Building the supply chain of tomorrow: An integrated approach

Supply chains are more important than ever, and one massive disruption after another in recent times—geopolitical turbulence, supply bottlenecks, labor shortages, and business closures—have turned supply chains into more than a question of internal efficiency. They are now a competitive advantage—and an operational risk.

Resiliency, flexibility, and sustainability are the new watchwords in this climate. Shaken by ongoing instability, companies are desperate to get ahead of issues in global networks, and many are integrating digital advanced planning systems (APS) with advanced analytics (AA) models and optimization algorithms to improve planning and performance.

McKinsey’s research into supply chain transformations, however, has revealed that tacking APS systems onto a firm’s operations is not enough to maximize returns. A survey we carried out in 2022 revealed that greater than 60 percent of supply chain transformations are either harder to execute or less successful than expected.

Successful transformations require deep, end-to-end process revamps. The companies that found full value in their transformations—acquiring the capacity to get ahead of issues—also updated their processes, organization, and capabilities.

This holistic approach to supply chain planning and management is now secured through McKinsey’s acquisition of SCM Connections, fusing the technology and capability-building expertise of SCM with McKinsey’s strategic insight and transformation experience. The move makes industry-tested advanced systems—including cloud-based systems, concurrent planning platforms, advanced diagnostics, and supply-and-demand planning—a high-level component of McKinsey’s end-to-end supply chain engagements.

Advanced planning systems, especially when integrated into an optimized end-to-end process, offer proactive strategies for anticipating challenges as well as customer needs, providing visibility that was impossible in the past.

Supply chain transformations centered on APS can embed the resiliency, effectiveness, and efficiency demanded in today’s environment. Maximizing the returns on this transformation will involve not merely implementing the technology but also building capabilities and sustainable processes for the future.

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