February 25, 2022
When will the supply chains get better? According to a survey from The Wall Street Journal, about 45% of economists believe that it will take until the second half of 2022. As I researched supply chain data, we seem to be at about the same level of supply chain efficiency as last year, in 2021, which is not good.
Although the supply chain disruptions have been caused by several issues, including the pandemic, labor shortages in trucking and other industries, and availability of raw materials, the little-known secret is that supply chain and logistics systems have just not been up to the task of dealing with these anomalies.
Most will say that little or nothing can be done. But we’re finding that’s not always true.
Although there are specific things that you really have no control over as a business (labor shortages, global pandemics, and availability of raw materials and parts), you need to make stuff that people want to buy. I’m seeing a few companies that have leveraged cloud computing as a critical weapon against many of these issues.
This is really about information and intelligence more than changing external issues that you can’t control. If you investigate the organizations that could still deliver on time in 2021 and now, they all have the same set of concepts that they employ, such as the ability to work around problems using highly intelligent automation. They are leveraging not just simple data, but true intelligence that might not figure out ways around all supply chain issues but can remove many of the obstacles we deal with today in making and shipping products.
For example, in many instances, some parts are not available to complete the manufacturing of a product. But there is enough historical data, to be mined in real time, to determine where the part can be had by other suppliers and the likelihood of availability and on-time delivery.
Some companies stockpile some parts ahead of anticipated shortages determined by AI systems before other business see them, or they can even automate reengineering aspects of the finished product so different parts can be substituted without creating a quality issue. In some cases, these systems end up sourcing better parts that might cost a little more (say 10 cents) but end up making millions of dollars in products available for purchase, rather than waiting in a warehouse for some minor part to show up. You’ve heard the phrase, “A dime is holding up a dollar.”
What’s interesting about this process is that it does not entail executives in the C-suites pulling all-nighters to come up with these innovative solutions. It’s 100% automated using huge amounts of data and machine learning and embedding these things directly within business processes so the fix happens seconds after the supply chain problem is found.
These aspects of intelligent supply chain automation are not new. For years, there has been some deep thinking in terms of how to automate supply chains more effectively. Those of you who specialize in supply chains understand this far too well.
How many companies are willing to invest in the innovation—and even the risk—of leveraging these new systems? Most are not, and they are seeing the downsides from the markets tossing them curveballs that they try to deal with using traditional approaches. We’re seeing companies that have been in 10th place in a specific market move to second or third place by differentiating themselves with these intelligent cloud-based systems.
Best I can tell, less than 5% of the companies that depend on supply chains for their revenue have taken steps to put these systems in place. In many instances, the systems must be customized for a specific company, and that means even more cost and risk.
The rise of industry clouds may change some of this. Indeed, it won’t take long for the public cloud providers to adopt and provide these types of services. Those who wish to gain this advantage will just use the services from the public cloud providers and not have to build their own.
What’s most interesting, the cost of the technology is never a real deterrent. All the advanced systems that you need for this to work, including storage that holds petabytes of data, analytics, AI, and the ability to embed all of it into existing or new supply chain systems are a rounding error for most companies in terms of operational expense.
So, the next time you deal with a company that is indeed able to deliver as promised no matter what the market condition are, see if they are leveraging cloud computing as a core innovative platform to set them apart when the markets become difficult. Who do you want to do business with?
May 06, 2022
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