How predictive analytics could future-proof your supply chain
Just one day of supply chain disruption is enough to damage reputation, revenues and profits. But predictive analytics are helping businesses to optimise supply chain visibility, respond before crises occur and save millions of pounds
How much would it cost your business if your supply chain suffered just a single day of disruption? How quickly could you identify the cause of the problem and implement the right solution before your supply chain returned to breakeven? And is there a way of predicting risk before disruption occurs and saving your business from damaging financial losses?
Those are the three big questions being asked by business leaders in boardrooms and offices worldwide, who want to future-proof their supply chains from disruptions at global, regional and internal level. Global trade issues, natural disasters and cybersecurity breaches are just three of a growing number of threats to supply chains that can and have stunted revenue growth and wiped out the profits of businesses big and small, sometimes in a matter of hours.
The costs of inaction can be fatal. Supply chain issues erode customer trust, public perception and, eventually, shareholder value. The Economist’s Business Costs of Supply Chain Disruption report revealed that two-thirds of participants suffered revenue losses of between 6% and 20% due to pandemic-related disruption. McKinsey has predicted that in as little as 10 years, disruption could cost some companies 45% of annual profits.
Businesses across almost every industry are taking action. They are turning to machine learning to gain visibility beyond tier one and two suppliers, and use supply chain analytics to predict and navigate disruption weeks, or even months, in advance of crises occurring. Many companies have already saved millions of pounds in potential losses and increased revenue by minimising supply chain costs.
Everstream Analytics helps some of the world’s largest companies, including Google, Anheuser-Busch InBev and DuPont, to do just that. Everstream calculates what it calls ‘the value of a single day’ to show the true impact of disruption to a company’s supply chain. This is the financial cost of just one day of disruption and highlights the value for a business in investing in analytics to boost supply chain visibility and disruption response time.
The gross margin impact of a single day’s disruption at one of Everstream’s customers was recently calculated at almost $275,000 (£228,000). In this instance, just one minor disruption translated to a drop in shareholder value of more than $6m (£4.9m). This potential loss would also create non-quantifiable issues, such as sinking public perception and consumer trust, which would only worsen if competitors avoided delays and seized market share.
Julie Gerdeman, CEO at Everstream Analytics, believes this level of detail and insight is now imperative at C-suite level. “Supply chain visibility is mission critical - executives are expected to provide these insights to their CEO and board,” she says. “Manual supply chain risk management is catastrophic for some businesses because they can’t react fast enough. Time and again we’ve seen companies fail to meet revenue targets because of supply chain issues. The question is: can you afford not to invest in your supply chain?”
For one of the world’s largest automotive manufacturers, the answer was no. The company partnered with Everstream and set a clear goal: to create a system that identified early risk indicators of supplier distress to save on working capital and avoid production outages.
Everstream used a combination of AI and human analyses to identify more than 1,000 sub-tier suppliers so the company could respond at speed to disruption before it occurred. The move paid off. Soon after, they were alerted to a cyber attack on a supplier and sourced aluminium from the spot market earlier than competitors. The company saved more than €1m (£845,000) by purchasing before the price of aluminium rose.
Gerdeman says an analytical, data-driven approach is giving businesses the ability to be proactive, rather than reactive, and use supply chains to gain a competitive advantage. She says: “Being able to see things well in advance and make decisions doesn’t just help to stop disruption and build resiliency, it also helps to capitalise on opportunities ahead of competitors.”
Everstream provides this visibility, as well as predictive, and prescriptive, analytics by harvesting data from a multitude of proprietary sources. The company uses meteorologists and a 20-year bank of environmental data to predict future weather patterns and climate-related disasters such as hurricanes, wildfires and flooding to warn customers to change course. A proprietary relationship with DHL and its half a million workers around the world provides valuable, real-time logistics data. It also pulls together proprietary and public data from ports to monitor potential shipping days.
But with mountains of data to sift through, selecting the right data is crucial. A truck manufacturer may need better supply-chain visibility and transparency on logistics flows, right down to component level (for example axles and tyres), and a detailed view of high-risk global events (strikes, weather alerts) that could impact their production sites or global supplier base. In contrast, a cotton manufacturer may require historical and predictive temperature data to predict weather patterns that could affect farming or help them to save money on temperature sensitive freight costs to avoid spoilage during transportation.
The Everstream platform is able to make sense of all this data and tell clients clearly what it means for their operations and advise on how best to respond. “It’s about providing insights, not just more data,” says Gerdeman. “There is no shortage of data, but that can create a lot of noise and confusion for businesses. Every business requires different types of data to achieve different goals, so relevance and quality is key.”
These predictive insights are giving businesses the tools to map out supply chains of the future and protect revenue and profits. Water shortages have prompted companies that rely on access to water production to use Everstream’s climate data to consider where best to build manufacturing facilities. They’re also helping to inform sustainability decisions and give companies the visibility to partner with ethical suppliers.
Those businesses that don’t tap into the power of analytics could face a testing future as supply chains come under increasing pressure in the months and years ahead.
For more information please visit everstream.ai
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