I remember the events of March 2021 when the gigantic carrier ‘Ever Given’ was stuck in the Suez canal threatening the global economy by disrupting the supply chain for almost the whole of Europe for a week. The domino effect of the blockage is predicted to last a long time widening the gap between demand and supply in crucial sectors such as the semiconductor industry. Was this a case of poor supply chain management?
Was this disruption preventable? Does technology play a part in supply chain management? Is it possible to avoid such disruptions in future with the help of technology? Should the global supply chain face the brunt of bottlenecks like the one at the Suez canal?
To answer these questions, we should first understand what is supply chain management.
Basics of Supply Chain Management (SCM)
Supply chain management is the handling of the movement of goods and services from the manufacturers to the consumers. The handling starts with the raw materials necessary for manufacturing the goods and ends with placing the finished goods at the hands of the end customer.
SCM consists of five basic components:
Involves planning of all resources needed to fulfil the customer demands for a particular good/service.
Involves identifying the suppliers of raw materials required for the product, ordering the raw materials, transporting them, working out the storage of raw materials, and handling the payment to suppliers.
This is the stage that includes building the product from the raw materials, packing, and shipping them.
Delivery and logistics
Deals with supplying the required number of finished goods to customers, transporting them, and receiving payments for delivered goods.
Consists of taking back defective goods and arranging for replacement or repayment
There can be unexpected disruptions in all the aforementioned phases of SCM. Interleaving technology with the general operations of SCM can help predict and mitigate such disruptions before they occur and cause damages. Let us see how
Role of technology in handling disruptions in SCM
Technology is used in SCM for identifying potential problems in the supply chain, for adjusting the dynamic pricing and for ensuring the availability of the product that is promised to the consumer.
Disruptions in the supply chain are many. There are natural disruptors like floods and storms(like the snowstorms in Texas in 2021), accidents like fire incidents that could burn down the entire inventory and machinery used for manufacturing (like the fire in Renesas plant, Japan in 2021), security attacks, tax dynamics, and pandemics like COVID19.
The role of engineers is to find solutions to problems using technology. Indeed, there are ways to prevent and mitigate these disruptions. Some solutions are listed below
A digital twin of the physical supply chain model will help in studying the effect of problems on supply chains. Disruptions can be artificially introduced in the digital model to study the cause-effect relationship. Knowing the behaviour in the presence of disruption will enable the planning committee to be better equipped to face it. In best-case scenarios, the losses can be minimized when the extent of damage is known in advance
Keeping a tab on inventory in real-time gives a clear picture of the current state of affairs at the supply chain. Disruptions in transit of products like vehicle strike, road closures etc can be identified almost immediately and addressed at the earliest
AI and ML for prediction
The supply chain operates to supply for demands. Using AI and ML on past data, future demands can be predicted, thus triggering a stock up in inventory for quicker delivery of goods in case a higher demand is expected. In case the AI predicts a reduced demand, wastage of perishable inventory can be prevented by not stocking excess products.
Blockchain finds application in SCM for tracing the origin of each raw material. Blockchain being secure, creates a transactional record at every phase. Any problem arising at any point in the supply chain can be traced back to its origins thus preventing a similar problem from occurring again
Other applications of technology in Supply chain Management
Analytics helps to optimise the supply chain. AI-based analytics tools can crunch a large amount of data and provide accurate business forecasts. Planning can also be more accurate with AI-based analytics.
Inventory management ensures the presence of the right products in the right place at the right time. Effective inventory management tools will reduce shipment times, minimize oversells and stockouts. Accounting also becomes quicker with these tools
To answer the questions we started with, could disruptions like that of shipments being blocked at the Suez canal be prevented by technology? Possibly not, at present. But other disruptions like overselling of stocks can certainly be prevented. However, such problems can be foreseen with technology. Organizations then have some time to think about possible solutions to foreseen problems. Therefore, it doesn’t come as a surprise when the disruptions do happen and the organization is not left fumbling for solutions. Here are some SCM tools that organizations can explore for their processes.
Thus, it is safe to say that technology makes the supply chain agile and better equipped to handle disruptions. It also optimizes the usage of resources thereby minimizing loss due to wastage.