Global Trade • January February 2023 • BACK TO THE FUTURE

Manufacturers cannot delay the core changes they must implement in their operations. Old or new trade wars, tariffs, nearshoring, long-term contracts with business partners, an increase in inventory levels, or rebuilding a local industry as a response to the current supply chain chaos will not fix what is no longer working. Supply chain models built on legacy technologies, globalization that changed countries’ economies and business relationships, and changes in how we work should raise a red flag for executives when they build their strategic plans for the coming years.

Like business owners who did not survive the Industrial Revolution because they did not adapt to technological changes, businesses that do not adopt a broad digital transformation into their operations will not survive this revolution. Are we at the beginning, the middle, or the end of this revolution? It remains uncertain, but we are definitely in the midst of a revolution. When we look at history, it’s easier to point out a specific time frame to attribute to dramatic change, but when we are rooted in the momentum of change, is it even possible to digest what’s happening around us?

The pace of technological changes has increased dramatically in the past 100 years. Technological innovations that once took hundreds of years to transform society now take decades or less. People born 80 years ago remember how it was to live without TV, satellite for weather forecasting, modern healthcare, computers, or smartphones. The list of technological changes is longer, but if we look at the big picture, we can see that these changes happened in a relatively short period of time. So, the question is: How fast can humanity adjust to changes that are occurring at breakneck speed?

The inability to meet demand is more visual when people see empty shelves or when they must wait a long time to get what they want. The challenges we experience are in the final result reflected in the last mile of delivery while the root of the problem lies in the first mile.

How can we improve what doesn’t work at the last mile of delivery if we don’t have reliability in the first mile?

Modern machinery has allowed industries to increase their production capacity. In the beginning, the innovative machines on the production floor, in the field, in the mines, or in the finance department were on their own (“stand-alone” machines). Over time, technology evolved, and it was possible to operate machines from a control room, and different departments in the same business could communicate or share data through an internal network. A few more years passed, and software became a must-have product for running a business. The digital revolution that began in the 1980s created pillars of software that have become a world standard.

These old technologies are unable to support today’s end-to-end visibility or real-time decision-making, which means that old technologies are struggling to provide strategic business value. These outdated technologies are basically analog machines that try to solve problems in a digital world. The result is slow response times, waste, conflicting priorities between functions, delays, and inflexibility, leading companies to struggle to meet increasingly detailed customer needs.

Data management became the core of the business when computers and machines took on a more significant role in the functioning of plants. Each software was created to address a specific pain point in business activity, and as a result, teams need to use a variety of systems when, on the one hand, there is overlapping data or, on the other hand, partial data. Moreover, the processes implemented in the systems were based on the way manufacturers operated at that time.

Today, when most manufacturers’ activity is computerized and based on the global economy, should they use the same processes? Or redesign their supply chain to suit today’s market?

Globalization processes led to domestic and foreign business collaborations manifesting in obtaining raw materials or using subcontractors to reduce costs. These changes created more links in the chain, so it became longer and depended on external factors. Among the external factors are business partners that use similar, equivalent, or outdated software products to run their organizations. Each organization operates in its own data and software world. Each organization uses analog machines that try to solve the same supply chain problems in a digital world.

COVID-19 brought the sore spots into the spotlight. Data needs to flow faster to identify problems ahead of time to allow for more accurate planning. Better data flow requires faster compatibility with non-connected internal systems, employees’ homes, and external business partners. Manufacturers need better and faster capabilities to communicate with all the links in the chain in any situation. The future digital supply chains need to be flexible and agile and place all business partners and customers at the center so they can anticipate and withstand disruptions.

What we are currently experiencing is chaos. We never had variability on the first mile like we have today, and the current systems aren’t ready to deal with it. Manufacturers are not putting enough emphasis on the root of the problem, which lies in the flexibility and agility to adopt technological solutions faster. When trying to solve supply chain problems, manufacturers need to decide where to put their money when redefining their future supply chain and determining ways to communicate with employees and business partners.

Digital transformation in post-COVID is more than just buying off-the-shelf software. It starts with defining what infrastructure is required to provide flexibility for connecting software or applications like Lego bricks. The infrastructure should support hybrid business operations, leading to the definition of the work environment, new supply chain models, and the roles that take part in the process. More than ever, manufacturers need to understand the importance of business continuity, planning, and thinking ahead of time about the infrastructure to enable this. Visibility is in the eyes of the executives to make informed decisions, so if manufacturers want to build it properly, they need to hire an architect.

Manufacturers must build a bridge between the analog and digital worlds and consider geopolitical constraints. The knowledge to bridge this gap includes manufacturing, technology, and familiarity with the global economy. In understanding the global economy, emphasis must be placed on the geopolitical factors, their interrelationships, and the risks along the whole supply chain. Like buildings that require an architect to design them from scratch or during renovation, manufacturers need an architect to redesign their supply chain down to the raw materials level.

Liat Portal is Business Development Architect/Chief Visionary Officer at HaJunk, a San Francisco-based business development services company. She has a deep understanding of small and medium-sized businesses in the high-tech and traditional industries, having worked with dozens and learned the importance of agility, lean practices, and a burning passion for growing companies.