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The important role of technology during supply chain disruption

Richard Tucker | 30. Jun 2020
6 minutes read

How does your organisation manage supply chain disruptions? Supply chain disruption is at its highest rate in many years and while it's not always possible to predict every interruption in procurement, it is possible to plan ahead for them. Through advanced technology, organisations can improve their agility and better respond to disruptions as they occur.

The faster a break in the supply chain can be managed and mitigated, the less likely it is to have widespread consequences for the business. 


Supply chain disruptions are growing

Supply chain disruptions are growing on multiple fronts, there have been many types of business disruption. As supply chains become more complex, there are more opportunities for disorder across the board. The past few years have seen multiple notable types of catastrophes:

Floods, earthquakes, wildfires, and other natural environmental crises
Many businesses cannot predict a fire or a tsunami, but they still need to be able to function after one occurs. Natural disasters can disrupt an organisation's supply chain in a multitude of ways, wiping out inventory, rendering inventory inaccessible, slowing down delivery, and leading to data loss.

Factory fires and factory-related issues
Separate from natural environmental events, there are also setbacks that can occur in factories and warehouses as well. Factories and warehouses are often not in the control of an organization but can still lead to a loss of available inventory and failed product fulfillment.

Security-related disruption
Cybersecurity has become a significant issue for all areas of a business, including supply chain management. Security-related disruptions can halt an entire supply chain operation because many companies manage their data through the cloud. A data breach could lead to lingering consequences for a business, for example, if data is stolen or lost.

Tariff and tax disruption
Political changes over the last year altered the landscape for companies in some industries, and they are not always changes that could have been predicted. Of all the types of disruption, this is one type that is extremely difficult for a company to overcome—though they can do so through multiple, global sales and vendor channels.

The nature of the COVID-19 situation has made supply chain planning difficult. COVID-19 may accelerate companies’ search for ways to reduce supply chain risk and the likelihood of future disruption. More than 90% of the Fortune 1000, including many technology companies, have already suffered supply chain disruption.

As you can see, many of these disruption types of wildly unpredictable—it’s the erratic nature of these events that presents the challenge. However, operations can continue running smoothly through appropriately managed risk.

Solutions for supply chain disruption

The key to continuity in supply chain management is a backup plan. Here are a few technology-based disaster solutions:

Creating simulation models
Simulation models, such as "digital twins," create a digital model of the physical supply chain of an organization. Through this digital model, organizations can experiment with scenarios showing how disruptions could potentially impact their business. Decision-makers also have the chance to create ways to deal with disruption before they occur.

Real-time tracking
Tracking an organisation's inventory and assets in real-time provides faster notice when a disruption does occur. An organisation will be able to track product and inventory bottlenecks and can use this information to address day-to-day disruptions such as highway closures, delayed flights, and cancelled shipments.

Using AI and machine learning for predictions
Artificial intelligence, when given the data to do so, can predict even complex future occurrences. AI and machine learning can be used to identify the demand for products, thereby making it easier to manage the supply chain as a whole. The better the supply chain operates; the less a disruption will impact it.

Blockchain and other visibility technologies
Blockchain technology and other similar technologies create transactional records, increasing accountability over larger supply chain networks. These records produce an accessible and consolidated system of transactions, like a digital paper trail. In terms of disruption, the blockchain could make it easier for organizations to track the location and cause of unexpected events and identify issues of fulfillment.

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Be prepared for supply chain disruption

Poorly handled supply chain disruptions can ultimately lead to trouble for an otherwise well-prepared business. Small-to-mid-sized businesses are particularly vulnerable to the impact of the unpredictable—but technology can help. By improving your organisation's technology now—and building out your disaster preparedness plans—you can reduce the potential consequences of a disruption before it even occurs.

The power of technology

It is clear that technology holds the key to unlocking at least some of these problems, and, when applied to supply chains, powerful change is possible. Through cloud-based networks that link together buyers and suppliers, businesses are gaining extraordinary visibility into supply chains. This is allowing them to assert accountability over sourcing decisions previously seen as far removed.

Short-Term Action Considerations

  • Scenarios – Understand financial and operational impact across multiple scenarios.
  • Supply Demand Balance– Focus on balancing supply and demand and building buffer stock as necessary.
  • Supplier Financial Health– Evaluate the financial health of your key suppliers to assess the potential impact to your supply chain.

Mid-to-Long-Term Considerations

  • Micro Supply Chains- Build agility and speed into your supply chain by creating micro-supply chains; finite, decentralized, agile ‘mini-operating models’, with flexible supplier contracts and relationships with manufacturing closer to the point of purchase. Explore strategies to ‘buy where you make and make where you sell’.
  • Supplier Diversification - Assess opportunities to diversify the supplier base. Identify geographically diverse suppliers to onboard in the event of emergency. Consideration should be given to dual sourcing for critical components.
  • Supply Chain Strategies– Move away from an adversarial, short-term approach toward a long-term strategy of driving value. Periodically test and revise your strategy to account for organizational growth and environmental change.

Read more about short and long term considerations here.


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