As we enter the final quarter of 2021, hindsight shows us the wide-scale impact organizations have faced as a result of supply-chain issues stemming from the global pandemic. Chaos has reigned. Most companies have experienced revenue losses, materials shortages, inconsistent data, and increased strain on their networks and their personnel in every part of the world.
Global concerns like Costco, FedEx and Nike have all recently cited these issues in their future outlook statements, drawing conclusions that supply chain issues and higher shipping prices will continue occurring in the coming months through 2022. Every organization will surely join the chorus.
These developments, unfortunately, aren’t a huge surprise having experienced the pain and the challenges the industry has faced and will face in the coming months ahead. At Verusen, the supply-chain intelligence company of which I’m founder and CEO, we’ve seen these issues growing in scale and complexity over the past 18 months.
State of supply chain
We’ve just completed our 2nd annual State of Supply Chain report How Supply-Chain Disruptions Have Shaped Supply Chain Initiatives and Priorities surveying a wide range of supply-chain management professionals across all verticals including Manufacturing, Automotive, CPG, Energy/Oil & Gas, and Pulp & Paper, from manager level up to the C-Suite. And what we found were deeply critical issues that have underpinned the supply chain management crises.
Our report found that 43% of businesses are intentionally inflating their inventories to protect against further disruptions. This is also raising their cost structures. Other factors include how poor data quality, siloed materials data, and excessive legacy software systems contribute to data complexity. These stand as the most prevalent causes cited for poor materials management and planning in the supply chain industry. What this means for buyers is delays, higher prices, and frustration. The result for the bottom lines of business is lost revenue and increased inventory costs.
At the same time, the study illuminates the fact that the supply-chain industry is seriously lagging in its response to pandemic-related challenges. Two out of three companies are using the same materials management business practices they used five years ago, while less than half are intentionally inflating their inventories to protect against further disruptions. That’s an unsupportable situation that must change.
Pressure to control costs is another major issue. Nearly all survey respondents (90%) noted that their companies are focused on cost reduction. Yet, three-quarters of respondents also described a focus on operational risk.
This combination of poor data cost controls, and resource constraints leads to widespread inefficiency and stifled efforts by companies to digitally advance their materials management processes.
Better visibility and understanding of data help solve the efficiency challenge. With so many adverse conditions in play from factory floors to shipping centers, companies need to critically evaluate their supply-chain processes and determine how and when to uplift and upgrade them. Among the areas ripe for upgrade include using AI/ML (Artificial Intelligence/Machine Learning) to better see and understand current data, and moving away from legacy technologies and manual processes.
Upgrading the technologies necessary to overhaul these legacy systems would likely help alleviate some of the supply chain snafus. But our report found that companies feel that converting legacy systems to cloud-based AI systems might take over a year in time with high costs, too. That’s incorrect, as emerging technologies like AI can deliver results within weeks of implementation.
The study’s findings largely correlate with another study on supply-chain issues by NTT Data. In its study, NTT surmised that the logistics industry is struggling with the greatest crisis in decades and that the answers may lie in advancing technology in supply-chain management.
In a recent Forbes article, Capital Management hedge fund executive Garth Friesen wrote:
“Real-time data transmission, 5G, robotics, Internet of Things and data analytics will help logistics managers with better visibility into the different areas of the supply chain and improve maneuverability when issues occur.” That’s an opinion we can stand behind.
Inevitably, it will only be a matter of time before these changes start to take place. Companies working with logistics issues need to prepare diligently for this eventual shift. This may include work in:
● Gathering top-quality data sources internally and externally.
● Using the right data and information to gauge your business with your teams.
● Understanding what data is necessary for your business and use it wisely.
● Making it easy to access and share data across departments and teams.
● Shifting technology pieces to meet AI/ML standards.
Moving ahead with supply-chain controls
As we approach 2022, many organizations are continuing to act in response to the global pandemic and the completely unforeseen situation it has caused. For most, this has resulted in massive revenue losses, materials shortages, inconsistent data, and increased strain on networks around the world.
Unfortunately, companies are still struggling through these disruptions, and are largely turning to legacy technologies to solve tomorrow’s problems. These approaches have failed companies’ supply chains in the past, yet are unlikely to deliver any different outcome in the future.
It’s time for companies to apply 21st-century technology and approaches to 21st-century business challenges. And, it doesn’t have to be a multi-year effort that consumes significant company resources and money.
It’s time to unlock the power of emerging supply-chain technologies to deliver results fast, and enable companies to rewrite the business processes in ways that deliver the agility they need, at a cost they can afford, to delight their customers.