The impacts of the COVID-19 crisis underscore how important proactive and forward-looking crisis management is for safeguarding the competitiveness of businesses, especially with regard to the supply chain. With the pandemic outbreak, important suppliers failed practically overnight. Many industrial companies waited in vain for urgently needed raw materials and production materials, or had to put up with long and costly delays. The further course of the pandemic also demonstrated the vulnerability of tightly meshed supply chains. COVID-19 and its restrictions disrupted what had previously been solid commodity flows around the world. Companies suddenly had to look for entirely new sources of raw materials and business partners.
Supply chain management therefore needs to be rethought. It is not only the short-term disruptions caused by COVID- 19 that play an role here, but also important social developments such as sustainability and the circular economy. The conclusion to be drawn from these developments is that companies need to build resilient and responsible supply chains that prove to be crisis-proof, but also address the issues of emissions and incorporate environmental social governance (ESG) criteria from the outset. Building such supply chains can only work if modern technologies and data are used throughout the company.
Technologies from artificial intelligence (AI) to the Internet of Things (IoT) to cloud management and blockchain are enabling companies to reinvent supply chains to meet their climate and resiliency goals. In one of our recent reports, 75% of CEOs indicate they’re already digitizing value chains to take sustainability management to a new level. in addition to gaining more efficiency.
Specifically, using digital twin technology is a good way to virtually represent assets, enabling supply chains to be modeled in real time. In this way, a business can test scenarios for improving resilience and reducing emissions while also optimizing customer service.
But technology without data is useless. That’s why data is at the heart of any effective climate action. According to our study, while four out of five CEOs use technology to collect and manage company-wide ESG data, only a quarter of these business leaders manage their data in an advanced way. To change this, companies need to accelerate their move to the cloud. With the cloud, companies can connect the complex web of systems and data across multiple levels of supply chain actors. The cloud provides the technology and environment that takes information sharing and management to a new level.
One example—straight from the field— that shows how technology and data can be combined to create ground-breaking and forward-thinking supply chain management is John Deere, one of the world’s leading manufacturers of equipment for agriculture, construction, forestry, and other industries. In agriculture—with large acreages, widely dispersed suppliers, a global network, and a natural interest in sustainability—the need for technology and data is evident. In Accenture’s recent edition of “The Industrialist,” Wallas Wiggins, vice president of global supply management and logistics at John Deere, made very clear how ESG criteria and technology are interdependent. Both are already shaping the supply chain today and will do so even more in the future.
Data from the farmer’s field is sent to the customer’s operation center, from the time of tillage to harvest. This data is analyzed to gain insights into yield. For example, locations can be identified where it is worth sowing more because the yield is higher there. Deere provides a lot of tools that its customers can use to gain valuable insights to reduce costs and increase yields.
As part of Deere's larger ESG-approach, one of the key focus areas is reducing greenhouse gas emissions. For example, they’re working to ensure all the electricity they bus is renewable energy. Deere is also developing a structure that helps share and match disparate sustainability expectations with suppliers. The structure also captures ESG data to make their, and suppliers’, contribution to sustainability initiatives visible.
In a world that thrives on exchange and swarm intelligence, it is important to use supplier knowledge. John Deere is therefore focusing on implementing innovative developments by its suppliers into its own products and services. In addition, John Deere also asks its suppliers where they see opportunities for Deere—an effective measure that is both informative and collaborative.
Necessity of supply chain
In addition to the technologies discussed here, equally important is the development of appropriate and agile working methods in dealing with innovative technology. Combining new ways of working with a digital-first mindset in supply chain management creates a better customer experience, smarter business processes, and more sustainable products. Especially when it comes to achieving ESG criteria, the optimized and digitized supply chain makes a significant contribution to achieving sustainability goals. Companies that take advantage of these benefits have the potential to leapfrog the competition.