An Approach To Making Supply Chain More Resilient And Agile
Supply chain has been playing an important role in business. Recently, due to the various disruptions and uncertainty in the market, companies are paying more attention to the design of their supply chain and its performance. Managers are trying to get ready for the next disruptions and turbulences by answering these questions; how supply chain strategy should be redefined to respond faster to the next disruption? How could companies create more values across their supply chain? What makes their supply chain process more competitive compared with their rivals? In fact, for the past few decades, the main role of the supply chain has been to assure that demand is fulfilled with the supply of product or services. However, the leading companies are looking at their supply chain as the main source of competitive advantages in the new business environment. It means that supply chain process does not only enable us to fulfill demand of customers, but each supply chain component could create added value which has impact on market share, financial stability of company, customer satisfaction and position of the company in respective industry.
Assume that there are two companies that are competing closely to get more market share. They might add new features to their products, launch a new product, creating new marketing campaign or they might come up with a low-cost strategy to get more market share. In many cases, the managers do not get considerable results due to the intense competition in the market. So, what could be the solution? In nutshell, the solution could be to review and redefine the supply chain process to create more added value such as managing inventory more efficiently, react faster to changing business needs, managing transportation cost, and getting the product shelf ready. But the challenge is how to achieve it?
We have entered the endemic phase of the Covid-19 crisis and companies including SME and large-scale companies should have learnt how to respond to the next disruption quickly and more effectively. Factors such as geopolitical changes, climate changes, market conditions and changes in customer needs are the main sources of disruptions and uncertainty in the future. Although the current supply chain practices have been around for the past few decades, it is time to re-evaluate and redefine the supply chain process to make it more resilient and efficient. Studies shows that 93% of senior supply chain executives and managers are planning significant changes to their supply chain configurations to make it more flexible and resilient. US’s administration also announced a bill to establish a new directorate for technology and innovation in the national science foundation. This bill has defined the supply chain resiliency and key technology in this area which indicates the importance of resilient supply chain in the future of business.
One of the key factors to have more resilient and efficient supply chain is optimization. Supply chain optimization has been receiving increasing attention by leading companies as it can unfold new business opportunities and create new competitive advantages. From inventory management to last mile delivery, you can identify the hidden costs, increase productivity and efficiency, reduce working capital, and enhance the resilience in supply chain. Supply chain optimization enables managers to make the best use of technologies to improve efficiency and increase coordination across supply chain. A study conducted by McKinsey indicates that despite the popularity of antiquated supply chain planning and optimization applications, 90% of the executives plan to implement a new solution in the five years.
Despite the popularity of antiquated supply chain planning and optimization applications, companies are still dealing with shortage and surplus issues that impose unnecessary costs to the companies which impact their cash flow and customer satisfaction. Inventory management and replenishment scheduling are the two factors to minimizing the risk of shortage and surplus. Inventory management is essential to the supply chain process. Its status and visibility can be a make-or-break moment for any warehouse. That’s why accurate inventory is very important.
In a competitive market where demand has fluctuation the multi-echelon approach is the best solution for maintaining cost-effective inventory management across multi-level supply chains. This method needs a helicopter view of the entire network, optimizes the inventories across the multistage supply chain and enhance the coordination among inventories. By doing so, stocks will be shifted to the optimal locations and that reduces uncertainty, safety stock, lost sales, backlog order and increase customer satisfaction.
The latest attempt to benchmark our method to optimize inventory management indicates that quantum computing could find the optimum solution or near-optimum solution in considerably shorter time compared with classical methods. That has positive financial impacts on company’s cash flow and ROI and it leads to more resilient supply chain with minimized risk.
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