BlogsSupply Chain Disruption: How to Respond to it Effectively?

February 22, 2023by Shashiraja
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Knee-jerk reactions never help- especially in agri-business. Like a farmer who bets on rain, an agri-input player, farm equipment manufacturer, or seed producer bets on data. And enterprises have seen a lot of reasons to remind them about this truth – in the last 2-3 years. From pandemic-driven bottlenecks and geopolitical dead-ends to natural disasters, raw material shortages, factory lockdowns, and a new crisis every following month, the word “supply chain disruption” has taken on a new connotation and gravity. With that, the value of information has also blossomed to a new height.

The modern supply chain – more fragile than ever

It is easy to see why agri-input players are suffering unprecedented challenges in logistics and supply chain management. They are now under increased pressure to:

  • Fight decision-making delays
  • Control blind spots – especially in far-off geographies
  • Reduce inventory costs, efforts, and defects
  • Avoid lack of visibility affects their negotiating power
  • Reduce high payments of fees, margins, and opportunity-cost losses
  • Connect ecosystem players for optimized operations
  • Cut down on costs wasted in planning, backup, and dead inventory
  • Get back their bargaining muscle and create a niche
  • Add competitive factors to their products
  • Reduce dependencies that hurt their margins, freedom, and diversification advantage
  • Add shine to their branding in a global sphere
  • Reduced risk and improved visibility with digitized value chains

Many reasons make it challenging for a business to navigate these areas. However, that’s precisely why there is a need to improve agility and precision with the help of the right technology.

For instance, according to a KPMG reckoning, overreliance on a limited number of third parties is a significant factor in such struggles. Being limited to one major supplier, one large customer (or export market), and/or one major supply chain partner can be quite a constraint – especially after the pandemic. There is, therefore, a need for third- and fourth-party risk monitoring to address inherent and residual risks in near-real time and cyber and counterfeiting risks.   

A lot can be done on the revenue side too. For example, agri-input businesses can build greater agility and resilience into their supply chains when they usher in providers who provide new capabilities as a service. This can be done via trading systems, planning and analytics capabilities, and additional logistics requirements that provide variable cost solutions rather than long-term fixed overheads, enabling increased flexibility and better cost control.  

Technology can also improve spending transparency—especially when a business has to be clear about the material component, wastage, conversion, labor, premium added, and category pricing indexed to the introductory commodity price. The gains are pretty substantial for agri-input players and the entire ecosystem of agriculture and farm equipment.

This edge of visibility and analytics helps with improved buying leverage, negotiating power, and substantial spending consolidation. This, in turn, helps with better vendor selection, consolidation, and ESG segmentation. According to S&P Market Intelligence, a company’s resilience to supply chain and demand pressures will be strongly affected, whether it is speculative or investment grade. Using supply chain data with market-based early warning signals and fundamental credit analysis can unravel the supply chain’s most critical and vulnerable parts.

But are players realizing these crucial areas of supply chain gaps and possibilities?

Supply chain disruption – high time to change

In a PwC Digital Trends in Supply Chain Survey 2022, it can be seen that while companies focus on supply chain basics like increasing efficiency and managing costs, they’re missing value-creation opportunities. These are starkly seen in digitization, sustainability, and transformation.

Few can see increasing the number of suppliers, transforming procurement practices, or increasing responsiveness and resilience as priorities—as a significant disconnect. As many as 80 percent of people feel that technology investments haven’t delivered the expected results. Here, having the right talent and the right tech are issues that matter a lot. And 58 percent of companies are witnessing higher-than-normal turnover among supply chain employees, with only 23 percent fully agreeing that they have the necessary digital skills to meet future goals. In addition, few companies are focusing on ESG reporting and metrics. As to the changes that could address those risks as their top priority in the months ahead – 10 percent consider increasing responsiveness and resilience as a top priority, four percent think about transforming procurement practices and operating models, and three percent point out increased diversity and segmentation of suppliers.

Overall, increasing efficiency and managing or reducing costs in supply chain operations top the list of priorities over the next 12 to 18 months. Controlling costs is named the number-one priority, five times more than digital up-skilling, seven times more than increasing sustainability and corporate social responsibility, and nine times more than manufacturing digitization and automation. Many companies are focusing more on the bottom line in the short term. However, they still need to make some of these potentially-transformative actions a more significant focus.

Regarding essential priorities, we can notice that 63 percent want to increase efficiency, 59 percent wish to manage costs, and 21 percent look to automate processes and analytics, while 19 percent focus on digital up-skilling and 16 percent on manufacturing digitization and automation. 

It’s essential for agri-business players to plan this crop of priorities well.

When technology is sprinkled in the right places, it can help the agriculture industry a lot in areas like:

  • Resource planning
  • Sales optimization
  • Cutting down of customer-churn
  • Robust identification of partners, suppliers, and assets
  • Better location and footprint strategy
  • Real-time crop analytics and forecasting
  • Market growth mapping
  • Determination of a stronger product-fit
  • Identification of fast-changing growth opportunities
  • Quick adaptation to changing conditions
  • The focus of sales efforts on the right segment

The question about supply chains can be multifold – do you want to save costs? Do you want to dilute risks? Do you want to be more resilient? Do you want to be more data-driven? Do you want to be intelligent and proactive- from within?

The answer, however, is simple- invest in something that can empower your agri-input supply chain and keep you strong enough to handle any supply chain disruption. With a digitally connected chain across all stakeholders, you can digitize and inter-connect your stakeholders well so that they can make better and more accurate decisions than before. You can simplify enterprise-wide information and connect business processes. You can empower your stakeholders with actionable insights, minimize documentation, and reduce errors with the fast-tracking of orders. You can give them the power of visibility and quick action. So that they never make knee-jerk reactions again. 

Sources

https://kpmg.com/sg/en/home/insights/2022/03/six-key-trends-impacting-global-supply-chains-in-2022.html 

https://www.pwc.com/us/en/services/consulting/business-transformation/digital-supply-chain-survey.html 

https://www.spglobal.com/marketintelligence/en/mi/Info/0922/supply-chain-survey-22.html

 

 

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