Surviving the COVID-19 Pandemic and Future Supply Chain Disruptions Through Supply Chain Digital Transformation
Supply chain disruptions, like the one we are currently experiencing due to the COVID-19 Pandemic will continue to happen. Just look back over the last couple of years. We have had a major fire in China a major earthquake and tsunami in Japan, a volcanic eruption in northern Europe, several large hurricanes in the southern United States, a major ocean carrier going bankrupt stranding thousands of ocean shipping containers, trade wars between just about every country, withdrawal or significant changes in trade agreements like Brexit and to top everything off a global pandemic which has kicked off the latest global recession. Although I am sure I missed a few, the point is our global, complex, fast-paced supply chains can be disrupted in hundreds of ways and I for one don’t see that changing anytime soon.
Transaction focused Enterprise Resource Planning (ERP) system and spreadsheets do not provide the capabilities needed to efficiently and effectively respond to major disruptions. ERP systems do a great job managing transactional data but do not have the capabilities to provide an early warning to a disruption or analyze the situation through advanced analytics like simulations and what-if scenarios. Error-prone spreadsheets were never designed to handle the multi-dimensional relationships and constraints involved in today’s supply chains or to provide the advance numeric or visual real-time analytics required to develop an optimal response quickly.
Surviving major supply chain disruptions requires capabilities that are only available through advanced supply chain planning and optimization platforms. Only platforms like that offered by Logility provide the capabilities to plan for the unexpected through powerful artificial intelligence enabled, purpose-built capabilities that can simulate the effects of disruptions on and end-to-end supply chain, highlight ways to mitigate these effects, and develop action plans that can be quickly deployed. Only advanced supply chain planning platforms have the ability to use end-to-end digital supply chain data and machine learning intelligence to quickly sense changes in the supply chain, alert the appropriate users, suggest the best responses, and if allowed take automatic actions to respond to a disruption. And only advanced planning platforms strengthen user’s decision making capabilities by providing the data and analysis capabilities they need to make decisions during high-pressure disruption situations.
Of course, end-to-end visibility and automation/augmentation through advanced analytics and cognitive engines requires comprehensive, clean, consistent and current master and supply chain data. Once again, only advanced supply chain platforms have the capabilities to pull all of your internal and external structured and unstructured data together and serve it up in near-real time in the format needed to support planning and optimization processes. To understand the size of the data opportunity just imagine the amount of data that can be stored on 200 Million DVDs. That is the amount of new data being created every day in 2020. A good portion of that data could be useful in sensing and responding to supply chain disruptions if you had access to it.
Another foundational capability is supply chain agility. Agility (or the ability to change quickly and easily) 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 maximizes company benefits. Agility can be maximized by leveraging both human and technology capabilities appropriately. 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 will enable a company to quickly launch new products, easily divert products from one destination to another and rapidly respond to opportunities and disruptions.
Finally, in today’s instant everything business environment a foundational capability essential to surviving supply chain disruptions is speed. Speed to identify the disruption. Speed to analyze available data and come up with the best response, and speed to execute the required actions. Automation unlocks increases in speed. Automation of data updates. Automation of sensing of trend changes. Automation of alerts. Automation of analysis and yes even automation of 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 decisions faster. The time from disruption occurrence to optimal response can be reduced by at least a factor of 10X through automation and augmentation. Just think what that time compression could allow your company to do and how much value that might create.
- Change purchasing and manufacturing plans days or weeks sooner
- Divert inventory on the fly
- Lock up alternative supplier capacity before competitors even now about a disruption
- Take critical cash flow and other financial actions to minimize business impact
Surviving the COVID-19 pandemic will push many supply chains and the people that manage them to their limits. Supply chain disruptions, like the one caused by the COVID-19 Pandemic, will continue to take place in today’s complex, global supply chains. We may not be able to predict the nature of a disruption or when it will take place, but we can be better prepared to effectively and efficiently respond using advanced supply chain planning capabilities. Below are a couple questions to jump start your discussion regarding your company’s ability to handle supply chain disruptions:
- Do you have access to comprehensive, clean, consistent and current supply chain data from your supplier’s supply to your customer’s consumer?
- Do you have a plan for adopting advanced analytics, artificial intelligence and machine learning in your supply chain operations?
- Does your digital supply chain platform generate multiple scenarios to analyze how your supply chain will be affected by different types of disruptions and to develop mitigation plans for those that are more likely to occur?
- Can you quickly sense a disruption in your extended supply chain, analyze “what-if” options to mitigate the disruption and execute the best response?
If your answers to any of these questions is maybe or no, then I recommend you explore and implement digital supply chain transformation for a better, more intuitive future. I look forward to receiving your comments and learning how your company is dealing with COVID-19 and preparing for the next supply chain disruption.