This article originally appeared on Forbes.com
In my last Forbes post, I stuck my neck out and predicted that there will be no return to normalcy this year for supply chains.
It only took a few months for the Federal Reserve Bank of New York to tack the other way and declare me wrong based on its Global Supply Chain Pressure Index going into negative territory for the first time since before the pandemic. (The index brings together 27 variables that monitor everything from cross-border transportation costs to country-level manufacturing data.)
Well, I’m standing firm. Not only are supply chains most decidedly not back to normal, but these kinds of headlines are also distractions at best — and at worst, could lull some in the industry into pulling back on a remarkable technological and cultural transformation that still has many miles to go.
Volatility will be the name of the supply chain game for the foreseeable future, so the surest way to manage our way through constant volatility is to double down on pervasive data sharing and industry collaboration.
I wasn’t the only one to slough off the NY Fed’s take. Widespread pushback arrived within 24 hours, with academics and industry veterans debating the stats and the methodology as well as the anecdotal experiences from the front lines of our roads, rails, air and oceans.
I don’t want to be overly critical of the NY Fed or debate its methodology. My simple take is that everyone from the NY Fed to the average consumer often equates transportation logistics — managing and storing goods as they move through our supply chains — with supply chains writ large. That’s understandable, given the prominence and visibility of transportation logistics. But it’s just a subset of the overall framework for how products get sourced, manufactured and delivered.
In other words, transportation logistics occupies many links in the chain, and arguably the most visible ones. But there are many more links in the chain, and while they don’t tend to generate front-page headlines, they are just as critical.
The pandemic laid bare the archaic, manual, siloed nature of our supply chains. And the most pronounced pain the industry felt as the pandemic progressed was attributable to wild swings in demand and the challenges of getting goods to their final destinations amidst port closures, container availability, labor issues, natural disasters and a host of other issues.
Thankfully, much of the industry got the message and invested heavily in digital transformation while simultaneously embracing collaboration to a degree that would have been impossible to fathom a few years prior.
So where are we now?
In many regards, things look better when it comes to the transportation logistics links in the chain. Ports are running almost seamlessly. Container rates have plummeted from their dizzying $20,000 peaks.
But the supply and inventory links in the chain are still in a state of shock. And most companies continue to worry about a looming recession.
Put another way, things have flipped. For the last few years, the supply chain industry got religion about collaboration because retailers needed to manage their massive stockout problem. When is my shipment getting here? To get the answers, you needed to share data and collaborate with your partners.
Now, it’s a different problem. Manufacturers need an ongoing stream of highly accurate “demand signals” so they can optimize their manufacturing processes. But the solution is the same: pervasive data sharing and collaboration.
To be clear, this isn’t a trivial undertaking. Some finished products require thousands of discrete parts and partners. And so, it’s profoundly important for manufacturers to scrutinize their bill of materials and identify the most critical vendors and parts for any given product. It’s unrealistic to expect 100% visibility into every vendor or product overnight – such transparency would require years of investment and work. But you can connect with and track a prioritized list of 100 vendors that are indispensable to production in short order.
Supply chain insights and collaboration are impossible without quality, portable data.
A recent report from PwC, “The smart moves your supply chain needs now,” makes the point explicitly, advising companies to “get control of your data story.” As the report’s authors rightly note, “Leading companies collect and model massive amounts of customer and supplier data” and invest in analytics to detect changing consumer preferences, track sales, detect fluctuations in demand and to identify possible shocks before they happen. They also share data openly with suppliers so that ecosystems can collaborate on issues and process optimization and “respond in a concerted fashion.”
That’s why I can’t stress enough how important it is for companies to take an API-first approach to their data strategies and to insist that their technology providers — from the big public and private cloud providers to supply chain solutions providers — do the same. Application programming interfaces are critical to ensuring data can be easily moved and shared between any cloud and any application (yes, including legacy systems and apps), so that everyone in the ecosystem can collaborate to generate insights that can mitigate issues and make supply chains more resilient.
Tech providers also can and should do more to standardize, automate and aggregate data in such a way that it can be easily and quickly integrated into customers’ business intelligence stacks. In fact, some companies are making big strides in this area, giving customers the ability to get to data analysis in minutes, instead of the usual rigmarole of tapping stretched IT teams to perform time-consuming data prep workflows. We need to hit the accelerator on these efforts.
Bottom line: forget about “normal or not.” Make data and collaboration your company’s norm, and you’ll be building a more resilient supply chain. One critical link at a time.
