IBM’s Jonathan Wright: Repairing the Shattered Supply Chain

Watch a replay of Jonathan Wright's presentation

While the COVID-19 contagion is foremost a health crisis, it has also upended world trade. The deadly virus caused a major shutdown in manufacturing centers around the world and disrupted the supply chain for many companies across the globe.

The World Trade Organization (WTO) forecasts an economic contraction of between 13% and 32% this year, according to a new report. “These numbers are ugly – there is no getting around that,” WTO Director-General Roberto Azevêdo said. “But a rapid, vigorous rebound is possible.”

That rebound will depend in large part on improved supply chain management to reduce inventory fluctuations and shortfalls. COVID-19 showed that many companies were not fully aware of the vulnerability of their supply chain relationships to global shocks. China’s dominant role as the “world’s factory” was pivotal. Many firms have a presence in Wuhan, the industrialized province where the outbreak originated, and which was hit hard. Companies whose supply chain is reliant on Wuhan’s Tier 1 (direct) or Tier 2 (secondary) suppliers experienced significant disruption.

While we repair the damage, experts say it’s time to look ahead to the longer-term adjustments in supply networks. “Most supply chain leaders are still in the reactive phase of how to deal with this pandemic, but they should start to identify actions now that will improve their resilience later,” said Jonathan Wright, global leader for Cognitive Process Re-engineering at IBM, during a Think Leadership livestream on April 11.

In the near future, Wright said, that will include re-evaluating their overall worldwide sourcing strategy, redesigning the supplier network, building smarter supply chain modeling, and more precise scenario analysis.

Following are his answers to some of the most frequent questions Wright has been hearing from clients:

How can organizations respond to the immediate change?

This is a period of deep uncertainty, so I break the time horizons down into three buckets: The Now, The Soon, and The Later. That helps prioritize our minds and the actions we need to put in place to help our customers manage the supply chain.

In The Now, we’re concerned about keeping our employees and operations safe, as well as meeting the immediate needs of our customers and managing our current inventory.

In The Soon – which I also call The Temporary Norm – we look out three months, maybe longer. In this period we must make sure we have consistency in the supply chain and a sustainable business model. So, we are looking at cost, labor and management, as well as prioritizing our investments around capital expenditures and around operating expenses. And we’re maintaining a really tight collaboration with our strategic suppliers, customers and partners.

In the third time horizon, The Later, we look at the long-term consequences and changes we must make.  I believe there will be a significant acceleration of digitization of automation and that we will emerge in a very strong position from a supply chain perspective. While the immediate focus is on maintaining the supply and meeting customer needs—often through hands-on rigorous work—leaders should also analyze the current pain points to plan for future disruptions.

Has the pandemic revealed cracks in the supply chain?

It has, and these cracks and oversights have now put organizations under incredible and extraordinary pressure. People are starting to realize the dependency they have on the extended supply chain. We learned, for instance, that more than 90% of the Fortune 1000 companies have Tier 2 suppliers in the Wuhan region. Many had little or no interaction with them. That risk to the global supply chain is phenomenal. But while there are many cracks, the resilience of supply chain professionals will prevail. We will get through. We will serve our customers with a much better understanding of the volatility.

We talked about the demand side. What about the supply side?

Different parts of the world are ramping back up, returning to normal. Supply is starting to return from regions that were impacted by shutdowns and lockdowns. We are still trying to understand the impact of that on us, but we are also shifting purchase orders to different suppliers and trying to maintain a balance across that supply network.

What are the long-term changes you expect?

We have got to get to a much tighter connection between demand and supply. We've got to bring that synchronization together, with end-to-end supply visibility, as well as hyper automation and an increase in near-shore operations. In the future there will be an increased use of things like AI and Watson, as well as more refined location data.

We have to do different things to manage our inventory, including where we hold it and for how long, as well as who our priority customers are.  We have to make sure that the priority customers are being serviced and that we allocate the right product to them as quickly as possible.

So, in some cases we're moving from a pull supply chain, to a push supply chain, to an allocation supply chain. And that requires a different mindset and a different way of working. It’s going to be about optimizing our supply chain at every level. The future will be bright but there will need to be changes.

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