If Covid-19 has proven one thing for businesses and the supply chain, it is that we live in a world of the never-normal. What this means is that, while Covid has been and remains the greatest disruptor within the supply chain, it will one day be replaced by another disruptor, such as Brexit or climate change.
A lack of flexibility and resilience within the supply chain meant that businesses were unable to react in the immediate aftermath of Covid-19 and its various lockdown protocols. This led to shortages in essential products such as food, PPE and utilities, which only heightened the strain on both people and businesses.
This has forced many businesses to reassess their priorities within the supply chain. Where efficiency and cost reduction were once king, a supply chain with greater resilience and agility is being seen as a better alternative. This is the future of supply chain. The only question for businesses is how best to achieve this.
For businesses looking to achieve greatness in their supply chain, how they use algorithms and AI will be critical. Currently, businesses commonly use algorithms in areas such as network design, inventory optimisation, demand forecasting, pricing, capacity planning and sourcing.
However, they are typically in one narrow area of the supply chain and do not take into account the end-to-end nature of the supply chain, which consists of connected processes.
While using algorithms in this way can provide companies with good results within their supply chain, its narrowness blocks them from achieving great results, which can prevent businesses from expanding on their capabilities.
To improve this, companies need to change how they implement their algorithms across the supply chain. The techniques that they use must be holistic and available to all supply chain practitioners in the organisation, regardless of their skill level or the scope of their job function.
This, of course, is easier said than done but there are some principles that companies can adopt if they want to transition their supply chain from one which is simply good to one that is great. These principles include modelling the entire end-to-end supply chain (with the digital twin), transitioning to prescriptive recommendations, augmenting the knowledge worker, scenario planning and leveraging external data to drive outside-in thinking.
A test run for the future
Companies that want a holistic view of their supply chain should look no further than digital twin technology. Powered by analytics, this technology allows companies to plan end-to-end supply chain strategies in a virtual format, before putting it into practice in the real world.
This enables them to do two things. Firstly, it allows them to uncover certain pain points in the supply chain and resolve these before they become both real and costly disruptions. Secondly, they can prepare multiple contingency plans in case of unexpected disruptions, such as Covid-19, creating a supply chain with greater flexibility and resiliency.
While good algorithms look at a specific portion of the supply chain (such as the factory only, or the warehouse and its connections), great algorithms work off the digital twin and see the interconnected nature of supply chain decision making.
Using the digital twin, companies are provided with recommendations and solutions to their supply chain strategy, informed by data. However, more than this, they are provided with the underlying rationale behind why one alternative is better than another, and clear trade-offs to make a business justification for a specific course of action.
However, despite the capabilities of the technology, companies must be wary of using it to replace human decision makers entirely. Its power lies in the technology’s ability to augment human decision-making, by giving them options and trade-offs.
As a result, there is an increasing demand for the multidisciplinary employee, who has an engineering or mathematical background but also has a deep understanding of the business, is creative and possesses great communication skills. Great algorithms support this symbiotic relationship between man and machine, which will be a defining one for businesses looking to succeed in the never-normal world we live in.
Recipe for success
For this technology to work as effectively as possible, businesses need access to reliable data both internal and external. This data can then be used to feed the algorithms that power the digital twin, ensuring that the insights being generated are as accurate and efficient as possible. When it comes to training algorithms, the more cleansed and harmonised data the system has to learn from, the better.
As a result, it is important that businesses ask questions such as:
- How do we get both internal and external data cleansed, harmonised and in a form where we can make holistic decisions?
- How do we then leverage internal and external data to get greater value from our current assets and improve our products to grow market share profitably?
- How can data drive more insightful decision making about future options and scenarios?
With these capabilities, businesses can create a supply chain which is not just tailored towards efficiency and cost reduction, but one which is cross-functional. This will enable businesses to achieve their objectives and goals, satisfy their customers and create a cleaner, greener supply chain. With legislation such as fines for UK businesses guilty of deforestation in their supply chain, the latter will be a vital component in the future of supply chain.
We all knew that technology would play a key role in the future of the supply chain – that is something of a given in today’s world. However, Covid-19 has truly demonstrated to businesses how this technology needs to be used and for what purpose.
The ongoing disruptions caused by the pandemic, the impending turmoil of Brexit and who knows what else lurking around the corner, mean that businesses must be prepared for anything at any given moment. Technology such as AI and machine learning, applied to solutions such as the digital twin, will enable this flexibility and allow businesses to strive in this world of the never-normal.
by Vikram Murthi, Vice President, Industry Strategy, LLamasoft