data.”

By Marcel te Lindert 

In the first 20 weeks of this year, Halfords recorded a 23% drop in turnover compared to the same period last year. The British retail chain that sells automotive and cycling products blames this on supply chain disruption. Due to problems with the import of goods and a severe shortage of truck drivers in the UK, it has become impossible to keep the store shelves stocked – and there’s no sign of a solution in the short term, according to Halfords.

And Halfords is not the only retailer with problems, said Shirell James, Senior Vice President EMEA at One Network: “The UK economy virtually stalled in July due to shortages of goods and labour. According to official figures from early September, the economy grew by just 0.1% in July. It’s not just individual companies or supply chains that are facing problems, but the whole economy is being hit. And that’s in the month when the British government lifted most coronavirus restrictions.”

Social network

Founded in the UK, One Network Enterprises manages networks of supply chains in various sectors, such as retail, automotive and healthcare. “In the past, you saw mainly hub-and-spoke models: companies that tied their supply chain partners to them by connecting them to their own ERP system. Our model is similar to that of social media. Every company can join the same social network, where everyone is connected to everyone else. They can define which partners in that network are allowed to see which data and when. The common goal is to solve the problems of the sector for which that network has been set up.”

The problem with traditional models is that it takes a long time for relevant data from one party to reach all the other supply chain partners. “The best way to get rid of the bullwhip effect is to eliminate that lead time. If you can make the data immediately available to all interested parties, you can reduce the bullwhip effect – and that’s important, because it’s the bullwhip effect that causes supply chain disruptions.”

Responsiveness

James talked about a digital supply chain network that provides up-to-date insight into supply and demand and into the manufacturing and logistics progress. The participants can work closely together through the network and therefore respond quickly to changes in supply and demand. “Companies that are only concerned with optimizing their own operations often merely shift the problems upstream or downstream. By collaborating within a digital network, it’s possible to solve problems for the entire supply chain, including with the help of artificial intelligence. Which stock should I hold where in the network? And what is the best purchasing strategy, given the lead times in the network?”

Connecting supply chain partners together in a digital network enables the impact of disruptions to be minimized. “Look at the huge number of disruptions in the coffee supply chain: coffee crops in Brazil have suffered frost damage; container shipping problems have delayed supplies; there has been a shortage of cardboard for disposable coffee cups in the UK, partly because of Brexit, not to mention staff shortages in the transport and hospitality sectors. Everywhere in the coffee chain, businesses are losing money because turnover is falling or margins are declining.”

Patching the wounds

The current problems are partly due to increased supply chain complexity. As more and more companies have outsourced parts of the primary process, this has created mutually dependent networks. “And the greater the interdependence, the greater the risks and the smaller the supply chain resilience and agility will be. Companies managed to cope with those risks for a long time, but not anymore. They’re now trying to solve things with supply chain visibility tools, but in fact they’re merely patching the wounds.”

The problem is that a lot of information still travels through the supply chain from link to link, or rather from silo to silo. “We need to rid ourselves of that silo structure. Moreover, 80% of the data needed to adequately manage supply chains comes from partners. How can you get access to that data? Many companies are setting up a data lake. But they would be wise to also include external data from their supply chain partners, because that’s what provides visibility into the disruptions.”

Maximum profitability

James emphasized that the purpose of supply chains is not to make products, but rather to manage the process in a way that leads to maximum profitability. Supply chains are currently leading to lost sales because product availability is decreasing. Costs are rising because more employees are needed to monitor the supply chain and solve problems, and because inventory and transport costs are increasing. Because each link in the chain builds its own buffers to protect against disruptions, a lot of working capital is tied up in stocks that are not generating value. “A digital supply chain network makes it possible to optimize the planning and execution of activities in the end-to-end supply chain, so the supply chain gains speed. And speed is always a winner.”

So how can you set up a digital supply chain network? James offered a few tips: “Start with visibility, so that the whole network is working with a single version of the truth. Then, you need systems so that you can take action based on the resulting insights – and those actions must add value.” Lastly, James stated that no supply chain stands alone; each one is part of a global network. “And therefore every disruption impacts on many supply chains, not just yours. The better those supply chains work together, the better it is for everyone.”