April 2024


Closing the Gap: In a turbulent economic environment, how can a more agile supply chain deliver business growth?

Claire Agutter

In the volatility of today’s international markets, businesses need to be agile and responsive and supply chain flexibility has emerged as a game-changer. “The ability of a business and its capacity to swiftly adjust supply chain operations in response to unpredictable market demands and supply-side disruptions can be make or break for many”, says Claire Agutter.

Riding market highs and lows

Companies are up against an avalanche of challenges and uncertainty in 2023: high inflation, rising interest rates, recession, geopolitical conflict, energy crisis, competition for talent and vulnerable supply chains, just to name a few. These factors are contributing to, and compounding, a complex, uncertain business environment. Whilst most of these are issues the world has encountered before, the ability to be agile and responsive with supply chain flexibility is needed now more than ever in businesses operating in a digital world. Put simply, a business’s capacity to swiftly adjust supply chain operations in response to unpredictable market demands and supply-side disruptions can be the difference between boom or bust for many businesses.

An agile and flexible supply chain

By incorporating more flexibility and resilience across their supply chains businesses can withstand unexpected shifts in market conditions and changes in customer buying patterns. The key to a flexible and resilient supply chain is integration, transparency, and data intelligence – core components of an effective Service Integration and Management solution (SIAM).

Bringing clarity to a complex supply environment, SIAM methodology enables companies to focus on end-to-end value and identify all of the service providers that support that value. Think of an end-to-end supply chain as a puzzle to be put together intelligently. Each piece must fit perfectly with its peers, resulting in a unified solution that yields valuable data. SIAM brings visibility into every element of logistics; from the time an item is put on a ship to when it’s delivered to the customer. Businesses can then use that insight to make the right inventory decisions to deliver on time to customers and, more broadly, to forecast future demand. Just one of the many benefits that are delivered via a SIAM model. For digital products and services, SIAM helps organisations to leverage specialised skills from different service and cloud providers to deliver the best possible online experience for their customers. In dealing with the unexpected, companies can also rely on that data to drive experimentation into potential new logistics solutions. Ultimately there is no downside to establishing a flexible supply chain which incorporates a SIAM model since it gives businesses the ability to deal with supply chain disruptions and demand changes more intelligently.

Bolstering the supply chain with Artificial Intelligence & Machine Learning

Companies are solving many types of problems in their supply chain with the use of Artificial Intelligence (AI). In the supply chain realm, machine learning (ML) is where most of the activity surrounding artificial intelligence has been focused. Used since the early ‘00s, ML can predict demand forecasting and market changes as well as suggest optimal responses and streamline operations. For example, forecasting how much of a particular product will be sold in a particular store is far more intensive than forecasting how many products in a product family will be sold in a region. This explosion in the number and accuracy of forecasts would not be possible without the latest generation of ML. Integrating AI into the complex web of production and distribution—the supply chain—will have a bigger economic impact than any other application of the technology and affect a larger number of businesses. McKinsey estimates that firms will derive between $1.3trn and $2trn a year in economic value from using AI in supply chains and manufacturing. AI is becoming much more widely adopted in business due to progress occurring on several fronts at the same time. These include the development of new machine learning algorithms, computing power, big data analytics, and acceptance by decision-makers and business leaders.

The advantages of a diverse supply chain

A resilient supply chain is diverse, sustainable and can minimise risk, and if the COVID-19 pandemic has taught supply chain leaders anything, it’s the importance of supply chain resiliency.  One that can flex when stressed, is not disrupted by geopolitical, meteorological, health, or economic shocks, and is secure for the long term. To successfully apply this equation relies on understanding exactly where your suppliers are, and what they supply. Multi-tier mapping of suppliers and reviewing supplier sourcing approaches for critical parts, products or services are fundamental to resilient supply chains – it’s often the delay in deliveries of small but crucial components that can halt production; or a technical change by a single organization that brings down an entire IT system. Economic nationalism increasingly impacts supply chains, and as a result, many businesses are looking to localise or nearshore their suppliers. A “glocalisation” approach, driven by the pandemic and sharp changes in global trade policies, focuses on balancing localised and globalised business options to stay competitive. Diverse suppliers can help cut costs and drive innovation. Their product or service may be more innovative – as supply chain strategy changes, businesses may find diverse suppliers are more open to proofs of concept. Another advantage is that diverse suppliers tend to be more localised to a business’s manufacturing and distribution sites, which in turn has a ripple effect of helping local businesses buy the goods and services they need to stay afloat.

New suppliers may not necessarily be better than existing ones

Sometimes it’s more about working with your existing suppliers than finding new ones when times are turbulent. A great relationship between buyers and suppliers can increase resiliency, generate new value, produce new product development, and effectively decrease costs. Businesses that invest in supplier relationships will be more robust to weather economic challenges and stay open for business. It may also be said that those who regularly collaborate with suppliers have higher growth, lower operating costs, and greater profitability than other competitors in their sector. Leading businesses are looking for new ways to collaborate with existing suppliers but there is also an opportunity to cultivate supplier relationships that are more collaborative from the start. The benefits of effective collaboration can include growth, innovation, productivity, and the quality of products and services. A lesser-discussed benefit is the opportunity to support local, minority-owned businesses many of which can face significant challenges gaining access to larger businesses as a client and who are often vulnerable to the slightest change in market volatility.

How to make your supply chain more efficient

Faced with 2023 economic challenges, having a flexible, robust, and diverse supply chain will undoubtedly deliver value for money. At Scopism our SIAM Community enables connections between those who need support and those who know how, with members including practitioners, customer organisations, service providers, consultants, software vendors and many more. We celebrate your wins and feel your lows. Here are some of the communities’ advice for closing supply chain gaps to ensure your business remains agile and competitive:

  1. Incorporate a Service Integration and Management (SIAM) model – Put simply, SIAM is a way to bring clarity to a complex supply environment. It allows you to focus on end-to-end value and identify all of the service providers that support that value. SIAM helps your service providers to understand where they fit into the big picture and how they contribute to business outcomes.
  2. Employ AI and ML in the supply chain – AI and ML-led supply chain optimisation software amplifies important decisions by using cognitive predictions and recommendations on optimal actions. This can help enhance overall supply chain performance. It also uncovers possible implications across various scenarios in terms of time, cost, and revenue.
  3. Minority suppliers – Not only can diverse sourcing contribute to building a more resilient supply chain, but increasing spending with minority suppliers creates value and shows your business is serious about social commitments to its broader ecosystem: customers, investors, regulators, communities, employees, suppliers, industries, and competitors.
  4. Believing in existing suppliers – A long-term relationship between suppliers allows for the free flow of feedback and ideas. Over time, this will create a more streamlined, effective supply chain that could have a positive impact on both costs and customer service. It also should mean that when issues do arise, the healthy working relationship between supplier and client will make such issues easier to resolve.

Be a part of our SIAM community.

As the global markets continue to inflict supply chain disruptions, businesses that build resilient robust supply chains underpinned by a Service Integration and Management model are more likely to succeed. At Scopism, we speak to companies and individuals in over 40 countries that are practising SIAM across a broad spectrum of industry sectors. We celebrate your successes and feel your struggles and we want to provide a way for you to share stories, and encourage discussion through our SIAM Community where you’ll find lots of free online resources. Our goal is to help as many businesses as we can to thrive and grow with us being seen as an extended part of their team.

About Claire Agutter

Claire Agutter has extensive experience in service management spanning over 20 years. As an experienced service management trainer, consultant and author, Claire founded Scopism and is the publisher of the SIAM Foundation and Professional Bodies of Knowledge. Claire specialises in helping organizations get value for money from their IT investment and was nominated by Computer Weekly as one of the most influential women in tech. Claire is also the host of the popular ITSM Crowd YouTube channel and the Chief Architect for VeriSM.

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