In the past four years, the global landscape has faced unprecedented challenges, including geopolitical tensions, economic instability, fluctuating demand, extreme weather events, and a pandemic. These issues have underscored the importance of supply chains as the lifeblood of any business, connecting suppliers, manufacturers, distributors, and customers in a complex web. When a supply chain falters, the repercussions can be severe, leading to widespread disruptions across regional and global economies.
Effective supply chain management is directly linked to a company’s success and profitability. Organizations invest significant resources to understand their customers and anticipate their needs. The primary function of a supply chain is to meet customer expectations, from delivery dates to product quality. Companies with advanced supply chain capabilities experience, on average, 23% greater profitability, as highlighted by Accenture.
Despite its critical role, many business leaders are not sufficiently focused on enhancing their supply chain expertise. A recent McKinsey Supply Chain Pulse Survey revealed that most respondents lack confidence in the engagement of senior leadership with supply chain risks, and only 20% believe that their supervisory boards have a deep understanding of supply chain issues.
Just as executives require a solid financial foundation, they also need supply chain acumen to make informed, integrated decisions. As the pandemic forced organizations to strengthen their supply chains, leaders must now cultivate their knowledge and skills in this area to adapt and ensure future growth. Here are four essential actions for leaders to enhance their supply chain capabilities:
1. Integrate Supply Chain Management into Business Strategy
To reinforce organizational stability and enhance agility, leaders should embed robust supply chain management within their broader business strategy. By aligning supply chain initiatives with the overall business vision, organizations can better weather disruptions and create a competitive advantage.
For instance, Schneider Electric’s supply chain team plays a pivotal role in sustainability initiatives, collaborating with the entire organization to drive decarbonization efforts. Their commitment to halving operational emissions from their top 1,000 suppliers by 2025 is part of the Zero Carbon Project, demonstrating how integrated supply chain efforts can support wider business goals.
2. Assess Supply Chain Strengths and Risks
It’s crucial for leaders to work closely with their supply chain teams to identify both strengths and vulnerabilities. Risks can arise from internal complexities—such as product diversity or regional distribution—as well as external factors like material shortages or geopolitical instability. Leaders must recognize that decisions regarding supply chain strengths and risks affect the entire organization.
Once these elements are understood, leaders should allocate resources strategically to enhance strengths and mitigate risks. Today’s digital landscape provides numerous technological solutions to help organizations accomplish these objectives.
3. Invest in Digital Solutions
As we enter the Fourth Industrial Revolution (4IR), technologies like the Internet of Things (IoT), artificial intelligence (AI), machine learning (ML), and blockchain can significantly streamline operations. These technologies improve data collection, enhance visibility, accelerate analysis, and optimize resource allocation, all of which are vital for reducing risks and maintaining supply chain continuity.
To build resilience, companies should prioritize the implementation of 4IR technologies across their supply chain operations, ensuring they are deployed effectively and at scale.
4. Prioritize People and Collaboration
Technology alone cannot solve supply chain challenges; cohesive organizational structure is equally important. A supply chain must be integrated with human resources, marketing, finance, and other departments to function effectively. Leaders should foster collaboration by breaking down silos and promoting interdisciplinary teamwork.
At Schneider Electric, the supply chain organization is closely aligned with the sales team to enhance customer relations, and dedicated teams are established to ensure that market needs are reflected in supply chain strategies. This integrated approach drives supply chain transformation on a global scale.
Conclusion
In a world rife with uncertainties, including global health crises, shifting trade policies, and climate change, a balanced approach to financial and supply chain strategy is crucial for business success. Leaders must view supply chain acumen as a continuous journey, always seeking opportunities to learn, adapt, and evolve. By embracing this mindset, business leaders can establish a solid foundation for their organizations’ future success.
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