In a world where we cannot rely on the resilience of our supply chains, we must be prepared for disruption. Read this blog to learn more.
It is a taxing time for anyone in charge of managing the supply chain. There are huge disruptions both upstream and down. But beyond the current challenges of new borders, international conflict, and global shortages, there are long term structural changes that have shifted the nature of supply chain management.
Simply put, supply chains are becoming more complex. The business world has transitioned from an age of giant monoliths to an age of networks. Large companies have shrunk to focus more on their core capabilities, relying instead on an array of partners to support them in supply and services. Even if your organization has remained the same, you will likely find that your suppliers have fragmented: while you may speak to the same person, behind them might be an array of smaller suppliers. Loose global collectives of partners can collaborate as effectively and efficiently as single organizations.
This is an ongoing trend. The future will see even greater fragmentation as technology strips further friction from communication and commerce.
Planning through the confusion
This makes planning both more challenging and more vital. When the shocks come, you want to have deep insight into the supply chain and ideally to have modelled their impact in advance. Nowhere is this more apparent than in construction, an industry that relies on a complex supply chain for design, approval, materials, plant, and skills.
Fortunately, today’s finance leader has more tools at their disposal than ever before. This starts with data. Though the adoption of digital data interchange formats has been slow – one consulting engineer told me recently that the PDF remains the lingua franca of the sector – we are slowly getting to the point where a richer data set is available to those looking to analyse and make predictions. Not just finance data but information about all the critical resources for a construction project.
Imagine being able to bring together data on all these aspects of the business and model them against future projects. Then take those models and reimagine them against different scenarios. What would happen if plant costs rose? Or steel supplies delayed? Extend this further, bringing in external data sources – historic commodity prices, central bank inflation forecasts, even weather data affecting logistics…
In the past that would have been an impossible task, or at least one that required so much time and resource to be unfeasible. Today, with the availability of rich data and the application of machine learning, we can build incredibly rich models of the organization and even individual projects that it is possible to model almost any future scenario, and then return that insight to leadership to improve planning.
And what about tomorrow? The tools and practices of the construction CFO must continue to evolve with the shape of the supply chain. As highlighted in our eBook on the future of finance in Construction, automation will allow CFOs to spend more time focused on the future and less on the past. Increased computing power, particularly the application of quantum computing, will enhance the depth of models that can be produced and accelerate their production to real-time. Feed it with access to the right information and your AI assistant will give you a window on the future.
In a world where we cannot rely on the resilience of our supply chains, we must be prepared for disruption. And that means seeing and modelling those events, before they happen.
This blog is part 2 of a three-part series. For my blog on ESG click here. To read my blog on Predictive Intelligence click here.