Creating Resilience Amid Disruption
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Whether they are high-impact/low-probability events like natural disasters—or everyday upsets caused by snowstorms and traffic jams—managing disruptions is a big part of the job for supply chain and logistics professionals. This year we’ve experienced exceptional global disruption from COVID-19, so it’s not surprising that supply chain resilience is in the spotlight in this year’s annual survey on supply chain innovation.
Research on how supply chains are changing for success and survival
When we launched this annual survey for the third time, the pandemic had already disrupted the supply chains of almost every company in the world. In some cases, it halted or nearly halted operations, but other companies were struggling to meet unexpected surges in demand. This dichotomy has highlighted how supply chain resilience is imperative for success and survival because the future will always be full of disruptions, big and small.
of the professionals we surveyed said their companies will be making changes to supply chain practices based on lessons learned from the pandemic.
75%
Thinking about disasters as opportunities and using disaster preparedness to increase resilience are the essence of making lemonade from lemons...The advantage of creating resilience is that...it is a characteristic that gives enterprise buoyancy in the wake of any disruption, increasing its day-to-day flexibility to respond to a world that is changing fast and becoming ever less certain.
“For companies, resilience measures their ability to, and the speed at which they can, return to their normal performance level following a high-impact/low-probability disruption,” explains Massachusetts Institute of Technology professor Yossi Sheffi in his 2005 book, The Resilient Enterprise.
What Is Supply Chain Resilience?
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• Which supply chain capabilities will become more important moving forward?
• Which supply chain functions and processes will require the most changes?
• What changes will companies make in how they design and operate their supply chains to become more resilient?
• What factors are driving (and which ones are inhibiting) supply chain innovation efforts?
• Do companies still believe that customer experience will overtake price and product as the number one brand differentiator?
We explored these questions in this year’s research and revisited questions from the past two surveys about customer experience and innovation:
This year it’s popular to say, “We are in this together.”
This is certainly true in supply chain management, where communication and collaboration among many trading partners—manufacturers, retailers, distributors, and logistics service providers—is more urgent than ever. We hope the results of this research will provide useful insights and spark important conversations among all stakeholders about creating smarter, better, and more resilient supply chains.
As part of the survey, we asked manufacturers, retailers, logistics service providers, and other companies in the Americas, EMEA, and APAC to rate their company's supply chain performance relative to peers in their industry (ranging from Significantly Below Average to Significantly Above Average). We also asked them to characterize their company’s culture with regard to technology adoption (ranging from Laggards to Innovators). This enabled us to compare the responses between Above Average and Innovator companies with those from Below Average and Laggard companies. New this year, we asked the respondents what generation they belong to: Silent Generation (born 1925-1945), Baby Boomer (born 1946-1964), Generation X (born 1965-1980), Millennial (born 1981-1996), and Gen Z (1997-present). This enabled us to compare responses across different generations.
Adelante SCM and BluJay Solutions, in partnership with the Council of Supply Chain Management Professionals (CSCMP), conducted an online survey of supply chain and logistics professionals in June 2020. We received 233 usable responses from around the world.
About the Supply Chain Innovation Survey
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COVID-19 Pandemic: A Catalyst for Change
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2020 Supply Chain Market Research
www.blujaysolutions.com ©2020 BluJay Solutions Ltd. All rights reserved. For more information, permission to reprint or reuse this report, and all other correspondence, please email PR@blujaysolutions.com
A forward from CSCMP President and CEO Rick Blasgen
How will we define 2020 in the future? As a year of change? A year of disruption? A time of innovation? As the decade for supply chain? Any of these descriptions could and probably will apply, and that’s why the Council of Supply Chain Management (CSCMP) is especially proud to work with BluJay Solutions and Adelante SCM once again on this annual report. Recently, I wrote, “With the pandemic disrupting supply chains, industry professionals have an opportunity to create innovative solutions and rewrite the future supply chain landscape.” We are certainly traveling that path now, and this report provides valuable insights into how we are creating solutions—some of necessity, some of opportunity—that we will undoubtedly rely on for years to come and make us more resilient. When COVID-19 entered our reality, the focus for many immediately shifted from strategic innovations to the urgent and necessary - like securing our supply availability, making massive switches to alternative channels due to the shutdown and subsequent reopening dynamics, and instilling a relentless focus on safety for both our employees and the customers we serve. We have altered delivery processes, installed new safety and security protocols, upgraded our technology to support new channels with speed and accuracy. And we did most of this while simultaneously adjusting to working from our homes. The theme of resiliency, which surfaced in this research, was also relevant in CSCMP’s 31st Annual State of Logistics Report®, which indicates that 2019 U.S. business logistics costs rose slightly to $1.63 trillion, or 7.6% of 2019’s $21.43 trillion GDP. That report highlighting strengths of 2019, what we are facing currently, and a lens of what to consider in the future is aptly titled, “Resilience tested.” Through it all, creativity is alive and well, and innovation continues to be a foundational element of modern-day supply chain management. CSCMP stays on top of this for you, we care, and we want you to stay connected. Supply chain is still a people business. It’s our people who innovate, together, in our connected and never-wavering resilient supply chain community.
Rick Blasgen CSCMP President and CEO
Rewriting the Future Supply Chain Landscape
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Final Recommendations
Conclusion
Gen Z and Millennials: The Future Will Be Greener, More Transparent
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Visibility into Demand and Supply Even More Critical
Geopolitical Factors and Trade Uncertainty Emerge as Barriers
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BI, Analytics, and Machine Learning Grow in Importance for CX
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Customer Experience Survives the Pandemic
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Supplier Relationships Determine Supply Chain Resilience
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Introduction
The COVID-19 pandemic is driving disruptive change in supply chains.
The quick and unexpected shift to working from home uncovered shortcomings in many companies’ HR policies and IT capabilities, especially if they depend on on-premise applications that are not accessible via the cloud.
75% expect to make moderate to extreme changes.
Who is making Many or Extreme changes?
The quick and unexpected shift to working from home has uncovered shortcomings in many companies.
More than a third of the respondents (34%) expect their companies will make Many or Extreme Changes in how they design and operate their supply chains to become more resilient. Performance and technology leaders are most likely to be making big changes.
HR applications are typically not accessible via the cloud, which makes working from home very difficult.
LSPs vs SHIPPERS
Many LSPs still rely on custom-built applications to run their operations. 73% of LSPs selected IT capabilities compared with only 51% of shippers.
Why the difference? Similarly, changing IT capabilities ranked significantly higher for respondents outside North America, with 71% selecting it compared with 54% for North American respondents.
NORTH AMERICA vs REST OF WORLD
The adoption of cloud solutions is lower outside of North America, especially in developing countries. According to Gartner, “By 2022, cloud adoption for all other countries will lag behind the U.S. by one to seven or more years.”
What’s changing?
LSPs
Shippers
North America
Rest of World
IT capabilities
Human resources policies
Sourcing Strategy Protects Some, Punishes Others
Although Sourcing Strategy ranked fourth overall in what will change, there were some notable differences among the various respondent groups.
Change in sourcing strategy
Average or Below Performance
Above Average Performance
Laggard/Late Majority
Innovator/Early Adopters
The results suggest that Laggard/Late Majority and Average or Below Performance companies were hit harder by the pandemic when shutdowns occurred, due perhaps to having a less diversified network of suppliers than their counterparts. The difference between Shippers and LSPs is more straightforward: Sourcing is typically something manufacturers and retailers keep in house; few shippers outsource this function. And whatever sourcing LSPs do, it is generally more limited in scope than for shippers.
what actions do you foresee your company taking moving forward to create a more resilient supply chain?
INNOVATOR/EARLY ADOPTER vs LAGGARD/LATE MAJORITY
Laggard/Late Majority companies are less capable of handling supply disruptions and inventory stockouts due to the pandemic compared with Innovator/Early Adopter companies. As a result, they view expanding their supplier base and keeping more inventory across the supply chain as a higher priority than their counterparts.
Innovator/Early Adopter
Keep more inventory across the supply chain (become less JIT)
Headline Here?
Cross-training employees
Companies over $1 billion companies
Companies under $1 billion companies
These results suggest that smaller companies and LSPs have more limited resources than their counterparts, so if a portion of their workforce is unavailable due to sickness or quarantine, others will have to cover for them—thus the increased importance of cross-training employees across different roles, responsibilities, and systems.
Creating a more resilient supply chain begins with Developing stronger, more transparent relationships with key suppliers.
followed by Cross-train employees (49%) and Expand/diversify supplier base (43%)
These findings correlate with the results from the previous question—that is, the need to change or evaluate Sourcing Strategy is linked with Developing stronger, more transparent relationships with key suppliers and Expand/diversify supplier base. Similarly, the shift toward working from home, as well as employees missing work due to sickness or quarantine, has increased the need for and the importance of cross-training employees.”
Top-ranked action (53%) respondents expect to take to create a more resilient supply chain
See all the results
Expand/diversify supply base
Managing Supply Disruptions
While providing an enhanced customer experience has been particularly difficult during the pandemic due to stockouts and delayed deliveries, companies retain their belief that customer experience will become the number-one brand differentiator during the next five years.
Strongly agree
As in 2019, there was a notable difference between North American companies and those in the rest of the world (ROW).
The number of respondents who Strongly Agree increased by almost 12%
A lower percentage of North American companies Agree or Strongly Agree that customer experience will become the number-one brand differentiator compared with ROW companies (59% vs. 67%). The gap between them, however, decreased by 38% compared with 2019.
North America vs Rest of World
2019
2020
Cost Reduction Is the Main Driver for Supply Chain Innovation
Considering the large economic and financial impact of the pandemic, it’s not surprising that reducing costs is again the top factor driving supply chain innovation.
2018 vs 2019 vs 2020
The top three factors remained the same as in previous years, but this year To reduce costs/become more cost competitive ranked first overall.
62% of the survey respondents Agree or Strongly Agree,
a slight increase from 2019 when 61% responded the same.
2019 vs 2020
agree
Strongly disagree
disagree
neutral
“Over the next five years, customer experience will overtake price and product as the number-one brand differentiator”
Agree received the highest percentage of votes across all respondent categories
The number of respondents who Strongly Disagree decreased by 40%, compared with 2019
To reduce costs/become more cost competitive
To deliver an enhanced customer experience
to create a competitive advantage
Ranked first overall with 31% of top-factor votes, a 7% increase from 2019
Over the past three years, the number of top-factor votes given to To create a competitive advantage has increased by 15%.
Not surprising, Laggards/Late Majority and Average or Below Performance companies lead the way in reporting Little/no supply chain innovation happening at our company today.
Innovator/early adopter
Consistent with 2018 and 2019 results, To deliver an enhanced customer experience received the most top-rank votes from both Innovator/Early Adopter and Above Average Performance companies (31% and 36%, respectively). In contrast, To reduce costs received the most top-rank votes from both Laggards/Late Majority and Average or Below Performance companies.
This tells us that the disconnect for shippers continues. While over 60% of them Agree or Strongly Agree that customer experience will become the number-one brand differentiator over the next five years, cost reduction continues to drive their supply chain innovation efforts. For logistics service providers, however, To reduce costs (17%) ranked third behind To deliver an enhanced customer experience (29%) and To create a competitive advantage (27%).
When it comes to shippers (manufacturers, retailers, and distributors), reducing costs remains the top driver of innovation for the third year.
which supply chain capabilities will be the most important in delivering an enhanced customer experience?
When it comes to delivering an enhanced customer experience, the availability of data and its role in prompting action is apparent in the top responses.
The capability with the biggest gain this year was Business Intelligence/Analytics/Machine Learning, which moved up to the third spot overall with 16% of most beneficial votes—a 23% increase from 2019. Here’s how support for that choice breaks down:
Real-time visibility to orders, shipments, and inventory received the highest percentage of most beneficial votes again this year (36%), an almost 13% increase from 2019.
Time-definite deliveries ranked second again with 17% of most beneficial votes, also a 13% increase from last year.
Silent/Boomer respondents
Millennials and Gen Z respondents
Geopolitical Factors and Trade Uncertainity Emerge as Barriers
ABout the chart
The 2019 percentages in the chart differ from the values published last year due to a change in reporting format. The values have been adjusted to align with this year’s format.
What are the top three barriers to supply chain and logistics innovation at your company today?
INNOVATOR/EARLY ADOPTERS vs LAGGARD/LATE MAJORITY
For Innovator/Early Adopter companies, Geopolitical and/or trade uncertainty received the most top-barrier votes (16%). In contrast, this choice received only 7% of top-barrier votes from Laggard/Late Majority companies.
Innovator/early adopters
Company Size Continues to Be a Barrier
Change management hurdles received more top-barrier votes from large companies ($1 billion+ in revenues) than smaller companies (under $1 billion)—a 200% difference.
The top two barriers to innovation, although flipping in order sometimes, have remained the same the past three years.
In fact, the two new responses—Geopolitical and/or trade uncertainty (12%) and Lack of flexibility or innovation of supply chain partners (12%)—tied for third place overall.
Innovators vs Laggards
Like last year, Siloed systems and/or processes received the highest percentage of top-factor votes (17%), followed by Existing IT systems are outdated (14%). These percentages are down from previous years, but we added two new responses, which undoubtedly siphoned some votes (and, therefore, complicates making year-over-year comparisons).
Similar to last year, a much greater percentage of Laggard/Late Majority companies reported Lack of upper management support for funding and resources as a top barrier compared to Innovator/Early Adopter companies (19% vs. 6%)—a difference of more than 200%. A similar difference exists between Average or Below companies (16%) and Above Average companies (8%). These results suggest that Innovator/Early Adopter and Above Average Performance companies are better at developing and communicating the business case for supply chain innovation investments than their counterparts. It could also mean that upper management teams at Innovator/Early Adopter and Above Average Performance companies are doing a better job of creating innovation-driven cultures.
These results suggest that global trade issues, like the tariff war between the United States, China, and other countries, as well as Brexit, are hindering innovation at some companies due to ongoing risks and uncertainties.
Change management hurdles
The results validate the saying that it is much harder to turn a big ship than a small one. Put differently, smaller companies generally have fewer layers of management and red tape, so they can make decisions and take actions quicker.
200% Difference
top barrier to supply chain and logistics innovation
1.
2.
3.
Siloed systems and/or processes received significantly more top-barrier votes from North American respondents than ROW respondents (21% vs. 11%). The opposite was true, however, with regards to Poor data quality and Geopolitical and/or trade uncertainty. In both cases, they received significantly more top-barrier votes from ROW respondents than North American respondents.
In the case of Poor data quality, for example, the difference was more than 360%. This may be due to how companies outside North America connect with trading partners. As last year’s research revealed, EDI was the top connectivity method for North American companies, while Email was the top method for companies outside North America. With Phone, Fax, and Email accounting for 54% of data/information exchange per last year’s study, it is not surprising that poor data quality remains a big issue in the industry.
rest of world
North america
which capabilities, enabled by technology, will become more important moving forward?
The top four responses are interrelated and point to a key lesson learned from the pandemic: the importance of having real-time visibility into demand and supply in order to respond quickly and efficiently to changing conditions, and the ability to model and simulate different scenarios ahead of time in order to proactively prepare for whatever lies ahead.
above average performance vs average or below performance
Innovator/early adopters vs Laggard/Late Majority
The ability to capture and analyze real-time demand was the top-ranked capability overall with 61% of the votes. Looking across performance and technical maturity, this ability and The ability to model and simulate “what if?” scenarios will likely separate the leaders from the laggards moving forward.
LEADERS vs LAGGARDS
There were some notable differences between North American and ROW respondents, particularly with capabilities related to e-commerce.
The ability to enable buy-online-pickup-in-store (BOPIS) received significantly more votes from ROW respondents (30%) compared with North American respondents (15%). The same was true for The ability to plan and execute home delivery, which received significantly more votes from ROW respondents (35%) compared with North American respondents (17%). These results correlate with the fact that many European countries are further ahead of the curve when it comes to click-and-collect and home delivery than the United States. For example, a 2019 study conducted by Order Dynamics “found that 27.5% of U.S. retailers offered consumers an option to buy online and pick up their orders in a store, well below the global average of 37.6%.” No doubt, the COVID-19 pandemic has increased the adoption of BOPIS and home delivery across all countries, including the United States. Therefore, we expect these percentages to be even higher next year.
Looking at this year’s research from the different generational perspectives, we get a view into where supply chain management is headed. Overall, the two groups in mid- and early-career stages put a stronger emphasis on the value of technology, transparency, and environmental responsibility.
% selecting many or extreme changes
A greater percentage of Millennials/Gen Z respondents (38%) expect to make Many or Extreme changes compared with Generation X (34%) and Silent/Boomer respondents (31%).
Make many or extreme changes
based on the lessons learned to date from covid-19 pandemic, what type of changes do you believe your company will make in how it designs and operates its supply chain to become more resilient?
Maybe Millennials/Gen Z supply chain professionals are like the young Alexander Hamiltion in the hit musical who sang, “I'm young, scrappy and hungry and I'm not throwin' away my shot.” The pandemic, in other words, is their shot to transform and prepare supply chains for a better tomorrow. And as this chart shows, what functions or processes to change or re-evaluate varied by generation too.
Silent/Boomer
Gen X
Millennials/Z
moving forward, which functions/processes within your supply chain will require the most changes or re-evaluation?
While Risk management ranked third overall, it was the top-ranked function/process for Silent/Boomer respondents with 69% selecting it (compared to 49% for Gen X). IT capabilities, however, was the top-ranked function/process for Gen X and Millennial/Gen Z respondents (60% and 65%, respectively), but it ranked third for Silent/Boomer respondents (57%) behind Human resources policies (64%).
Developing stronger, more transparent relationships with key suppliers ranked first for Generation X (52%) and Millennials/Gen Z (61%) respondents. It tied for third, however, for Silent/Boomer respondents with 43% of the votes; Cross train employees (59%) ranked first for them, followed by Expand/diversify supplier base (43%). When it comes to the different generations, 55% of Silent/Boomer respondents Agree or Strongly Agree that customer experience will become the number-one brand differentiator. This is 11% lower than for all the respondents combined (62%). Gen X and Millennial/Gen Z respondents, however, had higher percentages, 64% and 65%, respectively.
The importance of supplier networks and relationships in creating supply chain resilience was also evident across the generations, particularly for Millennial/Gen Z respondents.
Focused on Supplier Relationships
do you agree or disagree with the following statement: "over the next five years, customer experience will overtake price and product as the number one brand differentiator?”
The results suggest that the younger the generation, the stronger the belief that competing on customer experience will overtake price and product as the number-one brand differentiator.
For example, To create a competitive advantage received a larger percentage of top-factor votes from Gen X respondents, while To meet sustainability goals received significantly more top-factor votes from Millennial/Gen Z respondents compared with Silent/Boomer and Gen X respondents. The latter results are not surprising. As highlighted in a March 2020 article published by Jones Lang LaSalle, “How Gen Z and Millennials are putting sustainability on corporate agendas”:
Millennial/Z
what are the top three factors driving supply chain innovation at your company today?
Across the generations, To reduce costs received the most top-factor votes, but there were some notable differences.
Innovation Drivers Vary
Nearly half of millennials and Gen Z are more attracted to making a positive impact in society and communities than starting a family and having kids, according to Deloitte’s 2019 Millennials Survey.
For Silent/Boomer respondents, Lack of flexibility or innovation of supply chain partners received the most top-barrier votes (17%), while it ranked sixth for Gen X respondents (9%) and fourth for Millennials/Gen Z respondents (11%). In contrast, Lack of support from IT or other functional groups ranked lower for Silent/Boomer respondents (7%) than for Gen X respondents (11.9%) and Millennials/Gen Z respondents (12%). In other words, Silent/Boomer respondents view external trading partners as being a much bigger barrier to innovation than internal functional groups, while Gen X and Millennials/Gen Z respondents believe the opposite. Also, the younger the generation, the more likely to view Siloed systems and/or processes as a top barrier to innovation.
what are the top three barriers to supply chain and logistics innovation at your company today?
Finally, there were also some notable differences across the generations about what’s impeding supply chain innovation.
Younger Generations See Risk In Old IT
% selecting agree or strongly agree
Based on this year’s findings, we recommend supply chains leaders take these steps:
Yes, the COVID-19 pandemic has been a great disruptor, creating many challenges for companies. But it is also serving as a catalyst for change, which many companies, especially Innovators/Early Majority and Above Average Performance companies, plan to make. This is an opportunity to finally break down the silos between systems and processes, and to replace outdated IT systems—the two biggest barriers to supply chain and logistics innovation. This is also an opportunity to diversify supplier networks, improve the way you manage supplier relationships, cross-train employees across different functions and systems, update HR policies as more employees work from home, enable real-time visibility into supply and demand, start modeling and simulating “what if?” scenarios, and the many other opportunities highlighted by the survey results.
View the Pandemic as Catalyst for Change and Innovation
Although cost reduction is once again the top factor driving supply chain innovation (no doubt influenced by the COVID-19 pandemic), companies still believe that customer experience will become the number-one brand differentiator moving forward. This is especially true for Innovator/Early Adopter and Above Average Performance companies. Simply put, companies that are able to reduce costs while also improving customer experience will emerge as leaders.
Balance Cost Reductions with Improving Customer Experience
The survey results clearly show differences in perspectives and priorities between Silent, Boomer, Gen X, Millennials, and Gen Z generations. Each group has stereotypes about the others, which often hinders effective communication and collaboration between them. The truth, however, is that each group can learn a lot from each other. One strategy to get past the stereotypes and create a more unified team is to emphasize shared goals. As the authors of an HBR article on this topic write, “By doing so, both older and younger people can see themselves as part of the same team working toward the same outcome. Indeed, focusing on commonalities or a common direction can reduce perceptions of ‘us’ versus ‘them’ and can create or reinforce a sense of ‘we’.”
Improve Communication and Collaboration Across Generations
