How Technology Helps Prevent Supply Chain Disruptions
The pandemic-related product shortages – from computer chips to construction materials – were supposed to be resolved by now. But they’re not. Instead, the world has gained a lesson in the ripple effects of disruption. As a result, companies are looking for ways to strengthen their supply chains.
COVID-19 has tested supply chains like never before. Yet, the weaknesses exposed by this crisis are not new. They’ve been there before; the pandemic just showed how easily global supply chains can become unstable.
For years, companies have measured supply chain success by how well they have been able to drive down costs and drive up efficiency. Just-in-time (JIT) inventory management became an art form, and masters of the practice achieved new levels of precision.
Then, 2020 sent shockwaves through many just-in-time strategies. The disruption was too significant to absorb, and supply chain ecosystems had not been built to flex. Furthermore, the JIT strategy was implemented during a period of relative global stability that we no longer can take for granted. It became apparent that global supply chains need to transform from rigid linear flows to agile and flexible networks in the future. Only then can they absorb threats of pandemics, political instability, extreme weather events due to climate change.
How to make supply chains more resilient
The solution isn’t to stop building efficient global supply chains. Instead, companies need supply networks with better visibility and the ability to pivot quicker when a crisis arises. The key to achieving this is to use data in more innovative ways. This means spotting disruptions sooner, analyzing their impact, and identifying alternative supply sources.
With the right technology and data, this is possible. Three factors can help organizations build a more resilient supply chain:
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Leveraging technology to improve supply chain visibility
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Multi-tier supply chain collaboration
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Put quality data to work
1. Leveraging technology to improve supply chain visibility
For a well-run supply chain, whether in a pandemic or not, it is crucial to have complete visibility into what is happening. Companies need to know as early as possible if there is a problem, be that a late shipment, quality issue, or some unforeseen delay with customs.
But, as shown by the pandemic, most companies lack visibility. The reason for this is that most supply chains are still transactional and reactive. As a result, an unexpected spike or drop in demand takes time to ripple through the multi-tiered supply chain.
Companies that have had visibility into their supply chains have traditionally only known about their tier-one vendors. They might not even have been aware of their deep-tier suppliers. This was the case with most carmakers before the pandemic hit. They didn’t pay much attention to who was supplying their component manufacturers’ microprocessors, but as the global chip shortage hit the industry, it prompted the carmakers to find out.
Putting it in simple terms, visibility isn’t just about Tier 1 or Tier 2 suppliers any more. It’s about the entire supply chain. As the pandemic has shown, businesses also need to understand the dependencies that exist between the suppliers. It’s essential to look beyond the first tier of suppliers to avoid being caught by surprise when a supplier’s supplier fails.
The good news is that digital technology can help companies gain end-to-end visibility of their supply chains. And, as expected, the pandemic has accelerated manufacturers’ deployment of those technologies.
With modern, digital sales and planning software (S&OP), businesses can gain a more comprehensive understanding of their supply chain while improving their decision-making based on shifting market dynamics.
2. Multi-tier supply chain collaboration
In response to supply chain disruptions, resilience has become a priority for enterprises. And to become more resilient, companies need to get better at supplier collaboration.
To resolve issues most efficiently, supply chain teams should share information with stakeholders and collaborate with the right people at the right time. To do that, they need the right tools and workflows in place to make that collaboration seamless across all parts of the supply chain. Furthermore, the teams need real-time access to the same data and collaborative processes. That way, the units can identify problems faster and resolve them efficiently.
Developing suitable technologies has been an important step, but technology alone is insufficient to enable deep collaboration between supply-chain participants. Instead, collaboration always starts with people and from the processes. No amount of technology will solve any problems if your people can’t use it or your processes don’t work. But, with the right people, skills, and processes, technology empowers people to do their job better, allowing companies to survive and succeed stronger than before.
Simply put, a unique symbiosis between human wisdom and automated S&OP is what will make your supply chain planning process successful.
3. Put quality data to work
The current pandemic is unlikely to be the last shock to the world economy. Whether it’s a disease, political conflict, or natural disaster, there is a potential for other disruptive events in the future.
As a result, businesses must put their data to work to prepare better for the next disruption. If an organization goes into disruptions with limited, inaccurate, or poorly segmented data, it will be challenging to get ahead of the situation.
Amid disruption, it is easy to see the benefits of leveraging cleaner, more accurate data in the supply chain planning process. The more precise the data integrated into the planning process, the more accurate predictions are. And when an organization leverages large amounts of diverse data, it cannot rely on spreadsheets or legacy systems. These systems are not fit for the complexities of modern businesses, especially during large-scale supply chain disruption.
The benefit of modern S&OP solutions is the focus on algorithmic supply chain planning with decision-making automation. Automated forecasting systems allow planners to create a “what-if” scenario of various disruptions based on historical data. This enables planners to react swiftly if the data shows a tendency toward a specific scenario.
Having real-time data on the entire supply chain can help organizations better identify demand and supply intersections, secure products more effectively and sustainably, and identify potential supplier risks in real-time. When using a trusted supply-chain analytics platform, organizations can identify areas of product vulnerability and introduce safeguards, regardless of whether they’re facing minor disruptions or pandemics.
Conclusion: time to prepare for the future is now
There are ways to make supply chains more resilient, effective, and agile with the help of technology, collaboration, and data. The result is greater value for customers, suppliers, and the company.
New supply chain technologies that improve visibility, collaboration, agility, and resilience emerge across the end-to-end supply chain. Furthermore, leveraging advanced technologies such as the Internet of Things and Artificial Intelligence (AI) supports companies to better expect and deal with the unexpected.
In assessing your technology needs, you need to consider short-term and long-term growth, so you can select technology that grows with you. Sometimes, growth happens in unexpected areas, and your business may venture into new segments, products, and services. By evaluating your business changes and the technology that supports those changes, you will be able to decide where to invest in your tech growth and where to cut back.
With the year 2022 approaching, it is important for companies to embrace 21st-century technology and approaches to solve today’s business challenges. And, it doesn’t have to be an expensive multi-year effort. To learn more, click here.