OPERATIONS & SUPPLY CHAIN TRANSFORMATION
5 November 2021
Globalized, multi-tiered, vast, and complicated supply chain networks have resulted from the world’s rapid growth. Mergers, acquisitions, and splits only add to the confusion. Supply chain issues have recently been exacerbated by ongoing lockdowns and travel restrictions, resulting in such widespread disruption that businesses must rethink their sourcing and delivery models in order to innovate on a massive scale.
The evolution of supply-chain capabilities and technology
The low rate of supply-chain digitization is mostly due to the limitations of the technology available to businesses until recently. Developers designed applications to take advantage of data provided by ERP systems, making supply-chain management one of the first company activities to undergo significant technological advancements. Those applications were primarily focused on three areas: speeding transactional tasks like those involved in end-to-end planning, supporting key operations like warehouse management, and improving the analysis on which choices are based.
What these technologies didn’t yet provide, however, were transformative capabilities for supply-chain management, such as linking and combining cross-functional data (for example, inventory, shipments, and schedules) from internal and external sources; delving into ERP, warehouse-management, advance-planning, and other systems all at once to uncover the origins of performance problems; or forecasting demand and performance with advanced analytics to make planning more accurate.
Supply Chain Performance improvement with Technology
Many companies have put a lot of money into digital transformation for front-office tasks, but they haven’t paid as much attention to supply chains. Despite their growth over the last decade, many businesses are now losing market share to the internet economy’s highly efficient and flexible supply chain networks because they have failed to implement technology that might help them construct robust and optimized supply chains. Modernized supply networks that can handle volatility and risk, on the other hand, might now be on the horizon. According to a recent BCI research, top management in over 49% of firms are more committed to managing supply chain risk, with 55.6 percent intending to use technology to deal with disruptions.
AI and digital technologies have had a major positive impact on organizational performance when they were first brought into the supply chain. According to a McKinsey analysis, demand-driven supply chain planning using AI decreases lost sales by 65 percent and inventory by 20 to 50 percent. It also saves 5-10% on warehousing and 25-40% on supply-chain management. As a result of the AI-enabled supply chain transformation, 61 percent of the supply-chain executives polled reported lower costs and 63 percent higher revenue.
Modern Supply Chains Capability Assessment
So, how does a modern and aspirational supply chain appear? It should be more agile, flexible, dependable, and efficient, and it should empower organizations to do so. The following capability tests should be able to pass the capabilities embedded and integrated within modern processes:
To guarantee a predictable lead time and delivery schedule, a modern supply chain should have predictive capabilities built inside the client purchase cycle. It should also be able to perceive and shape future demand for finished goods across several sites to ensure efficient and effective inventory and raw material planning.
A digitized and intelligent supply chain should monitor global and local events, logistics networks, weather, and scenarios that could have a negative influence on any component of the supply chain, including supplier capability, in real-time. After that, the supply chain should send out preemptive signals to allow for mitigation.
Customers will expect a more reliable experience, facilitated by a smart, contemporary supply chain. Throughout the supply chain, delivery promises must be protected, with an emphasis on increasing efficiency to reduce delivery lead times.
Parts, components, and final goods are all part of today’s supply chain, which is a complicated web of multi-tiered suppliers, locations, and logistics. A resilient supply chain network must have a dynamic ability to automatically determine the most effective alternate plan for mitigating any network-wide unfavorable scenario. It should also be capable of processing returns. Reverse logistics and circular-economic principles must also be dynamically integrated into overall planning.
Transforming and updating customer-facing functions isn’t enough to enable a tailored experience. It should also include capabilities in the supply chain. Is supply chain technology up to the task of converting pallets to parcels in order to meet customer expectations? Can it offer clients personalized delivery options and price, as well as near-real-time visibility into the status of their orders?
Multiple suppliers, logistics partners, warehousing partners, factories, and other stakeholders are all involved in a globally distributed supply chain. To improve predictability, dependability, and efficiency, it’s vital to establish effective collaboration across all parties. The utilization of different systems, technology, and platforms by different entities makes successful collaborative planning difficult. The basis for productive collaboration between many stakeholders can be laid by creating a digital representation of the physical supply chain.
It’s possible that the expectations are too high. To gain a competitive advantage, organizations must embed AI and digital technologies across all aspects of the supply chain – planning, sourcing, manufacturing, warehousing, logistics and delivery, and customer service processes – given the rapid pace with which digital economies have transformed customer expectations. IoT, Graph Analytics, machine learning, OCR, visual intelligence, conversational AI, cognitive search, and robotics must all be combined to build a digitized, intelligent, and modern supply chain that enables businesses to realize this vision.
Developing a transformation strategy
The final step in supply-chain transformation planning is to create a road map that looks several years ahead. This entails developing operational enhancements and digital solutions that will expand on the company’s current skills to achieve the capabilities outlined in its vision. Root-cause studies are critical for identifying potential adjustments because they reveal the issues that lay beneath performance gaps.
Following the creation of a list of potential adjustments, the organization must prioritize them. The classic approach of prioritization, which compares the expected benefit of a change to the ease with which it can be implemented, is still useful. However, it must be modified to reflect the complexities of digital transitions. In terms of agility, service, cost, and capital, the value remains relatively easy to quantify. However, estimating the ease of implementing changes is more difficult, partially because technology is constantly improving—what is unfeasible today may become practical in a year. Most businesses will benefit from adopting “no regrets” improvements right away, which have a high value and small implementation barriers while preparing for more uncertain changes later.