The Covid-19 pandemic brought many global supply chains to a halt. And as we emerged from the pandemic, many companies overcorrected by adopting “just-in-case inventory management.” What’s more, when consumer confidence varies widely from month-to-month and demand remains volatile, it is difficult for businesses to plan. In the apparel sector, for example, buyers must place peak-season orders six months in advance. With high volatility, demand forecasts in June can be completely different than actual demand in December. This raises the overall risk of either missing the season by not having enough, or facing enormous markdowns in January. To move forward, supply chain managers need more flexible, dynamic connections between trading partners to replace their current point-to-point, static connections that are unable to adapt to sudden, unexpected supply chain disruptions. What they need is a more modern, more responsive supply chain platform. This article discusses how today’s supply chain technology can help businesses build more resilience into their supply chains moving forward.
The Covid-19 pandemic shook global supply chains to their core, and they have not yet fully recovered. What’s more, many managers who had previously followed “lean” principles, including “just-in-time inventory management,” have overcorrected by adopting “just-in-case inventory management.” This tendency to simply overcorrect (and overstock) with an ad-hoc and ill-defined “just-in-case” inventory strategy has resulted in soaring global inventories in the retail, wholesale, and manufacturing industries at a time when the Business Confidence Index and Consumer Confidence Index both show unusual volatility. When consumer confidence varies widely from month-to-month, it is difficult for businesses to plan. In the apparel sector, for example, buyers must place peak-season orders six months in advance. With high volatility, demand forecasts in June can be completely different than actual demand in December. This raises the overall risk of either missing the season by not having enough, or facing enormous markdowns in January.
To move forward, supply chain managers need more flexible, dynamic connections between trading partners to replace their current point-to-point, static connections that are unable to adapt to sudden, unexpected supply chain disruptions. What they need is a more modern, more responsive supply chain platform.
Building Supply Chain Resilience with a Modern Technology Platform
Supply chain management technology platforms can build resilience on a number of levels, by allowing businesses to:
Establish unified commerce via increased supply chain visibility.
One of the most significant challenges facing retailers today is the orchestration of a seamless consumer experience across multiple channels, such as online, in store, and hybrid models that combine the two. Many grocers have developed innovative technologies that allow customers to place orders online, that notify the customer when the order is ready, and that then detect when the customer is nearby, creating a seamless customer experience. Network-wide inventory visibility is essential for enabling unified commerce. With network-wide inventory visibility, companies can avoid stockouts and overstock situations, reducing carrying costs and enhancing customer satisfaction. By utilizing advanced tracking technologies such as RFID, IoT sensors, and data analytics, businesses can gain insights into inventory levels, location, and movement in real-time, allowing them to make better data-driven decisions.
Collaborate on Sales & Operations Planning.
Successful sales and operations planning (S&OP) requires leadership participation from a broad range of functions, including finance, sales, marketing, production, and fulfillment. Fortunately, this becomes easier as modern collaboration platforms replace outdated tools to provide a single source of truth data, intuitive modeling, and performance dashboards. When executed properly, S&OP provides companies with the ability to anticipate future demand and respond proactively to changes in the market. This approach also aids in risk management and contingency planning, allowing businesses to mitigate the impact of supply chain disruptions or economic fluctuations.
Implement a SaaS System.
Software as a Service (SaaS) has had a profound impact on global technology implementation by revolutionizing how software is delivered, accessed, and utilized by businesses and individuals worldwide. For supply chain executives, SaaS extends reach and visibility by allowing every stage (e.g., raw materials, production, finishing, warehousing, and distribution) to share information, actions, and insights.
Create flexible and open cloud architecture.
Increasing complexity and constant restructuring require supply chain technologies to integrate easily and adjust quickly, meaning that composable architecture is particularly well-suited for modern supply chains. Like a LEGO™ set, composable architecture allows for complex systems to be built by combining smaller, modular components that can be easily assembled, interconnected, and reused. Administrators can add new hardware resources to the pool, and the composable infrastructure can automatically incorporate these resources into the available pool. New Balance is a great example of this in practice. The sportswear company created a single library of content that feeds all of its systems — wearables, mobile, kiosk, and beyond. Instead of rebuilding the New Balance commerce experience from the ground up for every system, the use of common composable architecture suitable for every situation was far more effective.
Technology Is the Driving Force Behind Supply Chain Excellence
While following this approach is critical to building a resilient supply chain that can endure unforeseen disruptions, the latest technology can also be leveraged to build stronger supply chain systems that position the entire organization for success. Instead of relying on technology to simply survive, forward-looking executives will use it to help their businesses thrive. The tactics adopted here will vary by organization, but here are a several broad approaches that can create stronger supply chains:
Leverage AI/ML to support supply chain management.
The emergence of artificial intelligence (AI) and machine learning (ML) has sparked a transformative era for supply chain management. According to McKinsey, effective use of AI in inventory control can achieve up to a 20% reduction in inventory carrying costs and a 50% decrease in stockouts. By leveraging advanced algorithms and data analytics, AI/ML technologies enhance the accuracy of demand forecasting, enabling companies to anticipate market trends, fluctuations, and customer preferences with unprecedented precision. This predictive capability facilitates efficient inventory management, reducing excess stock, and minimizing stockouts, thus optimizing working capital. In addition, AI/ML-driven algorithms optimize logistics, streamlining transportation networks and reducing costs.
Take collaboration even further.
One of the most visible and lasting impacts of the pandemic was how it forced employees at every rung of the business to learn new collaboration skills. Daily meeting participants on Zoom rose from 10 million to 300 million in just four months. And the reality is that while collaboration within an organization has often proven to be challenging, it’s even more imperative for supply chain managers to collaborate outside of their organization with customers, suppliers, and partners. These managers, in particular, will need to rely on the implementation of proper tools such as permission-based private networks to provide a safe, easy, and trusted environment to share supply chain data.
Invest in comprehensive cyber security.
Since 2019, cyberattacks against supply chains have doubled. Just last year, attacks increased by more than 200%. In many of these cases, security vulnerabilities in the supply chain were exposed by third-party operators, such as vendors and contractors. Fortunately, modern platforms are becoming the most effective defense for fighting cyberattacks. While managers might not be able to predict and protect against every risk, a modern technology platform is vital to keeping the organization one step ahead of threats.
Establish greater supply chain visibility.
Traditionally, visibility across the supply chain has been limited to “one-up” and “one-down,” meaning that managers can generally only “see” what their tier one suppliers and immediate customers are doing. However, in a multi-echelon supply chain, operators won’t feel the impact of disruptions that occur three or four tiers back until it’s too late to adjust. Today, modern IT platforms enable trading partners to gather in a safe, permission-based exchange where they can share information, improving visibility and building resilience across the entire supply chain.
The pandemic illustrated that we need to do more than simply invest in building effective supply chains — we need to place an equal priority on maintaining them. Regardless of how much expertise went into the creation of an efficient and resilient supply chain — we must recognize that in our ever-changing world the supply chain is never a finished product. By keeping our supply chains in a constant beta state and investing in the technology and insights needed to continually elevate them, a global supply crunch can be avoided. The task of building a supply chain that responds to real-time inputs and evolves to meet shifting demands will never be truly finished, but that’s no reason not to start.