More recently, some companies with leading-edge supply chains have started to experiment in creating “supply-chain nerve centers”—digital, end-to-end control towers that span functional silos. The differences center on four areas:
- Extending the ends in end-to-end planning by interconnecting historically isolated functions, such as supply-response planning and logistics execution, as well as upstream and downstream channel partners
- Sensing upcoming shocks earlier and deeper across the supply chain by applying digital technologies and the Internet of Things (IoT)
- Improving decision-making by applying advanced analytics (including machine-learning techniques) to analyze second-, third-, and even fourth-order implications of potential responses to disruption
- Reimagining the operating model, recognizing that technology alone won’t deliver sustained improvement in supply-chain performance
Companies that have started on the path to supply-chain nerve centers have already saved millions in inventory and logistics costs.
- A mosaic—or just fractured?
For years, companies have optimized individual supply chain functions. Advanced planning systems, warehouse management systems, and even custom solutions became the norm. These tools delivered value within their silos, but the overall picture was fragmented: a mosaic of disconnected solutions.
This lack of real-time communication across functions hampers optimal performance. Imagine a complex machine with isolated parts; valuable data remains trapped, hindering a holistic view. The solution? Seamless horizontal connections to unlock the full potential of your supply chain.
- The next evolution of supply-chain planning
Forget siloed planning and reactive responses. Supply chain nerve centers are the brain of your logistics network. These hubs connect different functions, acting like interconnected organs feeding real-time data to a central core. The result? A new level of awareness, allowing businesses to anticipate challenges and opportunities across the entire chain.
This translates to optimized plans built on collaboration and real-time data. Gone are the days of individual planning and firefighting. With everyone working from a single planning engine, companies can create feasible, optimal plans that reduce iterations and boost the efficiency of their integrative business-planning (IBP) process as they can see how every decision ripples through the supply chain.
- Overcoming the challenges of change
Technological advancements let us react to disruptions faster, but the sheer volume of identified issues can be overwhelming.
Accordingly, connecting previously isolated functions require careful design choices to be addressed in order to realize the full potential of supply-chain nerve centers.
Below are 5 design choices to be made:
- Calibrate thresholds to distinguish real issues from noise
- Choose which tasks belong to machines and which to humans
- Determine the decision-making cadence
- Define new roles and decision-makings rights
- Design an enabling technology stack
- Act now for a stronger future
Integrating cross-functional collaboration into supply chain nerve centers is the key to unlocking their true potential. This collaborative approach is crucial because much of the benefit of digital supply chains comes from breaking down silos.
Companies that master this new structure can unleash the full creativity and problem-solving power of their workforce. Those who lag behind, risk falling further behind with each disruption.
Six key lessons from a supply-chain nerve center
- Start with a manageable but end-to-end value stream that touches many functions at once
- Get comfortable with “law of 80% right”-dual focus on quality and velocity of solution
- Embed capability building and change management into the process itself-not as an afterthought
- Use disruptive technology to reimagine the process, not to digitize the status quo
- Let the process accelerate the data quality, instead of bad data delaying the process
- Lead by value, not by islands of capability in the business, digital organization, or supply chain
Click below to read more: https://www.mckinsey.com/capabilities/operations/our-insights/building-a-digital-bridge-across-the-supply-chain-with-nerve-centers
