For many manufacturers, reliable access to goods and services is a luxury of the past. The events of the last year have had a huge impact on organizations that rely on supply chains.
PTC Partner Deloitte published an insightful article (Looking beyond the horizon: Preparing today’s supply chains to thrive in uncertainty) about supply chain digitization in the midst of the COVID-19 pandemic.
Recently, PTC met with Jason Bergstrom, Principal at Deloitte Consulting, to ask some questions about sourcing. Bergstrom specializes in guiding his clients through complex supply chain transformation efforts to reduce operating costs, free-up working capital, and capture margin uplift. He is a certified Master Black Belt for Six Sigma and holds undergraduate degrees in chemical and material science engineering from the University of Colorado-Boulder and an MBA from MIT’s Sloan School of Management.
Keep reading to learn about trends he’s seeing, best practices that set organizations apart, and general insights related to supply chain digitization.
Supply chain digitization involves using systems, tools, and data—leveraging a digital thread of product information—to optimize your partner/supply base. It’s about using technology to adjust sourcing—allowing you to better meet current and future needs.
So, for example, you might have a database of suppliers and several of those suppliers might give you access to the same resource (i.e., a certain part or raw material). You can use data to track availability of that resource, cost over time, how much of the resource you have on hand, etc. Then you can use all that data to make better decisions, such as deciding which resources to purchase now/later, or which supplier relationships are no longer benefitting the organization.
If an organization was operating on “super-human strength” (reliant on the workforce, rather than solutions and technology), then, unfortunately, the chances of disruptions happening due to COVID-19 went up by a factor of 10. Because that super-human strength required human beings who could manually work through processes.
If the organization was digitized before COVID-19 hit, then they could rely on those processes and systems as challenges came along. They were more primed to handle the flow and volume of activity that was required when people weren’t together physically.
Digitized organizations had competitive advantage and were more able to be flexible and nimble.
There’s value to be had in the interface between design/engineering, supply chain (sourcing materials, etc.), and manufacturing with product lifecycle management (PLM) software. That has been the triangle where best practices are making a difference. Organizations might ask themselves how they can strengthen the sides of that triangle, so they can excel.
We can re-think the intersections of that triangle, both in terms of standardized processes and ways of working, and also the platform/tools being used. An example would be integrating PLM and ERP systems to remove the manual hand-offs between engineering, supply chain partners, and manufacturing. Another example would be for engineering to check their PLM system for their approved manufacturing list (AML) for vendor parts (AVL), which could eliminate the need for engineering to design a new part.
Sure, I’m seeing three major trends:
Trend 1: Customer expectations are increasing. Even pre-pandemic, in recent years customer expectations were massively accelerating across B2B plays. This will continue post-pandemic. Everything has become extremely user friendly and hyper-customer experience centric. This is true even in even the most mature businesses, such as chemicals and refining. That expectation is shifting in the manufacturing world, as well.
Trend 2: Time to market pressure is increasing. Those pressures from increased customer expectations, they will have an impact on how products are engineered. There will be even MORE demand for personalization and MORE demand to get things to market quicker, which results in a need for faster product development cycles. Customers expect more features, better service, the next thing NOW. The curve of this demand is expected to rapidly evolve going forward.
Trend 3: A shift is happening; suppliers are transitioning to partners. For years, procurement went out and found the lowest cost widget and got the best deal possible. An organization treated the company who had ‘the widget’ as a supplier. Things like total cost of ownership, supplier reliance, quality, and reputation—those things were overlooked by procurement in the past. This dynamic is changing. Manufacturers are starting to treat suppliers more like partners. A PLM system can support the partnership by providing a secure project space with IP protection, allowing the manufacturer to share only what they want to share with the supplier, and thus enabling the supplier to become a core part of their value chain. The supplier’s success is linked to the manufacturer’s success—and they both want to succeed together.
Changing market dynamics require partners, not suppliers. Collaboration plays a bigger role now. In the past, design firms didn’t want to get close to suppliers since it may have resulted in a loss of margin for them. It could even be adversarial. But now those close partnerships could help unlock a variety of benefits. Better designs, for example, allow organizations to design for manufacturability. A manufacturer might take into consideration whether they should co-design or co-build something with the supplier/partner. Cost can remain a key factor in selecting a supplier, but not the cost of an individual widget, rather the total cost of working with a certain supplier/partner.
In choosing supplier/partners, manufacturers should also consider their resilience, quality, price, and even their creative/innovative aspects, to determine the potential downstream value created by the partnership. Customer and market value should be an aspect of this decision, as well as any new business models the supplier/partner might have—these should be approached as a joint venture.
Suppliers/partners should be considered a critical part of the value chain going forward, with manufacturers working towards joint success with perfect transparency and aligned incentives.
Learn more about the value a digital supply chain strategy brings to the modern manufacturer.
Using a PLM-enabled digital thread