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The Future of Supply Planning is Here

The future of supply planning is being revolutionized by emerging technologies that can enhance supply chain operations' efficiency, agility and resiliency. With the increasing frequency of supply chain disruptions caused by several factors, such as natural disasters, political instability and global trade regulations, it’s more important than ever for businesses to have a robust supply planning system in place.

Today, businesses are looking for ways to respond quickly to current and potential future disruptions. The use of real-time data and advanced analytics to identify potential disruptions and understand their impact on the end-to-end supply chain is essential to being able to make informed decisions and respond quickly to mitigate risk.

“Disruptions cost global organizations an average of $182 million, a troubling sign as we are on the brink of a potential recession. What’s more, as 2023 continues to roll forward, supply chain experts are warning of factors that will continue to cause headaches for businesses.”

Ryan Mallory “Council Post: Will Your Company Be a Casualty to Supply Chain Disruptions? Here’s What You Should Know.” Forbes, 12 Apr. 2023

We will discuss key insights into today’s supply chain challenges and how to address them with a high degree of flexibility, allowing an organization to respond quickly to changing internal and external demands.

What are today’s current supply chain challenges?

The global supply chain landscape is constantly evolving. Businesses today face a range of challenges that can impact their ability to operate efficiently and effectively. Here are some of the biggest supply chain challenges today:

  • Business disruptions and market volatility: An overwhelming occurrence of unplanned events and the ability to respond to them in parallel or quick succession have been the experience of most supply chains across industries for the past five years. This includes but is not limited to, internal and external factors such as natural disasters, fluctuating scarcity of key supply chain resources (raw materials, capacity and transportation), increasing regulatory compliance, a shortage and skills gap in talent, and demand for sustainable products and business processes. These factors have and will continue to impact and drive volatility in cost and lead times for goods and materials and the overall flow of finished goods to the marketplace. As a result, organizations feel top and bottom-line impacts as the inability to serve demand results in lost revenue and/or an overall increase in cost to produce and serve, resulting in overall margin erosion.
  • Demand predictability - The ability for most organizations, but particularly those operating a Business to Consumer (B2C) model, has become increasingly challenging. The rise of social media over the past decade, the acceleration of direct-to-consumer models during COVID, general market volatility, and now inflation has made traditional demand forecasting based on lagging signals such as historical point of sale grossly insufficient. Hence, supply plans and supply chain execution that are driven by historical forecast approaches will also lag and create an inability to respond to the current and continued market dynamics sufficiently.
  • Holistic inventory visibility and optimization: Lastly, the complexity and dynamic nature of business rules for allocation, deployment and overall management of inventory scales beyond human capabilities. It is a complex equation to balance the production and stocking inventory to meet service levels and customer expectations against the carrying costs, capacity, and overall efficiencies within the supply chain. This was epitomized as the end of 2022 and 2023 were marked by excess inventory across many organizations as the pull forward of production and staging of inventory in the marketplace was the reaction to the extended lead times, capacity shortages, and demand that peaked earlier during COVID. The impact many organizations felt was higher costs, lower margins and waste as storing additional inventory, liquidation or salvage became key tactics. However, the opposite effect can also be detrimental as not being able to meet demand at the right place and right time can lead to stockouts, lost sales, and longer-term loss of differentiation, loyalty, and market positioning. Understocking can lead to stockouts and lost sales.

These challenges have increased the complexity of planning beyond the traditional approaches that most companies are designed to operate. By adopting an integrated approach and leveraging advanced technology and best practices, businesses can overcome these challenges and improve their supply chain operations' overall efficiency and resilience.

According to Gartner, leaders say designing, planning and leveraging technology are essential activities for managing supply chain planning and building a world-class organization.

Gartner "26 Key Supply Chain Planning Activities Map" Gartner for Supply Chain

What is lacking in today’s supply chain strategies?

Today, supply planning typically involves a combination of technology, data analysis and collaboration among various stakeholders in the supply chain.

While supply planning has come a long way with advancements in technology and data analytics, there are still several areas that are continuing to mature across the industry:

  • Accurate, timely visibility of internal and external information
  • Dynamic supply planning and execution based on integrated intelligence and automated decision making
  • Convergence of network modeling, scenario planning and traditional planning

With the right tools and strategies, businesses are looking for ways to improve visibility across the supply chain, identify potential risks and disruptions before they occur, and develop proactive solutions to mitigate these risks.

Organizations that plan for, embrace and incorporate advanced supply chain concepts into their operations can improve their agility and resilience, optimize their supply chain performance and better meet the evolving needs of their customers in an increasingly complex and dynamic global market.

Below are a few advanced technologies and characteristics of the future supply network that play a critical role in supply chain performance. While some organizations may view these areas as merely opportunistic, they are more robust and beneficial solutions that need to be a part of an organization’s growth plans.

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  • Artificial intelligence and machine learning: Artificial Intelligence (AI) and Machine Learning (ML) can help businesses analyze substantial amounts of data in real time, find patterns and trends, and make proactive decisions to mitigate risk. While many commercial planning solutions have already incorporated these technologies to some degree into their core planning engines the further use and integration of this intelligence should be explored to further augment and inform core planning algorithms. This could include detecting key shifts and anomalies that may impact current plans and assumptions, optimizing execution and operational plans, automating key planning processes and real-time decisions, and more.
  • Smart contracts & blockchain: Smart contracts and blockchain technology can help provide a level of digital visibility, security, accuracy and automation that will be critical to enabling a more dynamic and on demand approach to executing supply plans and allocation in the future. Furthermore, it could serve as a key technology to bridge the gap and provide more robust, integrated traceability to the full supply chain as the single, immutable source of truth.
  • Digital twins & advanced simulation: Digital twins and advanced simulation provide the ability to virtualize physical assets, processes, and systems. The ability to simulate or provide a digital twin of the supply chain or critical pieces of the supply network unlocks the ability to evaluate scenarios and risk, identify key constraints, optimize and evaluate various capabilities and parameters, etc. Combined with the increased availability of data and the application of AI/ML digital twins have the potential to provide a robust approach to continuously evaluate supply chains and networks along different horizons to ultimately inform and enable businesses in an unprecedented way.

The future of supply chain planning will include increased digitization, automation, connectivity and data-driven decision-making. Organizations that embrace and leverage these advanced technologies will gain a competitive advantage by creating agile, transparent and efficient supply chains that are resilient to disruptions and adaptable to the ever-changing market conditions.

To stay ahead, organizations need to create solutions and new processes that identify trends and patterns in the supply chain network that can be optimized to improve overall efficiencies and better meet their customers' needs.

You can read more in our recent whitepaper, Synchronizing Supply & Demand in 2023 and Beyond.

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