How to Anticipate and Answer to the Speed of Change

As our global population expands, the demand for our resources grows proportionally. As a result, developing technologies to keep pace with those changes and address both our long-term and everyday needs has become a critical endeavor.  

Still, concerns over supply chains have grown to encompass the entire value chain, and we’re learning that the pandemic is just one of the influences of recent disruptions. The overarching question then becomes: How do we anticipate, as well as answer to the speed of change? Whether that means spearheading new strategies that optimize food supplies or help slow climate change, the ultimate goal of our systems should be to promote efficiency.

That’s especially true in the sales space. The central tension that exists in commerce, in fact, lies between the push and pull of matching production with consumer demand. It’s a worthy goal that also happens to be a moving target. 

Assessing the problem

In a 2020 episode of the McKinsey Podcast, Susan Lund, an economist and partner at the McKinsey Global Institute, said her group embarked on a supply chain study that was able to quantify that “the world is a riskier place.” The key to this analysis was its timing, which began in fall of 2019 – before the pandemic.

“We were thinking about things like trade tensions and trade disputes, or hurricanes or cyberattacks”, Lund said. “And then COVID came out of nowhere. But even before COVID, we were able to talk to experts across industries and find out that, on average, companies now will expect to see a disruption to their production lines of one to two months, which is a very long time, every three-and-a-half to four years.

The implication is clear: the drivers of change in our supply and value chains aren’t going anywhere, even if and when many of the challenges of the pandemic subside. The key for manufacturers and retailers, then, becomes anticipating the unexpected. By understanding that the factors influencing production in the future can’t be fully controlled or predicted, how can the supply chain be made more resilient to protect against those factors? How can operations make the most of what they have? How can the problem be identified, adapted to, and overcome when shortages hit?

Solutions

In a recent episode of the McKinsey on Consumer and Retail podcast, retail supply chain expert John Barbee offered two key fulfillment strategies:

  • Maximize availability of product across all channels, offer convenience, and attune those factors to the market
  • Innovate

“In our latest consumer research,” Barbee said, “we find that consumers continue to change their shopping behavior, with three-quarters making some change and 40 percent completely changing brands because of the lack of availability or perceived value in fulfillment.”

Barbee also highlighted the importance of innovations such as curbside pickup, online purchase, and concierge services: “These things came to life faster than most retailers would have anticipated and fundamentally changed the way retailers think about deploying and testing new capabilities. So I think we will start to see a lot of experimentation with fulfillment models.”

Decision Intelligence

A prominent solution in retail and manufacturing is decision intelligence – AI that helps build operational efficiency through data analysis. Simply put, it’s a technology that can help companies determine how much product to manufacture based on all other factors at play. By overlaying multiple information streams and relying on processing speeds well beyond human capabilities, decision intelligence can help businesses decide how many widgets to build. Moreover, it can help them identify future disruptions, improve communications and interactions between isolated functions, and develop new tools and capabilities.

These analyses will empower decision-makers at retail companies worldwide to understand the ebb and flow of the supply chain. For example, understanding which products to keep in surplus – or when to build up that surplus – will ensure that business isn’t lost during high demand and low supply periods. 

Decision intelligence empowers the decision-maker. In other words, much like a calculator is used to solve complex math problems, decision intelligence can help empower C-suite executives in making decisions critical to business infrastructure. The idea: to understand demands on production and allocation, which will help maximize profits.

Change is coming. As always, the companies that are able to best withstand it – and grow through it – are those that build dynamic resilience and efficiency into their infrastructure.