“Out of stock” was a $1 trillion global problem for consumer products – based on research conducted by Symphony IRI pre-pandemic – and continued well into the “new normal” from toilet paper rolls to food products and from your favorite mobile phones to your preferred automotive vehicles. Let’s break down the parts of that trillion-dollar problem:
The infant formula shortage in the U.S. presents a particularly nightmarish customer experience scenario. Beginning with pandemic-induced compliance leniency, out-of-stock levels for formula had already begun rising sharply starting in November 2021, but reached an estimated 43 percent nationwide by the first week of May 2022, according to Datasembly.
Major retailers like CVS, Target, and Walgreens have responded by restricting purchases of formula and desperate parents scrambling to feed their babies have driven long distances only to be faced with bare shelves. Other parents have left angry comments on prominent e-commerce platforms about price gouging by third-party sellers and many turned to social media desperate to track down extra formula that internet strangers may have laying around.
Earlier in the pandemic, one skincare company was losing one million dollars in potential sales every day due to a missing packaging component. A small plastic spoon manufactured in Italy that normally accompanied the skin cream could not be produced because the Italian facility was shut down due to Covid-19 restrictions. The company failed to identify and address the problem for an entire month resulting in $30 million in lost revenue.
Executives at Clorox acknowledged that the consumer packaged goods company “left sales on the table” due to short supplies of disinfecting wipes and other items, and sports equipment company Under Armour has gone so far as to cancel planned orders for footwear and apparel that would not have arrived in time at stores.
Paradoxically, many leading retailers like Target and Walmart are reporting 30-40% excess inventory that they cannot move. Beyond lost sales, customer experience and the health of long-term relationships between business and their customers are at a huge risk for most organizations. Many Fortune 500 companies have experienced a more than 25% drop in customer service level while grappling with supply chain problems. Such significant customer service disruptions can lead to an estimated 6-7% loss in sales value when products are not available and deliveries are inaccurate or delayed. There seems to be no single agent of chaos to combat when addressing supply chain disruptions.
Or so it would seem! In the famous words of the Joker from The Dark Knight, “Nobody panics when things go according to plan” in the supply chain—even if the plan has multiple inefficiencies! But when disconnectedness upsets the established order, and everything becomes chaos, we can identify disconnectedness as the agent of chaos.
Disconnected Supply Chains in the Age of Disruption
Over the last 100+ years of their existence in the industry, supply chains have seen 4 phases of evolution:
- Phase 1 – People-oriented
- Phase 2 – People + process oriented
- Phase 3 – People + process + technology oriented
- Phase 4 – People + process + technology + data-oriented
People brought skills, processes brought standardization, and technology brought integrations. However, an integrated supply chain is still a few notches below a data-driven supply chain with visibility into what’s going wrong at any given time. Supply chains are innately connected, and every event in the supply chain has a “connection” with, and impact on some other likely event in the supply chain. However, for all the benefits they have delivered, people, process, and technology have created silos leading to a “Disconnected supply chain”. The clearest symptom of a disconnected supply chain is when organizations find themselves knocked off balance by disruptions that could and should have been detected along with reasons for disruption and potential next best steps through the ability to understand connections and relationships in data – the chasm that most supply chains still need to find a way to cross!
The greater damage from a disconnected supply chain and the subsequent disruptions is to ruin the customer experience and alienate loyal customers in the long run. A 2021 survey by The Economist of 400 C-suite executives found that 40 percent said their brand image had been noticeably tarnished because of supply chain disruptions, while 30 percent reported more customer complaints and 23 percent noted a loss of regular customers.
Suffice to say – A disrupted supply chain = A disconnected supply chain !!!
Getting Connected Visibility into Supply Chains
While 2022 may be an especially turbulent year for global supply chains, every organization must be prepared to anticipate and mitigate the impact of supply chain disruptions in the long run. The McKinsey Global Institute’s research suggests that companies can expect supply chain disruptions to consume about 40 percent of one year’s profit around every ten years–averaging out to about 4 percent per year on average.
“The challenge is that it never happens like clockwork, 4 percent a year,” says Dan Swan, a managing partner and co-leader at McKinsey’s Operations Practice. “It’s spiky, and it’s very hard to predict.” Companies that have successfully managed their supply chains are 2.5 times more likely than their unsuccessful counterparts to have preexisting advanced analytics capabilities, according to McKinsey research.
Now for some good news (finally !) with the Art of possible.
Supply chain personas can be empowered with solutions powered by AI and analytics to quickly discover the origin stories behind each disruption through their decision-making journey – knowing where things are going wrong, why are they going wrong, and what is the most optimised corrective action to take in order to drive improved customer service and on-shelf availability levels. This continued visibility and optimization view is a must for organizations that want to remain resilient, agile, and responsive at a time when global supply chains are facing massive pressure from external factors such as the ongoing pandemic, the war in Ukraine, climate disasters, and growing port congestion apart from a host of efficiency factors that drag down supply chains, sales, and customer service even in better times.
And that is our very raison d’etre. With ConnectedView, an AI-powered customer service improvement solution that empowers supply chain personas with better and faster decision-making through Connected Visibility and Connected Optimization by connecting the dots between disparate enterprise data to deliver actionable insights and recommendations.
Few supply chain management teams have the equivalent of a high-tech Avenger’s Compound or Hall of Justice for responding to the rogue’s gallery of supply chain disruptors. But the silent guardians of supply chains will need end-to-end solutions like ConnectedView that can deliver connected visibility across an organization’s existing logistics operations and supply chain software. That is the only way organizations can move forward in building tomorrow’s supply chain, optimized today.