Boosting Supply Chain Resiliency with Data Analytics and Artificial Intelligence

Boosting Supply Chain Resiliency

Coming out of the COVID-19 pandemic, many organizations are considering digital transformation as the key to ensuring supply chain resilience. Evolutions in technologies have enabled the creation of digital supply networks that can be used by companies to strengthen their procurement strategy. With new and emerging digital solutions involving artificial intelligence (AI) and analytics, companies now can harness their data to optimize inventory more effectively than ever before.

Even as the pandemic is receding, supply chain disruptions continue to be commonplace, and chief supply chain officers are under growing pressure to use and analyze real-time data to mitigate risk. According to a recent Forbes article, “43% of enterprises will continue to digitalize and integrate innovative technology into enterprise-wide systems. This means that in the coming year, the ability to augment operations and decision-making with data analytics will continue to be a transformative and highly favored capability.”

Forbes reports that implementing new data analytics capabilities is best considered as a series of digital initiatives, for which there are many options. For instance, the introduction of the metaverse is one solution that will greatly increase a company’s ability to deliver predictive insights across supply chain networks, enabling it to “reduce development times and risk, achieve higher operational efficiency, and improve resilience.”

Ensuring Continuity Throughout Disruptions

Companies are using analytics and AI to mitigate risk and ensure continuity throughout any global supply chain disruptions. These powerful tools help businesses automate tasks in a way they never could before, while gaining deeper insights for better, faster decision-making, according to Supply Chain magazine.

Supply Chain reports that digital twin technology is currently considered one of the most innovative uses of AI and data analytics in supply chains. A digital twin provides a virtual supply chain replica that enables scenario modeling to simulate the impact of disruptions, like market changes and natural disasters, allowing companies to determine how resilient their supply chain is. AI modeling also proactively identifies supply risk, such as a supplier’s inability to source needed materials, before it can become a problem.

Deloitte experts agree that “with improvements in data, analytics, computing power, and visualization, digital procurement has better evidence-based options for decision-making, which can improve both the value and accuracy of strategic decisions and the speed of execution.”

New disruptive digital supply chain technologies are altering the procurement function for the better. Deloitte recommends that procurement leaders invest in both:

  • Maturing digital solutions that are currently transforming procurement with minimal investment, such as cognitive computing/artificial intelligence, predictive/advanced analytics, intelligent content extraction, visualization, and crowdsourcing
  • Emerging digital solutions that could impact procurement in the future, such as block chain, sensors/wearables, cyber tracking, and virtual reality/spatial analytics

In the face of continuing disruption, companies must adapt to ensure supply chain resilience. Digital transformation is an incremental, multi-year journey. If your company has not yet created a digital procurement strategy and started this process, now is the time to consider the many AI and data analytics options available on the path to intelligent supply chain management.

To Achieve Supply Chain Resilience…Shift Your Focus from Cost to Risk Management

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It wasn’t long ago that companies could keep watch on their component costs without having to give undue attention to supply chain logistics. All of that changed with the supply shortages and delays created by the arrival, in rapid succession, of the COVID-19 pandemic, climate-related events, and the Russian invasion of Ukraine, all of which highlighted the fragility of supply chains.

These disruptions have made it clear that supply chain risk management strategy must now be top of mind. As a recent article in the Harvard Business Review (HBR) put it, “As managers navigate this dynamic, they need to think beyond product costs and supplier choices.”

Some areas of supply chain risk that managers should address include:

  • Economic: Issues related to supplier health at every tier in the supply chain, including supplier bankruptcy or manufacturing stoppages
  • Geopolitical: The effects of international conflicts, such as U.S.-China trade issues and the war in Ukraine
  • Environmental: Issues related to natural disasters or sustainability, such as societal demand to reduce greenhouse gas emissions
  • Cybersecurity: Protecting against cyber threats to supply chain management

While many manufacturers previously approached their suppliers focused mainly on price, today they must develop a more strategic approach to achieve resilience, flexibility, and sustainability, said HBR. By focusing on supply chain risks, managers can learn to stabilize supply chain disruptions in the near term while developing structural resilience in the long term.

To do this, companies must have strategies that allow them to assess the risk of their suppliers, as well as to mitigate those risks, noted business benchmarking site Brainyard. Managers need to know what’s happening not only with their Tier 1 suppliers—the suppliers they work with directly—but also the Tier 2 and 3 suppliers further up the chain.

“Once an organization has assessed the risk of its supply chain partners, the best way to build resilience is to diversify its supplier base,” reported Brainyard. “That means finding redundant suppliers for key parts and materials that are located in different parts of the world so, for instance, a hurricane in a certain region doesn’t halt all shipments of a crucial material. It could also mean finding partners closer to home—maybe not in the same country but on the same continent.”

Diversifying the supplier base and keeping safety stocks on hand are costs that may be more expensive or hard to justify, but can be important for building structural resilience, risk management professionals at McKinsey & Company wrote recently.

Other actions that can be critical to building resilient supply chains include “creating a nerve center for the supply chain, simulating and planning for extreme disruptions, and reevaluating just-in-time strategies,” the McKinsey article noted.

With supply chain risks now firmly on the C-suite’s radar, leaders must not only create supply chain risk-reduction strategies, but also revisit and update them continually.

It’s only by taking steps to mitigate risk and find the best product options that you’ll achieve better business outcomes. Learn more about Dynamic’s portfolio of supply chain services designed to anticipate and mitigate internal and external risks.