Retail supply chain disruption is a huge issue. We all realized this during the COVID-19 pandemic, and the war in Ukraine has created further problems. Perhaps the most significant issues are logistical disruptions, production delays, inflation, and labor shortages.
However, there have also been shifts in demand—both short-term and more permanent—that have created market volatility, leading to challenges in reducing waste. Retailers are in an unenviable position to make the best use of resources to control costs, maximize profits, and minimize environmental impact while providing a good customer experience.
There will inevitably be trade-offs, but where? More importantly, how can retailers start to navigate some of these risks and mitigate supply chain disruption? We hosted a #SASchat on Twitter about this issue and here are some highlights from the discussion.
The principles behind supply chain risk mitigation
Supply chain risk management requires the right skills among workers. Skills in data and analytics are needed from end-to-end, which may require up-skilling and reskilling workers. It is, of course, also crucial to have the correct data. Companies need to consider their data sources and whether the data is up to date. They also need to provide access to it so that workers can gain insights from the information available.
It may be helpful to consider building out the supply chain ecosystem. Interestingly, some supply chains are successful, but others are not. The failure seems unlikely to be about one single link. Instead, it is far more likely that supply chain success rests on the whole ecosystem being robust and resilient—and on communication across the entire chain. It is undoubtedly true that, as Andrew Fowkes, Head of Retail Centre of Excellence, SAS UK & Ireland, noted, demand-side flux does not necessarily provide feedback to the supply chain in a timely way. Kevin Kalish, Head of IoT Analytics, EMEA, also highlighted the importance of end-to-end visibility of the supply chain.
Kalish also noted the need for scenario planning and sensitivity analysis to improve resilience. This allows a better understanding of what might affect the supply chain and faster responses to potential disruptors.
There are many ways in which retailers can start to act on these principles. One way is working with customers to mitigate supply chain risk with more accurate demand forecasts through demand sensing and shaping. Companies can also use multi-echelon inventory optimization, with predictive modelling and what-if analysis, to determine how different variables will affect the supply/demand balance.
Andrew Fowkes noted that supply chain digitization could reduce some risks by removing human error and delays in decision-making. This is especially true in siloed systems. However, he commented that digitizing only some parts of the process is impossible, as this will move bottlenecks around the supply chain.
We are seeing exponential growth in technology to support supply chain risk management in retail. What was impossible yesterday is suddenly possible today.
One way to improve sensitivity analysis and scenario planning is the use of ‘digital twins’ or digital replicas of the supply chain. These can then be manipulated to show the effect of different scenarios and problems, improving contingency planning. Experience suggests that it is crucial to mirror this process's assets, transactions, suppliers and logistics. Companies can then create scenarios showing how shifts in supply affect costs and customer satisfaction and the effects of changes in inventory on profitability. The technology is rapidly becoming available to do this on a large scale, with companies such as Michelin reported to be interested. Nexans is also using digital twin technology to drive change.
The use of digital twin technology requires some changes in approach. As Kalish pointed out, for the Internet of Things (IoT) and digital twins to be an effective tool, a system of AutoML at scale has to be applied to the supply chain and production operations’ digital twin. He added that this approach enabled Georgia Pacific to deploy 15,000 predictive models across its operations. The system can help teams understand the potential impact of their decisions—and therefore improve decision-making. Simulations can also highlight existing bottlenecks, improving real-time decision-making too.
Reskilling and growing
We are seeing exponential growth in technology to support supply chain risk management in retail. What was impossible yesterday is suddenly possible today. However, there are still enormous challenges, especially finding people with the right skills. Technology has moved far beyond the skills available in most companies, meaning that upskilling and reskilling have now become both essential and vital issues to resolve at speed.
Interested in learning 4 strategies to improve efficiencies, predictability and the customer experience? Download a free eBook by SAS and Intel: Build Supply Chain Agility Through Digitization