The case for reimagining the supply chain model

Michiel Verhoeven, Managing Director, SAP UKI

The impact of supply chain disruption has been felt country-wide. Supermarket shelves have been left empty, packages have been delayed during shipping and gas and oil prices have rocketed. The last few years with the pandemic, the war in Ukraine and economic downturns have shaken the world and left global supply chains, and the businesses heavily reliant upon them, at breaking point.

And yet, there are still challenges to come. For many organisations, and particularly those in the UK, supply chains will continue to be stresstested as the country tumbles towards the longest recession since records began. Now more than ever, businesses have an opportunity to implement what they have learned since the beginning of the pandemic and reimagine the supply chain process, moving away from a Just in Time to a Just in Case model, avoiding further financial and reputational repercussions.

Exploring the causes of supply chain disruption

Since the start of the pandemic, supply chain issues have negatively impacted businesses in several ways, in particular through delays in production of goods and the delivery of services, a decrease in revenues, and a loss of customers. According to the Institute for Government , labour shortages, Brexit trade barriers, global supply problems and panic buying are all contributing to supply chain disruptions in the UK.

The pandemic has been the main factor causing current supply chain issues in the UK despite claims that we’ve now seen the back of it, and according to a survey, 98% of UK businesses agree that factors such as social distancing restrictions, travel restrictions, speed of vaccine distribution and remote working are to blame for the continued struggles. Secondly, 86% said that the impacts of Brexit, such as visa and border restrictions and a lack of available talent, are a leading cause also. Since then, new challenges have emerged with record inflation numbers and a huge increase in energy prices adding to the challenges.

Where supply chain management was once about cutting costs, businesses are now faced with the challenge of staying ahead of consumer demand, while improving resilience, cutting carbon emissions, and still keeping costs down. With almost a quarter (23%) of businesses anticipating that supply chain issues will still be an issue in the summer months, now is the time to rethink the existing model.

Embracing a new supply chain philosophy

For decades, companies prioritised costs, speed, and convenience when selecting suppliers, building factories, and deciding how much stock to keep on hand. The ‘Just in Time’ philosophy seemed inviolate – the drive for the lowest production costs, the prioritisation of tier-one suppliers, the concentration of suppliers in one region or location, a reliance on historical data to predict demand, and distribution by the pallet-load. But these have now fallen away.

The majority of UK businesses (84%) now think they should move on from a Just in Time supply chain model to a ‘Just in Case’ model to overcome future supply chain crises. With businesses set to face broader and more frequent global shocks over the next decade, the fate of supply chains has become a boardroom issue, and with Just in Case, companies have an opportunity to not only make themselves stronger but to improve their competitive stance too.

The Just in Case process fundamentally allows businesses to improve their contingency planning. Whether it’s labour shortages, delivery delays or resource scarcities, businesses can offset disruption and remain resilient by manufacturing surplus goods – predicting increased demand and ensuring steady availability in times of need. It means that customers are shielded from disruption out of their control and can access goods and resources when they need it most.

Technology provides a helping hand

But transitioning away from Just in Time to Just in Case requires the support of advanced technology, and in particular, in enhancing traceability along the supply chain. Historically, traceability has proven to be a key hurdle for businesses in supply chain transformation and so it’s no wonder that 70% of UK leaders are now planning to adopt modern technology to help overcome these challenges in the next couple of years.

Traceability is at the heart of being able to predict demand, provide realtime updates, deliver steady availability of goods, and build a sustainable business -all while meeting regulatory compliance. It also acts as a key competitive differentiator for value creation by supporting customers purchase decisions. Nike, for example , has recently taken the lead on traceability and has set a precedent for others to follow.

With traceability also comes the option to review where efficiencies can be made and to review the value of being involved in a global supply network versus a local one. As many as 56% of UK businesses are now planning to prioritise UK-based supply chain solutions to protect against global disruption and accelerate the production of goods and time to market. The movement towards localisation can also be seen at a political level, with the UK Labour Party’s commitment to building a UK-owned energy company – Great British Energy Ultimately, supply chains today remain in flux – driven by a set of macroeconomic issues that show no sign of being resolved quickly. Leaders must show that they have heeded the lessons of the past few years and evaluate whether their existing model is suitable for their business and their customers. The Just In Case model provides businesses with a viable alternative that is suited to contingency planning and delivering service continuity. With the trends indicating this is where UK businesses are focusing their attention, leaders cannot forget the value of advanced technology in helping them weather the storm.