In 2020, we saw COVID-19 cause dramatic shifts in demand patterns and severe shortages of raw materials that feed manufacturing. The result was an unprecedented disruption in supply chains, with estimated losses of $4 trillion. Managing this crisis, as well as future ones, requires a focus on the entire supply chain, from first mile to last. The goal is to provide an exceptional customer experience while optimizing working capital and controlling operating costs.
As demand continues to shift to the omnichannel and e-commerce, supply chain strategies must proactively recognize any disruptions that threaten to undermine on-time and in-full (OTIF) order requirements. What’s needed is an intelligent supply chain, employing visibility technology that not only can predict disruptions but also trigger actions to alleviate them, such as changing sourcing requirements, enabling inventory balancing and optimizing product allocation.
The solution requires a move away from linear supply chains to digitally integrated supply chain networks. A recent study found that organizations that adopt digital technology can reduce supply costs by 50% and increase revenue by 10% through enhanced visibility and data. These networks draw on tools with seamless, real-time communication between manufacturing, logistics providers, suppliers and applications for enterprise resource planning (ERP), warehouse management (WMS), transportation management (TMS) and order management (OMS). Companies can integrate traditional silos by feeding data into a “control tower” that generates valuable insights for the entire enterprise.
The advantages of digital systems are felt everywhere. They address the risk of supply chain disruptions such as port congestion, strikes, bad weather and late shipments — anything that negatively impacts sourcing, production, customer orders and capacity management. An intelligent supply chain allows companies to anticipate such disruptions and adjust inventory forecasts, manufacturing plans and transportation routing accordingly.
Additional risk comes from damage to inventory that’s already in the company’s possession. Products that exceed thresholds for temperature, humidity or vibration diminish the customer experience. The internet of things (IoT) can dramatically reduce such issues by sending signals when goods are near those thresholds, allowing for pre-emptive action by the shipper. The result is a dramatic improvement in key performance indicators and customer satisfaction.
Companies moving to an intelligent, digitally integrated supply chain can achieve both hard and soft savings in areas such as brand loyalty, shareholder value, employee satisfaction, product footprint analysis, labor productivity and inventory optimization. But effective constraint management can only happen when a cloud-based system sits atop an ecosystem of partners and applications, enabling the business to achieve “one source of truth” for timely performance reporting across the supply chain.
In the transition to a digital supply chain, businesses need to take a number of key actions, including:
Technology in 2022 will focus on intelligent supply chain solutions and cloud-based visibility platforms, to form an integrated and collaborative digital supply chain. An integrated network allows supply chains to proactively adjust to disruptions, provide a positive customer experience, and fulfill stakeholder expectations.
Keith Pickens is retail domain leader and general manager of UST.
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