In today’s world, companies are confronted with lots of uncertainties in their supply chains. In order to face possible disruptions, it’s key to prepare by discovering possible weaknesses in the processes and innovating to make the supply chain more resilient. Process mining is one tool that can help do just that.
In the wake of the worldwide Covid crisis, the supply chains of many companies have been severely disrupted. This does not mean that Covid was the cause of these disruptions. It only was instrumental in bringing the inherent weaknesses of these supply chains (inadequate infrastructure, strategies like just-in-time, etc.) to the surface. A few examples: the health crisis has caused a drastic rise in demand for certain goods and a simultaneous drop in demand for other goods. Suddenly there was a high demand worldwide for medical protective equipment. This resulted in production having to be ramped up, but also in delivery problems.
A similar, but opposite movement, had a strong impact on car production: travel was severely restricted. As a consequence, the big car rental companies revised their buying decisions (to replace their fleets), resulting in a big drop in demand for new cars. The car manufacturers then revised their purchasing for components, not foreseeing that the demand for new cars would pick up again rather quickly. When it did, they found themselves at the end of the line for certain components, notably semiconductors.
Because in the meanwhile, due to lockdowns, consumers stayed at home and spent a sizeable chunk of their income on things like consumer electronics. To be able to supply these, the demand for semiconductors saw a big rise. And thus, the car manufacturers were confronted with shortages of semiconductors for their new cars, because they had cancelled their orders for components.
All of this results in scarceness and thus price increases for raw and semi-finished materials, combined with scarcity of labor (due to sickness and quarantine measures among others) and logistical problems that followed.
However, crises like the one that was caused by Corona, will keep on happening in the future. Serious weather events in the context of global warming, financial crises, terrorist attacks, cyberattacks or another pandemic will all – sooner or later – put spanners in the works. So, what can companies do to make their supply chain more resilient and more robust?
Basically, it is clear that companies need to foresee alternatives. If one suppliers’ default, they need to move their orders quickly to another one. If one route or means of transportation becomes unpracticable (ports overly busy, shipping excessively expensive, shortage of truckers,…) they need to have alternate means of getting the goods where they need to go. This is not just a responsibility of purchasing or of the vendor: they have to collaborate.
To be able to do so, they need to gain a better insight into their supply chain processes. Companies that build strong relationships across their supply chain network, not just with their tier 1 suppliers, will have a better chance to overcome disruptions. They need to prepare by diversifying their supply chain, in the geographical sense, but also by using not just one or two preferred suppliers. They need to analyze which components of their production process are strategic and adapt their inventory strategy accordingly. A good preparation is key so that they are able to react very quickly in case of a disruption or even to preempt problematic situations.
These principles are easy to understand, but how do you get these insights? Supply chains will need serious investment in modern digital technologies to help businesses understand and deal with the problems. According to Dana Gardner, principal analyst at Interarbor Solutions, the ROI on tech investment in better supply chain insight, analysis, automation and optimization has never been higher and swifter.
That is where process mining comes in. Process mining is defined by Celonis, the market leader in the field, as “an analytical discipline for discovering, monitoring and improving processes as they actually are and not as you think they might be”. But how does that really work?
With process mining, you can extract data from multiple data sources: Celonis allows to tap into all kind of data that already exist within your company, from ERP over spreadsheets to custom-made software. That way you get a real-time overview of your processes as they take place. Very importantly, as the data change, the Celonis analysis will reflect it, so this is not a static one-off analysis.
You can also monitor performance against best-practice models (provided by Celonis based on their extensive customer base), to identify inefficiencies, their impact and their root causes. These best-practice models also will suggest recommendations to remove inefficiencies.
But best of all, is that the Celonis process mining solution allows to automate improvement actions across systems and alerts the right people to remove blockage manually if required. That way, Celonis allows to react in a very agile manner to any disruption.
A classic example that is often quoted in the context of process mining, is the fact that you can identify “maverick buying” operations. In all companies there will be a certain degree of maverick buying, that is purchasing outside of the standard procedure. This can be for a variety of reasons. In theory, most purchases will pass through the purchasing department, where buyers will source products from preferred suppliers with which the company has developed a good relationship. Maverick buying is harmful in many ways: it increases risk, it will result in higher spending as the prices charged by these suppliers will most likely be higher than those negotiated with preferred suppliers and these rogue suppliers will not be as likely to deliver on time…
Process mining will reveal this maverick buying, identifying the departments that bypass purchasing, the products bought and the suppliers in question. This usually results in an attempt to reduce the maverick buying in several ways (making it harder to do by enforcing workflows, training departments that do a lot of maverick buying, etc.). But by revealing vendors who often deliver maverick purchases, the company can discover potential alternative suppliers. It can then contact these suppliers to have them evolve into preferred suppliers and thus diversify the supply chain, making it more resilient to threats.
This is but one – less evident – effect of process mining as a means to make your supply chain more resistant to sudden disruptions.
At Quinaptis, we have several Celonis certified consultants. So if you are interested in finding out how we can make process mining work for you to make your supply chain more resilient, don’t hesitate to reach out to us.