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The Complexity of Simplifying the Supply Chain

Hotwire Global

COVID-19 hit and suddenly, the supply chain became the hot topic of conversations everywhere.

First, toilet paper and cleaning supplies started dwindling. Then it was the medical equipment – when is the PPE coming? Then meat, milk, and coffee supplies were questioned.

The general public wanted answers. And the media responded. Reporters in publications as wide-ranging as Teen Vouge and ESPN started to cover COVID-19 induced supply chain issues.  People now understand that getting them the products they need goes far beyond the company they buy it from being able to make it. Are the raw materials available? Is there a backlog at ports as medical shipments are prioritized? Are distribution centers closed or does safety require a reduced workforce? Is the company having to source new packaging materials?   Some suppliers and vendors had to entirely shut down production facilities because of coronavirus. The dependencies within the supply chain, that had been built on razor-thin margins to cut costs, became very clear.

So, we can now all see the complexity of our supply chains and how it’s affecting our toilet paper supply. But what does that complexity mean exactly? Supply Chain Complexity does not mean complicated, but rather it describes a condition of inter-connectedness and inter-dependencies across a network where a change in one element can have an effect on other elements.

Most of the stuff we buy today comes from companies with a very large, globalized supplier base. Supply chains we have today are built to keep costs down: fewer suppliers and bigger orders, low-cost labor by producing and sourcing globally, just-in-time inventories, and no extra capacity. After all, before-COVID, the cost of being understocked was the loss of sale. Now, it’s everything from nothing to wipe with to human life.

So, now the general public is aware of all this, and many agree we need to do things differently. But, many of the reasons we are here today is in response to consumer desires.

How did we get here?

“I want it personalized,” “I want it in sustainable packaging,” “I want it cheap, but also humane, oh, and I want it tomorrow.”

The consumer demands that have been piling up on supply chain over the years have caused additional strain on an industry already focused on hyper-cost efficiency. To fulfill a growing trend of personalization, companies who, maybe half a century ago, produced three SKUs, now offer 3,000 varieties of product.

Simultaneously, consumers are looking to make more eco-friendly purchasing decisions. Just look at this gorgeous, radical redesign of Nestlé’s Häagen-Dazs ice cream containers. Reusable and returnable! I will order the DAY it becomes available.  Humane brands matter too. Consumers want to buy from “good” brands, and that means each and every vendor that contributes to the final product needs comply with expectations. Companies benefit from increased visibility and being able to trace every single vendor too – if there’s an issue somewhere in the chain, they can pinpoint where it began and what products are affected.And let’s not forget that on top of fast, personalized, sustainable, and traceable, cheap continues to be at the top of the list too – we all want cheaper products and cheaper delivery.

What can suppliers & producers do now? Lean into tech & talk

As coronavirus spread around the world, producers and suppliers found situation after situation that broke the chain. So, they’re simplifying. Companies are putting consumer demands to the side as they cut product SKUs, lengthen production and shipping time, and add cost onto consumers. Kimberly Clark pivoted to cut SKUs and churn out toilet paper, in addition to securing more trucks for delivery and starting a marketing campaign encouraging folks to #ShareASquare.

While customer demands for fast, personalized and sustainable are temporarily being pushed to the side, there are two areas of growth that suppliers should currently be leaning into: technology and talk.

Coronavirus has exposed just how far behind many of the companies we rely on to make and move our goods are in regards to technology. Those who can take this time to set up a digital-first approach with the technologies in place to show greater visibility in their supply chain will be poised to succeed.

These companies must also take advantage of the fact that a huge new segment of the populace and influential reporters, who have never talked about supply chain, are now speaking their language. Maybe it’s a fashion reporter covering how crucial logistics are to starting an e-commerce operation or a sports reporter who’s been shifted to the COVID-beat covering mask supplies, but there are many people who want to know more about how supply chains work than ever before. There’s a need for experts who can educate the public and simplify how they talk about the value of supply chain to people don’t live and breathe this space.

There’s a sweeping need to create more responsive supply chains. Hyper-cost-efficient nor hyper-simplified will do. Even for those slow to modernize and digitize, there is an opportunity to lean into technology and take advantage of the spotlight, to come out of this virus stronger than ever.