The Covid-19 epidemic has highlighted the vulnerabilities of the traditional physically offices and ways of working together with external partners and suppliers. It introduces many companies to start working remotely in supply chain. How will that influence the way we work together? What are the benefits and how would Supply Chain management have to ensure adoption of a new culture and new technology? Read this text and learn about working remotely in supply chain.

Higher productivity and job satisfaction
Statistics are indicating that nearly twice as many are working from home full time. That is nearly twice as many as ten years ago. Why so? People feel a higher satisfaction, productivity and organizational commitment as well as decreased stress levels and exhaustion. This could also be the case when working remotely in supply chain.

Hire the best people
Some companies have gone all the way and are no longer maintaining an office. They have people working all around the globe and are trying to exploit new technology to the fullest. The “all remote model” allows companies to hire the best people wherever they are. For some companies it would mean reducing cost because they would not have to pay high rent and perhaps also high salaries.

Effective culture
The company named GitLab has over 1000 people located in 60 countries around the world. They have no physical offices. They have not only experienced a financial impact but are also reporting a cultural impact. Normally offices breed politics. Intrigues, backstabbing, toadying and other forms of power brokering behavior thrive behind closed doors. Removing the walls fundamentally changes organizational culture. The assumption is, that a dispersed company committed to open discourse, with no political manoeuvring, will work more cohesively than a standard co-located company.

Harness and grow supplier innovation
Supply Chain innovation is a way to create new competitive advantages. Suppliers and partners play a key role. Best-in-class companies work closely with suppliers and partners long after a deal has been signed.

In most circles today, this is called “supplier relationship management.” But that translates to one-way communication (telling the supplier how to do it). Two-way communication, which requires both buyer and seller to jointly manage the relationship, is more effective. A more appropriate term for this best practice could be “alliance management,” with representatives from both parties collaboratingr to enhance the buyer/supplier relationship.

Doing this in a remote setting could mean building a “collaboration platform”. In this platform the supplier/partner could be onboarded/offboarded, it could be a way of working with problem resolution ensuring that the relationship stays healthy and vibrant. It could be a way of sharing progress on key targets. Not to forget to mention that it is a brilliant way of working towards Supply Chain innovation.

The potential is big. According to a recent survey done by State of Flux, 64% of the questioned companies use portals for handling contracts with suppliers. Only 21% use portals to manage the relationships with the suppliers and only 6% use technology to manage supplier Innovation.

Improve Joint Planning
Besides working remotely in Supply Chain towards innovation, a collaboration platform is also a great way to engage suppliers and partners in the planning, both on a strategic and operational level. Sales and Operations Planning (S&OP) processes and Supply Chain Risk Management have become increasingly important, when developing a shared view of how to run a company. A collaboration platform, that builds on real-time data, can support lowering business risk, improving visibility and communication so the decisions that are made are as effective as possible.

The Supply Chain of yesterday, where stable conditions, standardized products, low cost production and very inventory-based operations will most likely not come back. Instead we will have a Supply Chain of tomorrow, characterized by increased uncertainty, more customized products, a very conscious consumer. By applying technologies that will be part of the future industry you can support your Supply Chain organization in meeting these demands. You can learn more about this at Optilon SCC2020.

Complexity, one of the most used and ambiguous terms in business, is increasingly present in several layers of businesses today.
Due to its nature of being cognitively challenging to understand, complexity has a bad reputation in business. For instance, complexity in Supply Chain offers many challenges. However, complexity is not inherently bad as it can offer many benefits for businesses. Recently, Harvard Business Review wrote a striking piece about the strengths and costs of complexity in a business environment. Not the least, the paper offers methods for embracing complexity while eliminating costs and escalating benefits.

The many sides of complexity

Complexity comes in many colors and forms offering both strengths and costs. Harvard Business Review summarizes the most significant strengths and costs caused by complexity in a business context:

Strengths:

  • Increased resilience – due to an enhanced ability to be responsive when faced with unforeseen opportunities and threats. Complexity also gives increased buffering capacity and more fallback options.
  • A bigger diversity leads to increased adaptability. As it is easier to try out new ways of serving the customer by recombining existing elements in a new way. This will help companies sustain business performance.
  • Better coordination – since smaller groups/entities have a high interconnectivity making them easier to steer and manage.
  • Complexity often results to inimitability, since companies’ complex interrelationships among multiple elements are hard to copy.

Costs:

  • Managing a variety of elements in a complex company setup can lead to increased costs as efficiency is reduced.
  • The understandability decreases, as it can be a struggle for a business leader to identify the root cause of certain problems.
  • Unmanageability increase as it is harder to identify values and functions of every individual element and know when to intervene to manage performance – The organization becomes less like a machine and more like a complex natural system with a life of its own
  • The former leads to increased unpredictability as spontaneous and unexpected events can emerge. With lacking insights, interventions based on gut feeling can have undesired effects.
  • Leaders lose the grasp of how all elements are intertwined making it hard to predict what effects business decisions can have on the entire company

Solution for Taming Complexity in Supply Chain – Optimize Globally

As removing elements to reduce complexity is uncommon, leaders tend to move forward with new elements that add value on a more obvious and immediate level. Therefore, finding methods to retain the benefits of complexity and diminish the costs is of high priority. At Optilon we strongly believe in embracing the complexity and utilizing technology to gain competitive advantages – especially when handling high complexity in Supply Chain.

The evaluation of new processes, and structures should not only be based on how it will impact a certain group or entity of a company, but more importantly how they impact the company on a holistic level. This will help companies balance the trade-offs of a business decision. For instance, when evaluating future supply chain network models it is important to realize that the benefits of any single location may be concentrated in a smaller area, whereas the complexity costs may be distributed across the organization. By utilizing modern technology to create simplified overviews indulging the entire complexity in supply chain, companies can truly assess all potential costs and benefits following any operational, tactical or strategic supply chain decision.

 

Link to the HBR article

With a combination of front edge supply chain consulting and market superior supply chain applications, Optilon creates sustainable business value through supply chain optimization. By optimizing the flow of products throughout the entire supply chain we help companies increase revenue by reducing lost sales and expenditure of resources.. Learn more about Optilon here.

The retail industry is transforming through a period of unprecedented change. Emerging technologies such as Artificial intelligence (AI) and automation technologies have vastly altered every stage of the retail journey, from inventory management to customer service. Retailers are also integrating data analytics into every touchpoint of their business, including sales predictions, store optimization and product recommendations.

The ability of actors in retail to effectively use AI, data analytics and other emerging technologies to meet changing customer expectations will be a key determinant of becoming a winner in the new decade. These technologies will also dramatically impact operational activities, such as workforce management, inventory and sustainability efforts.

Robert Hetu, a research vice president with the Gartner retail industry services team, has gathered his thoughts around how emerging technologies will shape the future of retail. Optilon has summarized the most important trends from Hetu’s thoughts.

By 2024, Tier 1 retailers will reduce inventory carrying costs by 30%, dramatically freeing up working capital for digital investment, while revamping balance sheets.

Combining AI with a modern approach for demand forecasting, creating tailored market assortments and optimizing safety stocks will affect how much capital companies are tying in safety stock. A potential inventory reduction of 20% was already displayed in a recent report from Optilon.

By 2025, at least four of the top 10 global nonfood retail actors will establish a recommerce program as part of their global targets for zero carbon and sustainability.

While Gen Z and Millennials are more prone to sustainable practices, all generations are now a priority for sustainable consumption. Recommerce, meaning selling of previously owned products, is quickly growing in popularity. The secondhand apparel global market value reached $24 billion in 2018, with projections to achieve $51 billion by 2023.

By 2025, the top 10 retailers globally will leverage AI to facilitate prescriptive product recommendations, transactions and forward deployment of inventory for immediate delivery to consumers.

“Generation AI”, born after 2010 and that has always been influenced by AI, will start spending their money in the next decade. This generation will rely on technology to preselect the best offerings for them taking prices, ratings and product specifications into account. Retailers that will not be able to leverage prescriptive product recommendations will lose existing customers and won’t be able to attract new customers. This is due to lacking ability to stay relevant and influence their customers.

Link to article

Would you like to learn more about Optilon’s work within retail?

Please contact Area Manager Daniel Göransson on +46 70 937 92 88 or daniel.goransson@optilon.se

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