Supply chain disruptions, like the one we are currently experiencing due to the COVID-19 pandemic, will continue to happen. Just think about the last few years: a major fire in China; a devastating earthquake and tsunami in Japan; a volcanic eruption in northern Europe; several large hurricanes in the southern United States; an ocean carrier going bankrupt, stranding thousands of shipping containers; trade wars between just about every country; withdrawal or significant changes in trade agreements such as Brexit; and, to top it off, a pandemic that has kicked off the latest global recession.
I’m sure I missed a few, but my point is clear: Our global, complex, fast-paced supply chains can be disrupted in hundreds of ways, and that’s not changing anytime soon.
Transaction-focused enterprise resources planning (ERP) does not provide the capabilities needed to efficiently and effectively respond to major disruptions. ERP systems do a great job managing transactional data, but they do not provide early warnings to disruption or analysis through advanced analytics such as simulations and what-if scenarios.
Surviving major supply chain disruptions requires advanced planning and optimization platforms that enable supply chain organizations to prepare for the unexpected. Artificial intelligence (AI)-enabled, purpose-built capabilities can simulate the effects of disruptions to and end-to-end supply chain, highlight ways to mitigate these effects, and develop action plans to be quickly deployed. These platforms use end-to-end digital supply chain data and machine learning intelligence to quickly sense changes, alert users, suggest the best responses, and act. They strengthen decision-making capabilities by providing data and analysis during high-pressure situations.
Supply chain data
Of course, end-to-end visibility and automation/augmentation through advanced analytics and cognitive engines first and foremost requires comprehensive, clean, consistent and current master and transactional supply chain data. Once available, the platforms can serve it up in near-real time, in the format needed to support planning and optimization processes. To understand the size of the opportunity, just imagine how much data could be stored on 200 Million DVDs. That is the amount being created every day, and a good portion of it would be very useful in sensing and responding to supply chain disruptions — if you had access to it.
Supply chain agility
Another foundational capability is supply chain agility. Agility allows a supply chain to quickly respond to opportunities and disruptions in a profitable way. Supply chain agility is gained through capabilities that enable rapid identification of changes, fast decision-making, and optimal responses that maximize company benefits. Agility can be maximized by leveraging both human and technology capabilities. Humans excel at solving problems that require common sense; generalization; creativity; and dealing with ethical dilemmas, subjective actions and abstraction. Cognitive systems excel at locating knowledge, developing an optimal solution, eliminating bias, compressing process times and dealing with repetitive decisions. An agile supply chain can quickly launch new products, divert products from one destination to another, and respond to opportunities and disruptions.
Finally, in today’s “instant everything” business environment, a capability essential to surviving supply chain disruptions is speed: speed to identify the disruption, to analyze available data and come up with the best response, and to execute the required actions. Automation unlocks speed because it provides critical updates, trend changes, alerts, and decision-making and action execution. AI-powered platforms can automate the routine and augment a human’s innate common sense, creativity and subjective judgment abilities to make better choices faster. The time from disruption to optimal response can be reduced by a factor of 10 through automation and augmentation. Just think what that time compression could allow your company to do and how much value that could create by
- changing purchasing and manufacturing plans days or weeks sooner
- diverting inventory on the fly
- locking up alternative supplier capacity before competitors even now about a disruption
- taking critical cash flow and other financial actions to minimize business impact.
Key questions to ask
Finally, surviving the COVID-19 pandemic will push many supply chains, and the people who manage them, to their limits. Ask the following questions to jump-start your team discussions:
- Do we have access to comprehensive, clean, consistent and current supply chain data from our supplier’s supply to our customer’s consumer?
- Do we have a plan for adopting advanced analytics, AI and machine learning in our supply chain operations?
- Do we have the ability to run multiple what-if scenarios to analyze how our supply chain will be affected by different types of disruptions?
- Can we develop mitigation plans for scenarios that are most likely to occur?
- Can we quickly sense a disruption in our extended supply chain, analyze options to mitigate it and execute the best response?
If you answer “no” — or even “maybe” — to any of these questions, it’s time to get serious about exploring and implementing digital supply chain transformation for a better, more intuitive future.