Supply Chain

Resilience Has Replaced Leanness as Top Supply Chain Priority

In our VUCA world, potential supply chain disruptions are a constant threat. Robust data collection and analysis boosts security, compliance and sustainability.

Sponsored Content | / This article is sponsored by Capgemini | By Mouna El Bekri | Published 3 weeks ago | About a 7 minute read

Image: Decathlon has achieved industry-leading supply chain traceability by using RAIN RFID tags on 100% of its products. | Decathlon

Companies around the world pursued leaner supply chains in the early 2000s, but the shock of the COVID-19 pandemic and subsequent fallout revealed vulnerabilities in existing procurement models; factories could not operate as usual, and businesses did not have enough product in stock to meet demand.

COVID-19 was just the beginning of this sea change: The US’ new tariffs have introduced global uncertainty around trade routes; and natural disasters, geopolitical conflicts and cybersecurity breaches all continue to reveal supply chain vulnerabilities.

Companies need the agility to respond to unexpected, previously unperceived threats as they arise. This requires knowing the current strengths and weaknesses of supply chains, so protective measures can be taken now and responsive measures implemented later.

Resilience has surpassed leanness as the top priority. To achieve this, supply chain managers must protect against risks, known and unknown — which requires greater visibility.

The need for supply chain transparency

CFOs: Here's the Business Case for Bold Climate Action

The effects of climate change are now undeniable and increasingly costly; yet, making the business case for climate action remains a challenge. Join us on Thurs, May 15, as leaders from Climate Impact Partners, Kearney and Schroders share how leading companies are embedding sustainability into their business strategy; building resilience; and aligning cross-functional teams to deliver tangible, bottom-line impact.

Tell me more!

Many organizations simply do not have enough information about their supply chains to ensure their resilience. A 2024 McKinsey report found that while a record number of companies reported comprehensive visibility of their tier-one suppliers (60 percent, up from 50 percent in 2023), good visibility into deeper levels of supply chains fell by seven percent for the second year — leaving full transparency an ongoing challenge.

This will need to change for companies to comply with new laws that require full traceability — the ability to track all components of a product back to their origins; the US’ Uyghur Forced Labor Prevention Act and the EU Deforestation Regulation now require companies to know the provenance of their raw materials.

The US Food and Drug Administration is in the process of enacting a Food Traceability Final Rule as part of the Food Safety Modernization Act (FSMA), which will require record-keeping standards for high-risk food. Although it passed Congress with bipartisan support in 2010, the compliance date for FSMA’s traceability rule is still facing delays.

Companies with comprehensive environmental, social, and governance (ESG) programs in place have an advantage — they’ve already started to track emissions and other environmental hazards. But much of the technology in place to gather this information can also be used to track other risks.

In a 2022 Coupa survey, 65 percent of companies didn’t know if their key supply chain partners comply with any kind of ESG standards; and 57 percent said they didn’t have an effective risk-management system in place to protect the ESG integrity of their supply chains.

The minority of companies on the better side of these divides have a head start on their competitors.

Understanding visibility based on industry

It’s natural that companies with simpler supply chains will have better visibility. For example, the barrier to entry for becoming a supplier to consumer product and retail companies is relatively low compared with the automotive industry. The former requires at least a sewing machine, but the latter requires a manufacturing plant. Electric vehicle (EV) companies have an even better view of their supply chain because only a few hundred gigafactories manufacture the necessary batteries and component parts worldwide.

Some industries have even established a consortium (such as Catena-X for automotive) for developing decentralized databases that members can use to enhance visibility. There are multiple levels to supply chain visibility. From the broadest level to the most detailed, these exist in four layers:

The people and organizations with whom a company works
The full production line, including raw materials
Batch-level activities associated with groups of products
Each physical product.

The more granular this visibility gets, the more you can understand the quality and utility of a specific product and know how to manage its flow.

For example, every mobile device is assigned a unique, 15-digit International Mobile Equipment Identity (IMEI) number that network providers use for tracking. If someone could trace the specific components that went into building each device based on the IMEI number, that person would know whether each device’s constituent parts had been refurbished and by whom.

Another dimension to visibly is timing. With the right technology, you can track product flows in real time and gain a better understanding of where materials are physically present around the world. All this information can inform business strategy and operational transformation. Furthermore, a live view into how much you rely on each supplier gives a better understanding of where you might be overconcentrated — then, you can take steps to decrease susceptibility to disruption.

In March 2021, a massive container ship got stuck in the Suez Canal — one of the world’s busiest trade routes — and obstructed shipments for six days. Most companies didn’t know how much this ship running aground would disrupt their productions.

They might have known about a few items or materials that were recently ordered but had been unaware of disruptions for their partners. Most organizations didn’t fully understand how much or how little the incident affected them until months later.

Solutions for gathering and sorting data

Advanced technologies such as the internet of things (IoT) and blockchain can help organizations collect and embed data along the value chain. IoT devices are “smart objects” embedded with sensors and network connectivity that can gather and share data autonomously. By adding a physical object to a blockchain — an immutable ledger of digital records — you can link it to related components and processes.

For many years, French sporting goods retailer Decathlon has used radio-frequency identification (RFID) tags for every product it manufactures. It improves the shopping experience because shoppers simply drop items into a basket; each is logged for purchase with no need to scan each item. But these RFID tags have contributed to creating some of the best supply chain visibility in existence — which is no easy feat for the largest sporting goods retailer in the world, with more than 1,700 stores.

The second step is proactively finding the risks in the sea of data you’ve collected.

As any supply chain grows larger, it gets even more difficult to implement these kinds of technologies and collect actionable insights. One of the hardest aspects is finding the relevant information swimming in many massive datasets. This is especially true when dealing with traceability at the batch level, or especially the individual-product level.

Companies can use artificial intelligence-powered solutions to scan the data for patterns and identify the most important information related to developing stronger supply chains.

Implementing a sustainability framework

A trusted business and technology transformation partner can help companies develop and implement a supply chain-resilience framework, with a goal for all business leaders and stakeholders across the organization to have visibility into the supply chain and the ability to respond quickly.

A common obstacle is that different teams have their own tools for tracking product information related to labor practices, quality standards and so forth. The right people from across an organization need a single source of truth upon which they make decisions. When assessing risk, key stakeholders must determine whether to continue with specific suppliers based on uniqueness, quality, volume, history, reputation, importance, reliability, long-term necessity and so forth.

A robust enterprise resource-planning system can bring all this information into a single place. A company can also supercharge its supply chain management with modern solutions based on emerging technologies: digital twins (virtual representations of physical systems), advanced analytics (sophisticated visualization techniques), control towers, etc. These solutions allow you to make sense of the vast amounts of data being gathered. It’s not enough to collect data: They must be translated into insights.

Going forward

Just-in-time (JIT) inventory systems that reduced stock to its essentials and eliminated redundancies grew in prominence throughout the late 20th and early 21st centuries.

But disruptions to our global supply chains have revealed competitive pricing that maximizes efficiency and minimizes waste isn’t enough without resilience and real-time visibility. On its own, leanness will capsize in the first storm.

Supply chain traceability helps ensure regulatory compliance, drive sustainability progress and manage supply chain risks — yielding benefits for the environment, business and society.

With the right technologies and processes in place, companies can make informed decisions about their partnerships throughout the supply chain to make sure they secure the materials and products they need while reducing externalities and vulnerabilities.

Learn more about how Capgemini helps companies mitigate risk in an age of increasingly complex supply chains here.