A conversation between Gibraltar Equipment Finance President Jeffry Pfeffer and PwC Partner Cort Jacoby on specific ways middle market companies can adapt to market conditions and build a more resilient supply chain. This is the second installment in a 3-part series.
The importance of supply chain resilience can’t be overstated for middle-market companies, particularly in the post-pandemic environment. As we explored in our first Supply Chain Expert Insights Series, companies are rethinking how they approach traditional business practices and adapting fast to changing economic conditions.
In the first installment of our Supply Chain Expert Insights Series, Jeffry Pfeffer and Cort Jacoby, a Partner at PwC, discussed how companies can enhance supply chain performance and where equipment financing intersects. In that piece, Pfeffer and Jacoby discussed trends they’re seeing across the middle market, how companies are adapting, and what actionable steps can be taken to address supply chain challenges.
This second installment goes deeper as Pfeffer and Jacoby give their top action plan recommendations on where companies can make strategic investments to optimize business operations and develop a more resilient supply chain. Part three of our series will explore Jacoby and Pfeffer’s insights on how supply chain resiliency can lead to a sustainable path for growth and quicker ROI. They’ll also explore where equipment financing fits further into achieving these goals.
Whether it’s investing in analytics-powered tools, robotic process automation (RPA), or otherwise automating routine processes, embracing the digital economy is a key piece of creating supply chain resilience, Jacoby shared. Data-driven tools with predictive analytics, for instance, provide better visibility into where organizational changes need to be made across your sourcing, manufacturing, or distribution processes.
“Businesses must have a digital plan. The world is moving more and more toward the use of data and digital,” he said. “That end-to-end digitization will create new operating models that can create positive changes in an organization.”
The key to implementing those changes? You can’t do it all at once, Jacoby says. Instead, you must have “measurement overlays around end-to-end digitization to determine where investments are going to have the greatest impact for your company. You must think about ROI.”
Once the portfolio of opportunities are identified, businesses can think strategically about how much and when to invest money into the next segment of the portfolio, Jacoby says. Investing deeper in digitization also creates data access that boosts supply chain visibility across different business verticals – sourcing, manufacturing, and transportation/distribution.
Seeing similar trends, Pfeffer says the rise of the Internet of Things (IoT) has paved the way for gaining insights that optimize business performance. From an equipment financing perspective, having equipment visibility matters for securing financing. Knowing exactly when assets should be repaired, leased or replaced is vital to knowing what investments can uplevel their business, Pfeffer says.
“You have to understand your business drivers and how that ties to the condition of critical equipment. IoT capabilities help your financing partner gain visibility into your equipment condition, location and business contribution. Understanding these factors can help all parties maximize the operating value of equipment investments,” Pfeffer said.
“For years, we have seen a continual introduction of the Internet of Things into the machine world. The ones that are the early adopters are going to be the ones that are head and shoulders above their competition,” Pfeffer added.
Jacoby and Pfeffer agree the next phase in building resiliency is diversification, so your entire supply is not dependent on a market or partner that you have no control over. This also means evaluating when it’s time to reshore or onshore how products are manufactured and distributed.
“If the pandemic has taught us anything it’s that you need different options to source products. You need to prioritize where you should diversify your supply chain,” Jacoby said. “Resilience starts with your sources of supply and understanding the value stream from there and where potential points of failure exist.”
The other key to supply chain resilience is balancing inventory and production capabilities. This also means determining when it makes sense to pursue quick response strategies eliminating excess finished goods inventory (becoming “asset-light”) enabling a company to free up resources to invest in other areas of your business.
“We are seeing companies invest in their own production capabilities so they can be less dependent on suppliers halfway around the world,” Pfeffer said. “I am also seeing companies that are becoming more capability specific. They are investing in specific machinery and equipment capabilities. They are becoming an outsourced partner for a company that doesn’t have that capability in their brand. They provide niche expertise and help other companies scale their organizations.”
“Middle market companies can be aggregators of new capabilities and specialized products or services,” Jacoby said. “By providing specialized products or services you can help the market scale and grow more efficiently.”
The final piece in the supply chain resiliency puzzle comes down to investing in the foundation of any successful business: the people. As labor market trends have shown, recruiting and retaining talent is challenging, as is keeping people trained. This is especially true in an era impacted by data, analytics and increasingly AI.
“Businesses must put strong training programs in place and look at new, different ways of doing business. It’s not enough to invest in futureproofing without bringing the human resources along as part of that equation. Organizations need to continually train, re-train and equip employees with new capabilities and ensure operating proficiency to truly maximize improvements,” Jacoby said.
Stay tuned for the next installment and read more about how equipment financing supports supply chain performance here.