Written by Jean-Baptiste Clouard
Surely like me you are seeing this word “synchronization” more and more on your Linkedin Feed.
What does it exactly mean and why are people talking about it more and more?
I have worked in supply chain tech for more than 10 years now and have even created a company in this field.
Through this article, I want to walk you through this concept and share with you actionable advice and best practices.
Each year, trillions of dollars are lost as a result of shortages or overstocks by manufacturers and retailers. Even though most companies have an ERP system and good visibility of their inventory, mismanagement of stock and the associated financial losses have never been greater.
The traditional way to solve the problem was to make the individual company more efficient, but in the modern world, companies are becoming increasingly interconnected and so too are their supply chains. Stock optimization issues cannot be solved by considering the company in isolation.
And Covid has proved us right! The first lockdown in March 2020 caused a sudden halt in economic activity and for more than a year, many companies have been reducing or stopping operations altogether.
Although demand is now picking up, the market is facing a new challenge: the shortage of raw materials, and prices have soared for many products: metals, plastics, micro-chips etc…
But should we expect further upheaval?
According to CDP, who collects environmental data from 8,000 companies, environmental risks could directly cost large companies an additional $120 billion via their supply chain by 2026, with manufacturing and food sectors the most affected.
In their report entitled ‘Transparency to transformation: a chain reaction’, the organization estimates this amount at $1,260 billion, of which $120 billion are due to supply chains alone.
The reason for these losses? The increase in the severity and frequency of weather disturbances (such as cyclones and flooding) could lead to shortages, delays, and even stoppages in production lines. According to the same report, the biggest players are not spared either, with the list including L’Oréal, Walmart, and Unilever.
And leaders are already getting ready!
Many major players try to control their end-to-end supply chain by acquiring their own suppliers. For example, Toyota owns 5% of one of its suppliers Renesas, and 24% of Denso. This strategy effectively helps the Japanese car maker navigate through the latest microchips shortage.
But is this strategy enough?
Sure enough, you secure supplies so you won’t experience as many shortages. but it doesn’t enable you to optimize your stocks per se. It only limits shortages without really enhancing collaboration nor optimization.
Most of us have already worked in major enterprises and we know that communication and transparency are not that easy to foster (especially after an acquisition). Being part of the same group doesn’t automatically mean that the collaboration will be smooth.
Plus this can be used for really strategic supplies but can’t be the only one strategy for a company.
So what to do if you don’t want to acquire your suppliers or can’t afford it ?
You will have to foster collaboration with your suppliers.
This scorecard below has been created based on Gartner’s papers and research. According to them “Improving performance in a network of trading partners with emphasis in creating a shared value” is the ultimate goal.
Another report published by Gartner on the Top 25 supply chain companies in 2020 reveals that already few companies have reached stage 5.
Synchronization will surely become the norm in the years to come. Today, supply chain leaders are taking this maturity objective seriously, and the work which is being done now will eventually spread to all companies in the market. The choices made today will determine how prepared businesses are for the changes to come.
Though all experts agree that synchronization will be the norm, the concept is quite hard to grasp in our daily life. What does it mean? What does it entail?
Most of them make it an ultimate goal. You have to validate many other milestones to achieve synchronization. It is true that it requires a certain level of maturity, but it doesn’t mean that you have to check all the steps prior to thinking about synchronization. And If you are reading this today, surely you are ready and aware of this necessity!
In my opinion, we shouldn’t make it something this futuristic. Synchronization can be simple and effective and deeply and positively impact your daily life as a planner or a supply chain manager.
I believe it doesn’t need to include massive data sharing nor IT project and i’ll try to share with you tips and best practices to foster synchronisation and collaboration in your end-to-end supply chain:
Step 1 – Digitalization: Most of the companies we are talking to are still handling their orders through emails and excel spreadsheets. It is a painful and time-consuming process for all stakeholders. What is the latest version of the purchase order ? Which email should I check to have the delivery date ? Has the order been cancelled or not ?
We tend to forget it, but synchronization starts with something as simple and easy as a single view for all the stakeholders. A single view that all stakeholders can update in real-time, where your planner can check the status or delivery date of their orders.
Collaboration starts with less paperwork!
Step 2 – sharing your forecasts: you’re surely already doing it. But how dynamic is it? How frequently do you update the forecast? Do you send a new version whenever you have a new big customer order flowing in?
Sharing forecasts with their suppliers is the best way for them to anticipate demand and make sure that they will be able to deliver to you. Or the worst case scenario tell you that they won’t be able to deliver.
Make sure to share your forecast and update them whenever needed. If you have a specific tool to support dynamic forecast updates with the suppliers is best.
Step 3 – building a common value: this is the most advanced stage. The stage where you realized that the the future of both companies are deeply related. At this stage you invest in your network and treat it as an asset!
To do so, you don’t need to share all your data, especially sensitive one. Synchronization doesn’t mean no data privacy!
With recent shortages many industrials requested the states to be their third trusted party and to synchronize the end-to-end supply chain. Do I believe in this plan ? No. (But I’ll need another article to explain to you why. 🙂 )
Though this request sounds unlikely to happen, I believe that these industrial companies made a fair point. We do need a neutral third party to synchronize the supply chain. Someone who can give advice to the different stakeholders without compromising their data. No company will share their data and no government can optimize the end-to-end supply chain in a global market.
So all we have left is technology! An intelligent solution can indeed synchronize the different stakeholders without disclosing any confidential information.
While synchronization sounds scary, I believe that it can be something as small as having the same information when it comes to orders status and delivery date.
Obviously it can be something way more complex and advanced but we should also keep it in mind that it is something easy and actionable right away.