The Power of the Network Effect on the Next-Generation Supply Chain

The Blume Global Team | May 28, 2019

By Victoria Brown, Research Manager, Global Supply Chain Execution, IDC

 

It’s getting closer to the holidays and your products have hit all the must-have lists for buyers. Demand immediately spikes, your website crashes, and all your inventory is sold out online. What can you do?

You frantically reach out to your suppliers, but lead times are too long, warehouse capacity is limited, and expedited freight rates are astronomical. Manufacturers simply cannot keep up with the sudden increase in demand, and your company will have no way of getting your products to consumers fast enough for the holiday season. You will have all this demand, but won’t be able to meet it with your lack of sufficient supply—resulting in dissatisfied customers and lower sales.

Sound all too familiar? How will you avoid getting stuck in a similar situation?

Nearly half of supply chain leaders believe that their supply chain runs at an optimized state that could handle such a surge, and yet, less than 20% actually are able to handle it. Under duress, supply chains are surprisingly inflexible and resiliency to unexpected disruptions is often quite poor.

Most supply chains don’t have solely linear relationships. Every supply chain has a multitude of suppliers—who also have suppliers—and customers, across multiple modes. Poor visibility makes it impossible to see problems or opportunities with enough lead time to actually do something about them.

The Value of a Centralized Digital Supply Chain Platform

Investing in a digital platform for your supply chain enables your organization to have a single, centralized instance, with visibility into what’s happening, either at a single node or across the whole ecosystem. The ability to know what’s happening at the precise instant it’s happening is good. However, applying artificial intelligence (AI) and machine learning (ML) to a history of supply chain location data and other external data points enables organizations to predict when problems may arise before they actually do—allowing for stronger input into your planning process or for the ability to re-plan a shipment that’s already in-route.

Predictive visibility enables business agility, reduced inventory carrying costs, decreased labor and freight expenses, and increased customer satisfaction. Essentially, a centralized digital platform allows you to resolve issues and take advantage of opportunities faster than your competitors do.

Organizations are recognizing that managing the complexity of the supply chain ecosystem is the first step in driving change. Supply chains must find ways to manage inherent levels of market complexity with business processes, IT application tools, and product portfolios that consider granular visibility and intelligent logistics execution as first principles. While market complexity is the reality, complication has been the result of business process, IT applications, and inefficient decision-making.

One example of complexity exists in the many intertwined networks across every supply chain. Orchestrating those networks gets complicated quickly and lends itself to mistakes and errors. Yet, when done well, those networks that combine visibility and logistics execution are powerful tools to help manage broader supply chain complexity.

From Enterprise-centric to Network-centric

IDC predicts that by 2020, half of the large manufacturers will have begun shifting its supply chain applications from enterprise-centric to network-centric, driving productivity gains. Manufacturers, wholesalers, and retailers will be looking more closely at its network’s ability to move goods rather than just where its inventory sits within its enterprise. More strategic logistics choices can be made based on a multitude of flow options rather than static positions.

Managing complexity with modern digital tools like multi-enterprise networks and comprehensive visibility are critical components to a best-in-class supply chain. That’s why it’s key to identify and deploy supply chain intelligence tools that allow your organization to be aligned across strategic, tactical, and operational decision-making, improved data management, and enhanced visibility as key enablers. The idea is to have a supply chain that leverages efficiency and scale at the center, but enables diversity and flexibility at the edges. Thus, it manages complexity while reducing complication.

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