Supply chain resilience in the era of the permacrisis
Supply chains have largely recovered from the shock of the Covid-19 pandemic, but events such as conflict in Ukraine, relations with China and EU-UK trading relationship uncertainties affect efficiency. This permacrisis environment means supply chain management must change, facilitated by technological investment.
No Weak Links: Building Supply Chain Resilience, a report by Make UK in partnership with Infor, found that 93% of manufacturers agree that supply chains will remain under pressure in 2023 and 2024.
Andrew Kinder, senior vice-president of industry strategy at Infor, believes that it is “better to prioritise resilience over efficiency”. Traditional principles of leanness and just-in-time inventory management need to be reconsidered, with resilience defined as “the capacity to respond to change”.
Balancing resilience and efficiency with supply chain visibility
Investing in inventory and capacity is a buffer against uncertainty, but this becomes expensive, so building resilience is important. Kinder cites supply chain visibility as the “number one foundation” for building supply chain resilience, followed by intelligence, automation, and a digitally connected ecosystem. The Make UK report found that only 1.5% of UK manufacturers reported no supply chain challenges in the past 12 months.
“There’s no cure for volatility – it’s here to stay – but we can detect it or anticipate it faster than ever before. But to do that businesses need supply chain visibility,” Kinder says.
However, he says that “visibility is still somewhat limited in UK manufacturing”, with the majority still operating on a traditional ‘one-up-one-down’ basis, where operators can only identify from whom they have been supplied with an item and to whom their products have been supplied. This limited view only covers part of the supply chain, which is generally more complex. Investing in technology to improve visibility means businesses can better identify or anticipate problems, evaluate and recommend alternatives, and automate responses.
Digital solutions to aid human intervention
Kinder cites AI and machine learning as two key supply chain technologies: “The role of AI and machine learning is to bring that wider perspective of intelligence across all data. Once they have that information, they can automate decisions, or a business can decide whether the technology automates or just recommends.”
Kinder describes this as the “pivotal stage” for operators, with different levels of human intervention favoured across companies. Supply chain visibility technology helps decision-makers monitor supply chains, determine solutions and mitigate against disruption, with Kinder adding that solutions should enable instant communication up and down the supply chain, preferably in multiple tiers, to ensure rapid responses.
While the Make UK report found that 60% of large companies and 43% of SMEs have diversified their supply chain, there is still a low take-up of supply chain monitoring solutions. Just 15% of SMEs have explored this, while almost 40% have taken no steps at all.
One company that is ahead of the curve is Kuehne+Nagel, which has used cloud-based visibility technology for its global logistics services since 2013. With supply chains that cross borders, Kuehne+Nagel digitally monitors, measures and reviews domestic and international shipping modes, as well as inbound and outbound flows.
The positive business outcomes from supply chain transparency at Kuehne+Nagel include increased new customer wins by more than 50%, a threefold increase in transaction volumes, better managed lead times and improved product velocity.
Data is another area that can benefit business, but only if it is used well.
“Data has been described as the ‘new oil’ but, like oil, it is only any good if it is refined,” says Kinder. “Data needs to be as complete as possible, so if you think about supply chain decisions in the systems of your business, customers, suppliers, transport providers and finance institutions, that’s the data you want to make holistic decisions.”
Kinder says businesses need to analyse data so they are not “looking at noise, but at meaningful data that will guide decisions. AI and machine learning can separate the meaningful data and the correlations from the noise.”
Making the business case for technology investment
Barriers to investing in AI and machine learning include incomplete data and a lack of skills or confidence with the technology, even if relevant data is available.
For supply chain managers making a business case for investment, Kinder suggests that showing use cases can reassure decision-makers about the value of the technology, demonstrate that it is not daunting to operate and overcome scepticism, particularly about sharing information externally.
“Businesses need data from outside their enterprise – that means somebody has to be prepared to give it up and you have to be prepared to do the same thing for the good of the supply chain,” Kinder explains. He says businesses do not need to share intellectual property or commercially sensitive information to effectively use data.
“There is still some nervousness about data-sharing and a little bit of scepticism about AI and machine learning, yet most of us use this technology every day, such as recommendations from Amazon and Netflix,” Kinder continues.
He encourages supply chain managers to focus on KPIs when presenting a business case, such as quote times and turnaround times on deliveries: “We look at examples from existing data to see how improvements can be made that would positively impact KPIs and the resilience of the supply chain – it’s a business case, not an emotional case.
“It’s about technology choices versus more capital investment, or versus hiring more people, or holding higher amounts of inventory, so a business case for investing in AI and machine learning technology is absolutely required.”
In addition, government can encourage investment in technology to help the UK become more competitive globally and boost resilience, according to Kinder: “We recommend investment breaks for advanced supply chain technologies – for UK manufacturers there is a productivity gap, so we’re running slightly behind our nearest competitors.”
Resilience as a long-term investment
When companies can spot the shortfalls that prevent optimum resilience, the business case for technological investment becomes clearer. However, the Make UK report found that, as 2022 drew to a close, the share of companies planning intermediate investment in supply chain resilience fell from 11% to 2%, while the share of those planning advanced level investment dropped from 11% to 4%.
Kinder says that a resilience checklist helps businesses examine how well supply chains can cope with disruption. The checklist should cover evaluating alternatives to regular suppliers, if intelligence evaluates and models different scenarios, and whether there is a process workflow or system of intelligent alerts to detect changes.
Key checklist questions include: Do you know your intelligence and automation rating? How many of your suppliers use automation? Do you have a digital connection with your supply base that goes directly into your ERP system? Do you have a truly collaborative environment where you can see supplies in real time?
When shortfalls are spotted, Kinder says this helps create a solid business case for technology that will build resilient supply chains and help UK companies become more competitive on the global stage.
For more information visit infor.com