What is Intelligent Supply Chain Network Design?

The following is an edited extract from Supply Chain Network Design.

At the end of 2015, many “returns” of large-screen televisions of a large e-commerce site’s customers were marked “D/D” (standing for “defective” and/or “damaged”). A deep dive into consumer sentiment analysis showed that every time a large-screen television set travelled more than 500 miles, the proba­bility of damage increased exponentially. One of the decisions to reduce such long-distance travel was to redesign the network through­out North America. How to do this? Should they build new warehouses and shut down others not within the desired distance? That would have cost them more than the benefit of having happy customers!

This was done intelligently. Large-screen TV inventory was relo­cated to fulfilment centres that covered areas with high demand within 500 miles of at least one fulfilment centre. In this case, the network design team did not have to build a new fulfilment centre but allocate products to the existing ones with additional capabilities of handling heavy and bulky products. A systemic change and several other countermeasures such as “over boxing” a TV set, photos of shipments where the sets were confirmed to be erect, and inbound shipment verification worked together to drastically reduce the defec­tive and damaged sets.

Data-driven assessments, including mining consumer sentiments, tracking evolving demand and supply locations, adding insights from logistics and distribution practices, work together in re-designing an “intelligent” supply chain network. The term “in­telligence” here refers to data-driven actionable insights starting with the customer and working backwards.

Building resilient and agile supply chains with intelligent network designs

In a world characterized by volatility, uncertainty, complexity and ambiguity, supply chain resilience and agility have become paramount for businesses aiming to thrive. Building a resilient and agile supply chain involves robust processes, cutting-edge technology, skilled human capital and condu­cive government policies. Let’s delve into these areas.

Processes

To ensure the smooth functioning of the supply chain, companies need to take several key steps.

• Firstly, they should conduct regular risk assessments to identify any potential vulnerabilities in their sup­ply chains. This involves evaluating supplier dependencies, geo­graphic concentration and transportation bottlenecks.
• Secondly, companies should diversify their supplier base instead of relying on a single supplier or a particular geographic region. By sourcing from multiple suppliers, companies can ensure that a dis­ruption in one area does not jeopardize the entire supply chain.
• Thirdly, adopting a just-in-case inventory strategy instead of just-in-time can help provide a buffer against disruptions. Although this might increase holding costs, the trade-off for resilience can be worth it.
• Fourth, companies should enhance collaboration with suppliers, customers and logistics providers. Sharing data and insights across the supply chain increases visibility and helps quickly detect and re­spond to any disruptions.

Technology

To create strong supply chains, companies need to leverage advanced technologies.

• IoT uses sensors and devices to track products in real time and gather data on factors such as temperature, humidity and the origin of components and raw materials. It is particularly useful for maintaining the quality of environmentally sensitive products, especially in industries like food and pharmaceuticals.
• Blockchain, along with IoT, is a game-changer for supply chain transparency, providing an unassailable record of transactions that prevents fraud and ensures product authenticity.
• The powerful duo of AI and ML can help organizations sift through mountains of data to predict and prevent hiccups.
• Likewise, a tech­nology like Digital Twin lets companies visualize potential pitfalls and strategize accordingly. Plus, it doubles as a testing ground for new products and processes before they hit the real deal.

Human capital

Continuous training is essential in ensuring that employees are well-equipped to handle and respond to disruptions in the supply chain. Encouraging cross-functional teams is another effective way of ad­dressing supply chain challenges. By involving members from differ­ent departments, such as logistics, procurement, sales and finance, companies can benefit from diverse perspectives and a holistic ap­proach to problem-solving.

Moreover, cultivating a leadership culture that values resilience and agility is crucial in ensuring that the importance of a flexible sup­ply chain is understood and prioritized at the highest levels. This helps create an organizational environment that proactively seeks to identify potential supply chain disruptions and is prepared to re­spond to them quickly and effectively.

Government’s role and its trade-related policies

Governments have a crucial role to play in promoting international trade. One way they can do this is by investing in the development of robust transportation and communication infrastructures that ensure the smooth movement of goods. Another important step is to estab­lish transparent and stable trade policies that help businesses plan their supply chains. Sudden tariff changes or trade bans can cause significant disruptions to established chains, which is why predicta­bility is so important.

In addition, governments can act as facilitators, promoting public-private partnerships or collaboration between businesses from differ­ent countries. This can help to foster cross-border cooperation and create new business opportunities. Further, harmonizing regulations across different countries is crucial to making it easier for companies to navigate the complexities of international trade, especially in sec­tors like pharmaceuticals or food. By aligning regulations, businesses can more easily meet standards and comply with regulations, which can lead to more efficient and effective trade relationships.

In conclusion, while no supply chain can be entirely immune to disruptions, a blend of processes, technology, human capital invest­ment and supportive government policies can ensure they are both agile and resilient. By proactively addressing these areas, businesses can weather disruptions and gain a competitive advantage in the marketplace.