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Supply chain disruption isn’t going away… but process optimization can help us navigate it

Vaishnavi Sashikanth Profile picture for user Vaishnavi Sashikanth September 8, 2022
Summary:
We can’t control many of the factors, but we can make sure our own business processes are efficient and intelligent enough to weather the storm. Vaishnavi Sashikanth shares insights from Celonis.

Logistics, supply chain and delivery service concept : Fork-lift truck moves a pallet with box carton. Van on a laptop computer, depicts wide spread of products around globe © William Potter - Shutterstock
(© William Potter - Shutterstock)

Since the start of the pandemic, supply chain woes have become an unfortunate part of our reality. We feel its impact in our everyday lives and at every level of our companies’ operations. In many cases, the causes of the disruption are beyond any one company’s control – global conflict, shortages of raw materials (responsible for the ongoing computer chip shortage), unforeseen spikes in demand (remember the toilet paper saga?), and increasingly severe weather events due to climate change.

What are companies to do? Throw up their hands and accept that chaotic supply chains are just “the new normal?”

We can’t control everything, but we can control our own processes

I don’t think so. Because there are factors that are within our control — the most important of which is our own company’s business processes. With technology that has emerged in the past few years, we can achieve a new level of visibility and control over our processes, and optimize them to be more efficient and adaptive to disruption.

Consider this: one third of shipping containers transported every year are empty. That’s not an act of nature — that’s process inefficiency, plain and simple.

Modern supply chains are complex webs of materials, products, shipments, orders that are heavily interconnected. So every bottleneck, delay, or issue has a domino effect.

In the companies we work with, we’ve seen that there are more than eight changes per order on average. These could be price changes, quantity changes, delivery blocks, etc. Every one of them costs money. And then, they cause the orders to be delayed, which is why over 70% of orders have to be expedited. That leads to more costs. And if the order isn’t fulfilled and delivered on time and in full, then customer satisfaction takes a hit. That costs even more.

In the best of economic environments, supply chains are critical. But in the current environment of high inflation and looming recession, supply chain problems can be fatal.

That’s why we see more and more business leaders focused on the core issue of process efficiency in their supply chains. And why more companies are adopting a new type of enterprise software called an Execution Management System.

A new approach — when digitizing and automating alone aren’t enough

Most larger companies already have some sort of “digital transformation” initiative going on for their supply chain. Many have already digitized a good portion of their supply chain operations, running them on ERP (enterprise resource planning), SCM (supply chain management), and dozens of other systems.

The more recent wave of supply chain transformation goes beyond just digitizing, to automating processes and migrating to the cloud versions of the underlying systems. In our recent survey of 500 Chief Supply Chain Officers (CSCOs), conducted in partnership with IBM and the Institute for Business Value Economics, 69% said they are planning to accelerate cloud adoption and 72% expect most of their processes and workflows to be automated in the next three to five years.

But digitization, automation, and cloud migration aren’t the golden ticket to supply chain nirvana — not on their own. If a process is inefficient and you move it to a fancy cloud-based ERP, it can still be just as inefficient. Only now it’s an automated, cloud-based inefficient process.

Instead, a new approach is on the rise among industry leaders. It starts with using process mining technology to analyze all of your supply chain systems and generate a clear, real-time picture of your processes. Then, you pinpoint the inefficiencies that negatively impact supply chain performance KPIs like on-time delivery rate, average cost per order, and average carbon emissions per order. And finally, you take targeted action, including deploying automation, to correct these inefficiencies.

It’s game-changing, but it’s not rocket science — you need the tools to reveal and fix process inefficiencies in one system. A system of business performance.

Here at Celonis, we’ve been working to deliver this next-generation system of performance. We call it the Execution Management System (EMS).

The industry leaders who are driving supply chain performance with the EMS

During this period of nonstop supply chain disruption, we’re very proud of the new levels of performance our customers have been able to unlock with the EMS.

One of my favorite customer stories is from Ascend Performance Materials out of Houston, Texas. During the pandemic, Ascend was not only dealing with the same supply chain volatility as the rest of us, but they were also rapidly innovating to ramp up production and introduce new products to meet the demand for medical supplies and equipment.

I love how Debbie Keehn, Ascend’s SVP and Chief Supply Chain Officer, put it:

There’s what I call a ‘hidden factory’ in most businesses, meaning the unofficial loops and blocks going on in the background. It can be very inefficient and require a lot of brute force to process an order. Celonis was instrumental in allowing us to replace the chaos of this hidden factory with smooth, efficient processes.

After Debbie and her team brought the EMS into the company, they drove value fast, with a 27 percent improvement in on-time delivery within the first four months. Throughout the pandemic and today, Celonis has continued to support Ascend in driving performance.

To me, one of the most exciting new frontiers is the application of our technology to sustainability. The “domino effect” of inefficiencies that I mentioned earlier? It doesn’t just create costs for the company; it takes a toll on the planet. The majority of emissions and waste happen in supply chains before products even reach consumers.

In fact, if you take just the eight highest-emissions supply chains, they account for 50% of global CO2 emissions.

So it’s amazing to see companies like ABB, who are using the Celonis EMS to quantify emissions for hundreds of thousands of individual orders, and have already identified opportunities to reduce CO2 emissions in their supply chain by eight percent.

I believe that this is the future of business performance: optimizing our processes, in the supply chain and beyond, to benefit our companies’ top lines, bottom lines, and green lines.

If you want to learn more and get started, I recommend heading over to our Celonis for Supply Chain Transformation page and joining one of our live weekly demos.

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