We have often talked about how we bring The Connected Enterprise to life and what that means for us, but what often gets lost in the whole process and what we often tend to downplay is just the mere fact that we are a manufacturer. That means that we understand a lot of the intricacies of what it means to make products available to the market. As a company, we have spent a lot of time thinking about how we build and grow our internal supply chain, and that has allowed us to understand the ever-evolving industry challenges.
We often talk about supply chain uncertainty and the true elements that we are mitigating against as an organization. A lot of these come from the traditional macroeconomic challenges that we are all aware of. But what has been different about the last few years is that these factors have occurred concurrently, or they have happened in rapid succession, whether you start with protectionism and you think about the US, China trade war and then move on to the constrained markets. It was not too long before Covid that we were dealing with an allocation of labor challenge. Globally, in some sectors there were also challenges with component allocation and just the availability of electronics. The demands from cloud computing, electric and hybrid vehicles and even 5G all adding to the general stress on the electronic component supply chain in the global marketplace. This was complicated with foreign currency, spot pricing and the global trade environment.
If you fast forward to the current situation, the different layers of complexity that have been brought forth with the global pandemic, we have had to adjust to a transportation environment that has been significantly capacity constrained. Then you can add to that the notion of employee welfare and keeping our facilities clean, just maintaining product flow. There is a significant amount of unpredictability throughout the market that has made it incredibly challenging for us all. With our product mix and our demand profile we had to pivot away from thinking about managing our supply chain as being just efficient or lean. Just trying to take the most costs out of the supply chain was not going to allow us to be certain that we had product available.
We have had a lot of success in driving an efficient supply chain. We thought about this in a very siloed fashion, being very biased toward being efficient and lean. What that has meant for us is we have been extremely opportunistic. We have seen a lot of working capital reductions, but it did not always allow us to have the right value that we delivered in terms of availability and truly leveraging supply chain as a competitive advantage. A couple of years ago we started pivoting our supply chain to talk about agility. I know it is a buzzword and it is leveraged across multiple functions. We have continued to think through what it means to have the right cost, service, and quality given our overall company strategy. What we have begun to see are the elements of our agile supply chain, and how we have tried to focus on both our processes and our technology in relation to this new normal.
Strategic inventory or buffering has become very necessary given the current allocation and constrained markets. Network optimization is another one. This optimization pivots us toward looking at visibility and better decision making. One of the biggest elements of the agile supply chain is end date orchestration because it truly transforms the business. Finally, in terms of agility I would be remiss to not talk about process automation and IT/OT convergence, which is just a staple in our digital manufacturing journey. While agility is truly relevant, I think with a pandemic we have spent a lot more time talking about resilience, and just this idea of mitigating against unplanned disruption to understand our vulnerabilities.
Like agility, some of the elements of resiliency, starting with protection of supply is about ensuring availability of components or finished goods. With the onset of the pandemic we initially saw a significant drop of about 30 per cent in demand. In this scenario, market intelligence becomes particularly important to allow us to understand the behavior and the direction of the market.
Supply chain scenario planning has become a staple for us, so that we can be prepared for the various circumstances that we were challenged with from an end to end basis. Redundant manufacturing now plays a major role, not just for us, but other organizations. As I talk to peers the talk often turns to regionalization and reshoring.
There are areas where agility and resilience are unique, there are also areas where they are in union. The result is that in transitioning to a resilient supply chain we only had to reprioritize some of our initiatives, as opposed to completely redefining our strategy. That strategy is both for inside the four walls aswell as outside the four walls. Inside it is focused on digital manufacturing, while outside is where we talk about that truly connected supply chain.
While visibility is important for me to understand where my components, finished goods and working process are, if I did not understand the market intelligence with a greater focus on sales and operations planning, we would be headed in the wrong direction.
We have defined our future in terms of capabilities. We are trying to adjust to this fast-paced environment. We are trying to collaborate in a much more fundamental manner, and we are trying to make data driven decisions much faster than we have. If I sum it up, we are trying to make the right decision but faster.
I often leverage the traditional scoring model of plan, source, make, deliver, but it is also how we start to define our digital strategy. By focusing on those capabilities that give us that balance of agility and resiliency we acknowledge that this digital transformation is not just about leveraging technologies. We started there but at this point we are trying to be very thoughtful about how we look at this transformation. What you start to lean into is the importance of having an organization that is designed to process these levels of information or an organizational culture that thinks more from end to end perspective, as opposed to individual silos that I was alluding to earlier.
Phil Hadfield is UK Sales Director of Rockwell Automation, a reliable worldwide leader in industrial automation and digital transformation, well-known for its flagship product brands Allen-Bradley ® and FactoryTalk software. Headquartered in Milwaukee, Wisconsin, Rockwell Automation employs approximately 23,000 problem solvers dedicated to customers in more than 100 countries.