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Supply Chain Networks: there is strength in unity

13 December 2022
Article by Gisela Santos, director of the Industrial Management and Engineering consulting area

The supply chain is essential to satisfy market requirements at minimal cost and investment1 and is currently a hot topic. «Disruption» is the word that always comes to mind, with extended delivery times and material shortages on the agenda.

And, in fact, the data confirms this reality. In 2021, according to a study by the Gartner Group, 68% of professionals working with supply chains reported that they have been constantly responding to high-impact disruptions since 2019, and even that they are hit by a new disruptive event, before having recovered from the previous event2.

The reality is that, in a global market, we will constantly face supply disruptions, whether due to natural disasters, resource and labor shortages, conflicts that affect international trade or other inevitable and unforeseen events.

In this way, and according to a study by PwC, it is urgent to mitigate risk and increase the level of agility in the supply chain. This will lead the Chief Supply Chain Officers to update the current supply chain vision to an ecosystem vision with networked partners: a Supply Chain Network, that is, a network of interconnected Supply Chains3.

Having extensive experience in projects to improve and align processes and organize logistics and supply chains, we see this trend as prosperous for companies, as it is based on principles of optimization and agility.

Cooperation over competition

In a supply chain network, partners will share common information, processes and digital platforms, rather than just moving products, services and information from one link to another in a supply chain.

Additionally, these ecosystems will be able to share assets, such as warehouses, logistics platforms and transport, and even carry out joint investments, in order to mitigate risk and leverage opportunities on the supply and demand sides.

Citing once again the Gartner Group study, the modularity of these ecosystems will also be a competitive advantage2. Supply chain resources and processes will be organized into modules like «lego blocks», which can be quickly configured, building alternative paths along the supply chain network.

For example, if a factory encounters an unexpected breakdown and is unable to meet a certain delivery deadline for an order, this information is immediately available on the network, an alternative supplier can be automatically activated for the order in question. Assuming that this alternative supplier is located on another continent, the mode of transport (which would originally be by road) will change to sea, for example, immediately, quickly and transparently for all partners in the supply chain network.

The transition from a supply chain to an ecosystem / network of supply chains, in which the path of a product or service may follow alternative itineraries and different partners, depending on the moment, capacity, demand and risk, will be strongly supported by technologies such as blockchain, big data, cloud computing and artificial intelligence. In the coming years, the use of these technologies will support the creation of an autonomous supply chain network, capable of automatically planning the supply chain in real time and executing operational actions in an automated and efficient way.

However, it is expected that this automation will enhance and not replace human activities, particularly in the areas of decision-making, scenario planning and modeling, forecasting and market intelligence. Decision-making is also expected to evolve from a basis of sensitivity and feeling to decisions based on facts2. However, we will inevitably see the automation of transactional and repetitive tasks such as order entry and handling, for example, where labor will be replaced by digital robots.

Unity is a trend of the future

Forecasts made in 2021 by the Gartner Group point to the following trends2:
  • By 2026, more than 50% of large organizations will compete as collaborative digital ecosystems, rather than as individual companies, sharing inputs, assets and innovations;
  • By 2024, supply chains re-engineered for modularity will operationalize innovations in their business models in half the time of their competitors;
  • By 2026, more than 50% of supply chains will use machine learning and artificial intelligence to increase their decision-making capacity.
To make the transition from a supply chain to a supply chain network, the Gartner Group presents the following recommendations2:

Preparing organizations to participate in broader ecosystems
Include many new partners by building consensus on the benefits of being part of this ecosystem. The perception that the gains will be mutual for the partners will overcome internal resistance to sharing assets and information for the benefit of the ecosystem.

Build partnership ecosystem capabilities by clarifying how value exchange is determined
Develop the ability to identify new partners that bring complementary skills to the ecosystem and promote shared capabilities. Measure, monitor and improve, based on clear principles of commitment.

Develop the technology platform and ecosystem connectivity
Prioritize investments in digitization, in order to support the increase in the number and intensity of interactions with business partners. Working with those responsible for the IT areas, in order to adopt technology capable of exchanging secure information in real time, such as APIs (Application Programming Interface) and blockchain.

Where to start?

Firstly, the internal alignment of organizations is essential, eliminating functional silos, in which the various areas meet objectives that often lead them in opposite directions, to high logistical costs and low levels of customer service.

In parallel, the management of all logistical elements under the same «hat» is mandatory, given the trade-offs in the respective costs. That is, you cannot make decisions regarding transport, for example, without thinking about stocks and storage. Decisions relating to each logistical cost element should not be taken individually, but in an integrated manner.

The next step will be to implement a tactical planning function that covers the end-to-end supply chain and manages the actors and logistical processes, in a synchronized and integrated way. At this point, it will be possible and advantageous to align and collaborate with external partners, which will, however, be challenging in organizational terms.

In a traditional relationship, a company's purchases are the main and often the only point of interaction with its supplier's sales. In a collaborative relationship, there will be greater sharing of information and processes, whereby the operational and back-office areas of both partners, which traditionally do not establish contact with each other, will now be in direct collaboration with the partner's homologous area.

For true integration, the boundaries between companies will become less defined and the points of contact between organizations will be multiple.

Related Pages


1 Adaptado das definições da European Logistics Association e U.S. Council of Logistics Management

2 "Predicts 2022: Supply Chain Strategy”, 16 November 2021, Gartner Group

3 "Connected and autonomous supply chain ecosystems 2025”, PwC, 2020

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