Supply chains are in the spotlight and following COVID-19, there has been greater speculation on how they will adapt in the future. In recent years, with efficiency as a constant driver, we have been experiencing a transformation defined by four key trends, including digitisation, sustainability, customisation and regionalisation. With resilience at the top of everyone’s agenda, we will explore what it will mean for supply chains in the long term and how these four existing trends are set to accelerate.
The Evolution of Customisation
Supply chains must adapt to different types of customers. Customisation has become the new normal with tailored requests, speed, and local engagement becoming necessary. A “one-size-fits-all” approach to supply chain is not suitable as it inhibits growth and broadly leads to overall dissatisfaction. When embarking on our own journey, we have developed five Supply Chain models to reflect the expectations of our different customer segments, including integrators, electrical distributors and end-users.
Digitisation of operations
Digitisation provides the answer to building a customer centric supply chain. All customers are searching for efficiency, productivity, and quality gains. Unless operating processes are connected, systems and tools cannot truly support the needs of customers or the business to provide one version of the truth.
Connectivity allows us to control, monitor, and optimise every part of the process. It creates the desired end-to-end view, which can be visualised at Unified Operating Centres located at key points around the world, to provide on-site, real-time knowledge driven by data analytics. Such connectivity creates the ability to make better decisions and predict demand with customers, triggering a reaction along the links and activating frontline teams to address needs more efficiently. Together, connectivity and artificial intelligence can eliminate downtime by continually running tests to improve performance, detect issues and create diagnosis before outages occur. This enables predictive analytics to provide real time information that supported up to date decision making, which in turn reduces the risk of unplanned downtime.
Thanks to digitisation, suppliers can be fully integrated into an “extended supply chain”, encouraging transparency and traceability. Digitisation becomes a foundation for circularity. It opens manufacturing to all shareholders and changes the relationship between suppliers and manufacturers.
Of course, the human component is key. Digitisation allows for agile management, augmenting and empowering field operators and enabling unmanned operations to ensure their safety. It breaks down silos and builds collaboration and trust.
At Schneider, we deploy our own technologies across our Global Supply Chain footprint of 300 Connected Factories and Distribution Centers, 100+ of which are “SMART” Certified. We have sites in Asia, China and Europe designated as World Economic Forum advanced manufacturing “Lighthouses” that shed light on the benefits of Industry 4.0.
A great example of one of these lighthouses is the Le Vaudreuil, one of Schneider Electric’s motor control manufacturing plants in Normandy. Nominated as WEF’s model for the future, this factory draws on EcoStruxure technology and utilises a wide range of our digital tools.
This factory represents the future of manufacturing. Think about it. Inside the factory there are mini data centres storing critical site data, all USB keys pass through a decontamination terminal, and sensors monitor machinery to predict – as opposed to reacting to all factory maintenance needs.
What’s more – as a result of augmented reality, the factory is benefiting from a 7% increase in productivity, and energy savings of up to 30%. This factory not only showcases the benefits of embracing smart technologies but also the ease at which any business can begin its own digital journey.
Sustainable momentum across the chain
While the headlines might have increased in recent years, sustainability in supply chains is not a new trend. Supply chains are major contributors to environmental impact and since the early 2000’s, many sustainable initiatives have been undertaken.
Our actions focus on three factors:
- Zero-carbon to reduce CO2 footprint, reducing emissions and helping organisations meet their sustainability targets.
- Circularity in both design and end-of-life processes to minimise resources.
- Conserving biodiversity through the optimization of energy usage to maximise and hit sustainability commitments.
While the momentum was already underway, it will be accelerated going forward. The need for sustainability to address primary threats such as Climate Change has been reinforced by COVID-19 and will be a priority in recovery plans. Governments and businesses alike are focusing on a green future.
The past twenty years have seen the supply chain footprint shift. In early 2000’s, the footprint was highly concentrated in mature markets. By mid-2000’s, to align with customer footprint and optimise costs, it shifted to an industrialised footprint with international production lines. Today, the risks associated with long chains, along with growing trade tensions and geo-politics, are causing many organisations to again re-evaluate.
Over the past ten years, we have implemented a multi-local and balanced footprint approach, complemented by tight global coordination. For this to increase – we need to further build our local resilience through shorter supply chains, rooted in local communities. Our local operations can understand better, adapt quicker, reverse logistics, and repair locally. This is not a shift from globalisation, merely a new form – with global players connected in shorter chains.
None of the trends are independent from one another. Digitisation drives sustainability – it is critical for efficiency, circularity, and decarbonisation of energy. Sustainability is a driver for regionalisation – reducing mass transportation significantly reduces climate impacts. Regionalisation allows tailored supply chain solutions through flex centers bringing even more value to customers. As we see an increase in digitisation across supply chains, regionalisation will be facilitated.
Building the supply chain of tomorrow
There are many questions circulating about to what extent COVID-19 will change or accelerate these trends. There is no denying that the crisis was a supply chain crisis (caused by lockdowns, borders closing, country-by-country specifics). However, COVID-19 has not changed the fundamentals; rather it has acted as a catalyst that is forcing all organisations to rapidly adopt these trends. This builds resilience, and those who embrace it quickly will set themselves up for success.
A multi-local approach - A purely local footprint is not feasible – one disruption can bring down the whole chain. To overcome this, organisations need to regionalise, with a form of redundancy, and empower the local level, with a tight coordination of local sites. Of course, such reorganisation will impact costs. But it will be in both ways – increased CapEx for redundancy and relocation, and reduced costs due to decreased inventory and working capital from shortening the supply chains, as well as higher sustainability.
Resilience requires an end-to-end vision - It should be considered at the level of the interconnected partner ecosystem. It requires visibility and transparency from both Tier One and Tier Two suppliers all the way to customers. Business continuity plans need to reflect this end-to-end value chain.
A step change in efficiency can be achieved through integration across four axes - The integration of energy and automation to achieve both energy and process efficiency; the vertical integration of end-point to cloud, so all data from the shop floor upwards is visible; the lifecycle integration, capturing data from design and build, all the way to operation and maintenance, to eliminate the inefficiencies in the transition from CapEx to OpEx; and the integration of all sites and workshops into One Unified Operation Center for a big-picture view of energy and resource consumption, providing a “one version of the truth” platform.
Technology is the answer - We need digitisation across every aspect of the chain. Automation can support event response and day-to-day operational management, predicting and mitigating risks to customer demand and shaping scenarios to delivery optimal efficiency and agility.
The good news is that the technology to build a resilient, agile, and collaborative supply chain already exists. Ultimately, we can build the supply chain of tomorrow, today.
About Schneider Electric
Schneider Electric is leading the Digital Transformation of Energy Management and Automation in Homes, Buildings, Data Centers, Infrastructure and Industries. With global presence in over 100 countries, Schneider is the undisputable leader in Power Management - Medium Voltage, Low Voltage and Secure Power, and in Automation Systems. We provide integrated efficiency solutions, combining energy, automation and software. In our global Ecosystem, we collaborate with the largest Partner, Integrator and Developer Community on our Open Platform to deliver real-time control and operational efficiency. We believe that great people and partners make Schneider a great company and that our commitment to Innovation, Diversity and Sustainability ensures that Life Is On everywhere, for everyone and at every moment.
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