Lessons From The Supply Chain

The coronavirus pandemic has caused economic upheaval around the world, and supply chains were dealt some of the biggest blows. As vaccine distribution accelerates and many areas see case numbers decline, supply chain leaders can’t spend too much time catching their collective breath. Instead, it’s time to get in front of the next disruption, and that means focusing on demand planning.

Demand planning is all about building an accurate forecast of future demand to try to meet customer needs as precisely as possible. Underestimating demand comes at the obvious cost of missed sales opportunities and decreased revenue, but overestimating can be just as costly because excess inventory takes up space and cash.

According to insights compiled by Deloitte in 2020, the companies that were best equipped to respond to the disruption driven by the pandemic had strong relationships with their suppliers and tools in place to offer visibility into their broader supply networks. Those lacking both supply chain visibility and the capacity for accurate projections were left scrambling to implement systems that should have been in place all along.

To make sure your organization is well-equipped for the next disruption, whether it’s a natural disaster, major weather event, labor upheaval, or something else entirely, implement demand planning with these three steps:

1. Stay flexible to reduce disruption and promote growth.

Much of supply chain management is about reducing the impact of disruption. If you depend entirely on a single supplier, for example, your supply chain is extremely rigid; good management might involve diversifying and adding a few suppliers to the roster. If that’s not possible, or if all your suppliers depend on a single source of raw materials—making diversification more difficult—you can maintain excess inventory to help you get through disruptions. This extra inventory ties up physical space and capital, so it should offer a realistic buffer without requiring an excessive investment.

A resilient supply chain doesn’t just help your company avoid catastrophe—it actually encourages growth. According to research from Bain & Co., resilient supply chains result in a 15%–25% increase in manufacturing output, a 40%–60% decrease in the time necessary for product development, and a 20%–30% boost in customer satisfaction. Don’t wait for the next disruption to start making the supply chain changes that can yield these benefits.

2. Change before you have to.

If the pandemic has taught us anything, it’s that massive disruptions demand a proportionally rapid and innovative response—and the organizations that fail to see the paradigm shift and respond in an appropriate and timely manner will likely get left behind. The best way to set yourself up for future disruptions is to make small changes now that are aimed at improving efficiency and supply chain resilience. If your existing processes have been adequate so far, you might still be overlooking areas for improvement that will create a more efficient and resilient supply chain.

Survey your system at least quarterly and look for patterns and problems that consistently emerge. When you’ve pinpointed these areas, work on implementing fixes, whether that means collecting demand data at more regular intervals or changing your pricing structure periodically to avoid an inventory glut. Even subtle changes help you avoid having small problems resonate throughout your operation and cause bigger issues.

One of the best times to look for areas for improvement is during a move, so don’t be afraid to relocate production lines from one part of the factory floor to another and revamp the operation from the ground up in the process. A good example of this is Flex, a manufacturing and supply chain services provider that frequently shifts small assembly lines to other buildings to improve productivity. Each time, they redesign processes to use less space and labor, thereby increasing productivity.

3. Use the latest tools and technologies.

If you’re still relying on traditional tools and processes, you’re missing out on some major improvements. “Today, manufacturers are under constant pressure to reduce costs, improve supply chain efficiency, and enhance revenue margins,” according to ThroughPut Inc co-founder and CEO Ali Hasan R. “With a lack of clear visibility into their supply chains due to manual reactive operational approaches and poor planning tools, they miss out on the much-needed deep insights. This keeps them from creating smooth, synchronized, and responsive supply chain plans to achieve the desired operational excellence.”

The solution? Tools that use demand-driven analysis and real-time inventory updates to more accurately forecast demand and offer a holistic view of each individual component of a supply chain. AI is increasingly serving as a cornerstone of these tools because the technology can increase accuracy while offering an ability to scale that human analysts will never be able to replicate. By implementing AI in demand forecasting, you can improve productivity, quality, and output while decreasing costs and reducing delays and disruptions. Incorporating Internet of Things devices can take improvements even further by arming AI tools with accurate data that’s produced in real time, enhancing their decision-making capabilities.

Supply chains are still reeling from the ongoing pandemic, but this massive global disruption certainly won’t be the last. That’s why it’s critical to start planning for future upheaval by building flexibility, efficiency, and the latest tools and technologies into your supply chain. Even in the best of times, your organization will net a significant return on your supply chain investments—and when the next black swan event arrives, you’ll be enjoying a competitive advantage instead of participating in a mad scramble to keep your operation afloat.

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