How to boost resilience and create supply chain ecosystems.
by Ben Lannan, Matt Kuperholz and Paul Cornick
The new decade kicked off with some significant challenges for the resources sector, caused by a number of macro trends. Since then, COVID-19 has added fuel to the fire and now the following trends are expected:
- China has increasingly asserted itself through trade policy and investments in emerging markets. Not bound by Western conventions in project development, China has consolidated its status as the dominant player in global markets for hard and soft commodities. Expect this to continue.
- Post-COVID-19, governments everywhere will seek to boost revenues to claw back budget deficits.
- Corporations will be under increasing pressure to justify their social value.
- Supply chain disruption will give way to trade diversion in the region, shifting imports from low-cost countries to higher-cost alternatives.
Building Resilient Supply Chains
While the sector faces mounting challenges, there are also opportunities for resources players to build resilience. Resources businesses are part of large, complex and globally integrated value chains. No single participant can control every link in the supply chain, but they can improve collective resilience in a way that’s mutually beneficial. That is, resilience can be strengthened through better partnerships.
Resilient value chains share some common characteristics:
- Rapid digitisation and data enablement.
- Real-time recognition of challenges and opportunities, and rapid adaptation thanks to visibility of supply chains.
- Partnering with suppliers and customers to identify and resolve issues quickly, and minimise risk/business impacts.
- An operating model that allows for “next-level” connectivity and autonomy through dynamic supply chain segmentation.
Using improved partnerships to boost resilience requires a deep understanding of who you’re working with – on the supply side and the customer side. It also requires good connectivity across internal functions and assets. Get these end-to-end foundations right, and greater collaboration and information sharing becomes possible, making businesses more resilient to predictable and novel risks.
Digitisation is Key
Digitisation of supply chains is nothing new. But digitisation’s role in creating resilience in supply chains has thrust it to the forefront of business investment and policy making right now.
Access to timely, accurate data improves the transparency and reliability of supply chains. Digitisation also enables the use of advanced analytics and AI to plan for, and adapt to, disruptions, as seen during COVID-19.
PwC’s report, “Connected and Autonomous Supply Chain Ecosystems 2025,” looked at transforming traditional linear supply chains into connected and self-orchestrating ecosystems. The report found that best-practice organisations were able to achieve cost savings of almost 7% and increased revenues by almost 8% via digital supply chain excellence.
The power of digitisation is attracting the attention of policymakers. The Singaporean Government, for instance, has identified digital connectivity, and the development of an end-to-end supply data ecosystem, as a priority for its Emerging Stronger Taskforce. This is a strong statement around sustainability from Southeast Asia’s most vibrant economy. In New Zealand, meanwhile, supply chain digitisation is being used to safeguard and improve vital primary industries.
Closer to home, a myriad of Australian industry and government efforts are underway to drive productivity and innovation via digitisation. This includes the Commonwealth’s planned stimulus investments in technology, with a focus on resilience.
Previous work by PwC Australia, in collaboration with the Australian Chamber of Commerce and Industry and the Port of Brisbane, prototyped a functioning ecosystem of Australian businesses, with a focus on the resources supply chain, including Australian manufacturers/exporters, logistics service providers and infrastructure assets through a Trade Community System (TCS). This model demonstrated the value that digital connection across supply chains can bring.
At the same time, the model showed the barriers that have curtailed progress previously, including the entrenched status quo, commercial self-interest and distrust. Other challenges include: disparate systems, unique data ontologies and information asymmetry within resource industry participants and across the industry. To achieve digital supply chain excellence requires sustained investment, support and alignment over a considerable period of time.
Yet the returns can be considerable.
Any export-oriented minerals industries and upstream manufacturing industries operating in a connected digital ecosystem could achieve significant cost reductions, making them more competitive in international markets.
As for revenue gains, the resources sector could expect even better results than those shown in PwC’s research. The benefits to the resource sector are particularly acute, with digitisation supporting better cross-functional communication and the rapid synchronisation of demand and supply. This results in improved planning, procurement and supply chain processes that minimise avoidable breakdowns and optimise mine maintenance activities, to enhance productivity and reduce costly downtime.
Creating Interconnected Supply Chain Ecosystems
The creation of supply chain ecosystems, using utilitarian design principles, can remove the barriers to entry for smaller firms. Innovations such as surfacing and collating data through scaled adoption of marketplace-based data storage, promotes industry collaboration via safe access to information. This brings with it the potential for process automation, freeing up valuable human capital from mundane, low-value activities so they can be redirected towards skilled activities – a huge bonus in an industry that struggles to attract and retain talent.
There’s also the opportunity for ethical AI to advance data analytics from reporting (hindsight) to optimisation modelling and predictive analytics (foresight). Digital innovation will be critical to productivity in the sector, to say nothing of the potential social dividends on offer when it comes to safety, transparency and supply chain governance.
The Australian journey has been slow so far. Our research shows that, while there are a range of commercial offerings out there, they’re generally narrow and often focused on specific verticals and immediate adjacencies in the supply chain. Further, there’s still the challenge of coming up with a commercial model prior to achieving critical mass. This model has to sustain future investment at the same time as it incentivises the very supply chain participation that’s needed to make it work.
Critical Principles for Digital Ecosystems
PwC’s research indicates the following principles are critical to developing the kind of digital ecosystems necessary for a competitive industry.
- Trust: Ecosystems should be open, secure and trusted to enable data sharing and maximum participation. Independent, credible supply chain participants will be required to lead efforts.
- Ease of Use: Solutions should be easy to integrate. Also, they should augment rather than replace existing systems. Investment deferral, based on uncertainty of future cost recovery, can entrench stasis and reduces the chance to nurture future investment where it’s tied to a certain technology.
- Fairness and Value: Low or no cost to participate is critical. Revenue derived from productivity and data-driven service innovation, not another cost on producers, traders and government. Participants should be rewarded for participation, not charged. While those that receive value from data must contribute to the cost of its capture and availability.
- Evolutionary: Solutions should be available, scalable and offer clear value benefits. Smaller-scale supply chain participants should not be discouraged from adoption. A successful ecosystem should be adaptable and accept different systems and technologies without the drag of legacy technologies.
It’s clear from recent activity that the Australian government is focused on supply chains from a policy perspective. At the same time, there’s much the Australian resources industry can do to develop their digital plan beyond immediate supply chain hotspots, and towards a supply chain ecosystem.
Resilience and adaptability are key and can be achieved through forward-focused capability and supply chain orchestration.
Ben Lannan, Matt Kuperholz and Paul Cornick are with PwC Australia, which delivers quality in audit, assurance, consulting and tax services to more than 5,000 clients.