Supply Chain Innovations for the New Normal
Intelligence-driven, digital fulfillment solutions are no longer optional. They’re mission critical
At each step in its spread, the coronavirus pandemic has created disruption in factories, manufacturing and modes of shipping. Given today’s interconnected economy, COVID-19 has quickly exerted tremendous pressure on global supply chains. By early March, 75% of companies reported disruptions in some capacity within their supply chains, with sourcing issues surrounding China playing a significant role, according to a survey from the Institute for Supply Management.
By the end March, a second survey revealed 95% of companies had experienced or expected to experience disruptions in supply chains, with lead times for inputs across Asia, Europe and North America growing to at least twice as long as normal operations.
Even when compared with other outbreaks like SARS or natural disasters like Japan’s Fukushima nuclear disaster, the disruption of COVID-19 is unique. It has created pressure points on both sides of the supply and demand equation, and injected tremendous unpredictability into the ecosystem, notes Dr. Yossi Sheffi, director of the Massachusetts Institute of Technology’s Center for Transportation and Logistics. “It’s much bigger,” he says. “There’s a warehousing problem and a transportation problem when you need to distribute things.”
“There are so many adjustments that have to be made,” Sheffi adds. “It’s a huge disruption, and there’s nowhere to hide.” What’s coming, he says, is a “whack-a-mole” recovery, where interruptions and delays in supply chains will quickly arise, and businesses must have the capacity to adjust equally fast.
REIMAGINING SUPPLY CHAIN PLANNING
Even before the pandemic, supply chain management had started moving away from traditional, batch-based planning processes to a more active process rooted in real-time information, with the goal of increasing agility. Moreover, “every company was looking for more visibility with the upstream supply chain. Understanding two or three tiers in each direction. Knowing where your stuff is coming from, who their suppliers are, and where their potential disruptions might be,” Sheffi says. “This is not easy to do because suppliers look at who their suppliers are as a competitive advantage. They don’t want you to go around them.”
It’s an even more complex problem for large, multinational firms, which often have significant numbers of suppliers, he says, one that has only increased the premium placed on visibility in a post-COVID-19 world.
Vikram Balasubramanian is Group Vice President of Product Management at Blue Yonder, a leading provider of digital fulfillment solutions. He believes advanced technologies like machine learning and artificial intelligence can be most impactful in facilitating this shift toward proactive, predictive management of supply chains, and can help businesses anticipate and adjust for disruptions.
“Software tools to simulate the risks and opportunities in the market, whether they are external or internal,” are critical for businesses that need to stay a step ahead of disruptions, he says. “You can think of big bang events such as a tsunami or something like COVID-19, which have a high impact—a low probability of happening, but a high impact. So that’s a key type of risk scenario.”
But such tools aren’t just for infrequent yet massive disruptions like a pandemic. “There are a lot of higher probability impacts, which are more ongoing,” he says. “What if you have a competitor who’s lowering rates? There are so many different levels of risk and opportunity in the market.”
“Technology allows you to go and play out the scenarios and come back and figure out how you can actually respond back to them.”
Blue Yonder’s Luminate platform, for example, integrates layers of a company’s historical data with critical external variables (weather and traffic patterns, pricing changes, regulatory requirements, etc.) to create an intelligent, end-to-end solution applicable to retail, manufacturing and beyond. Luminate connects demand and supply through multiple tiers of a supply chain ecosystem, providing visibility to make smarter choices around managing it.
The approach is based on four pillars, says Balasubramanian. The first, Predict & Pivot powered by AI/ML, is based on “helping businesses respond not just to what’s happening, but what will happen in the future, giving them more lead time and options of how they’re going to respond to it,” he says. It’s a probability-based approach that, in retail for example, means synthesizing not only internal data, but external sources as well—day of the week, promotions, weather, the behavior of competitors and more—creating more thorough and accurate predictions of demand. From there, allocation can be made more appropriately from store to store, and pricing sweet spots can be determined.
Boundaryless “Always-On” planning helps bridge conventional time and organizational silos, closing the gaps between demand and supply planning and the upstream and downstream supply chain, and Integrated Planning & Execution is designed to allow companies to achieve better control of their operations and supply chain, ensuring end-to-end visibility of their inventory and labor, minimizing risk and delivering with confidence.
Finally, User Experience is a fully workflow-driven experience where users can easily create situation rooms, collaborate, gain visibility and orchestration end-to-end, see potential disruptions and opportunities before they happen, receive machine learning-based advice on appropriate actions, and maintain organizational learning.
Ultimately, says Balasubramanian, it’s about helping companies be more intelligent, intuitive, predictive and capable of delivering to their customers when, how and where they want.
If the pandemic has shined the brightest light on the need for transparency and sound risk management when it comes to supply chains, it has also elevated the importance of supply chain management in overall business strategy. It’s something Sheffi believes the smartest companies have always understood, but for too many, it was discounted. “This was always kind of a backwater,” he says. “A cost center.”
Now, in this new normal, there can’t be daylight between supply chain strategies and business strategies.
“They have to go hand in hand,” he says. “They are one and the same.”
ABOUT THE AUTHOR
Blue Yonder Group Inc.
Blue Yonder is the world’s leading, end-to-end, digital supply chain platform provider, enabling companies to better predict, optimize and fulfill customer demand. Blue Yonder empowers companies to dynamically improve business planning and execution to drive more autonomous, profitable business outcomes and reimagined customer experiences. With Blue Yonder, you can Fulfill your Potential.TM Visit blueyonder.com.