The pace of growth around the world has led to globally distributed, multi-tiered, large, and complex supply chain networks. Acquisitions, mergers, and splits merely add to the complexity. Recently, supply chain problems became magnified with continued lockdowns, and travel restrictions, ultimately causing so much disruption that organizations must now rethink their sourcing and delivery model to innovate on an unprecedented scale.
Technology is Improving Supply Chain Performance
Many organizations have invested heavily in digital transformation for front-office functions with little to no focus on supply chains. Despite growing during the past decade, many companies are now losing market share to the highly efficient and agile internet economy by failing to adopt technologies that can help them develop resilient and optimized supply chain networks. Yet modernized supply chains that can handle volatility and risk may now be on the agenda. A recent study by BCI shows that the top management in almost 49% of organizations are more committed to managing supply chain risk, with 55.6% wanting to leverage technology to handle disruptions.
When introduced into the supply chain, AI and digital technologies have had a significant positive impact on organizational performance. According to a McKinsey report, AI-enabled, demand-driven supply chain planning reduces lost sales by 65% and reduces inventory 20-50%. It also decreases warehousing and supply-chain administration costs to the tune of 5-10% and 25-40%, respectively. Subsequently, 61% of the supply-chain executives surveyed reported reduced cost and 63% reported increased revenue driven by AI enabled supply chain transformation.
Capability Test for Modern Supply Chains
So what does an aspirational and modern supply chain look like? It should be – and enable companies to become – more agile, flexible, reliable, and efficient. The capabilities embedded and integrated within the modern processes should also be able to pass the following capability tests:
A modern supply chain should have predictive capabilities embedded within the customer order journey so it can provide a reliable lead time and delivery schedule. It should also sense and shape the future demand of finished products across locations to ensure effective and optimized inventory and raw material planning.
A digital and intelligent supply chain should proactively monitor global and local events, logistics network, weather, and situations that could have a negative impact on any aspect of the supply chain, including supplier capability. The supply chain should then provide preemptive alerts that enable mitigation.
Customers will expect a more robust experience enabled by an intelligent, modern supply chain. The supply chain needs to protect delivery commitments across multiple stages, with a focus on driving efficiency to reduce the lead time to deliver.
Today’s supply chain is a complex network of multi-tiered suppliers, locations, and logistics, with parts, components, and finished products. A resilient supply chain network needs to have dynamic capabilities to automatically identify the most effective alternate plan to mitigate any adverse situation across the network. It also needs to be able to handle returns. Overall planning must also include dynamic integration of reverse logistics and circular-economic principles.
Enabling a personalized experience is not just transforming and modernizing customer-facing functions. It needs to also extend to supply chain capabilities. Is the supply chain technology capable of dealing with the pallet-to-parcel transformation to match customer expectations? Can it provide personalized choices to customers about delivery modes and pricing, or provide near real-time visibility to customers about order stages?
A globally distributed supply chain involves multiple suppliers, logistics partners, warehouse partners, factories and more. It’s critical to ensure efficient collaboration across all partners to drive predictability, reliability, and efficiency. Different systems, technology, and platforms used by various entities pose a big challenge for effective collaborative planning. Creating a digital version of the physical supply chain can provide the foundation for effective collaboration between different parties.
The expectations may sound quite daunting. However, given the pace with which digital economies have transformed customer expectations, it becomes critical for organizations to embed AI and digital technologies across all aspects of the supply chain – planning, sourcing, manufacturing, warehousing, logistics and delivery, and customer service processes – to gain a competitive advantage. Technologies like IoT, Graph Analytics, machine learning, OCR, visual intelligence, conversational AI, cognitive search, and robotics need to be integrated to create a digital, intelligent, and modern supply chain that empowers companies to achieve this vision.