Supply chain networks: increasing resilience and agility
Many supply chains in logistics are organised around lowering costs. During times when demand and supply are predictable, they work as planned. However, experience from the recent past shows that if demand fluctuates sharply or supply is restricted, even previously robust supply chains can fail, posing a risk to the company. Additionally, prior to the current crises, some executives displayed a “this won’t happen to us” attitude, instead of building contingency plans into the structure of their supply chain planning. Looking ahead to 2024 and beyond, we need a new approach. Supply chains are undergoing significant change, which means that new relationships need to be built, and precautionary measures carefully considered before they are implemented.
As part of this process, the flexibility and resilience of the existing supply chain management needs to be reviewed. Many logistics companies now need a more branched, yet simultaneously more reliable and more controllable network: a supply chain network. This type of business or utility network is characterised by how it connects and controls all operations, management systems, governance structures and decision support capabilities. This requires greater strategic and operational resilience than before, since it’s the only way to maintain an overview of the situation, and to act effectively in the event of a crisis or other disruption.
The difficulty, however, is that logistics itself is part of a supply chain, which means that it must be able to organise and act in several directions. There are numerous stakeholders involved, including suppliers, their clients, carriers, wholesalers and retailers, not forgetting those who provide temporary cover in certain circumstances. In an effective logistics supply chain network, reserve staff must always be taken into account, too.
What does a new supply chain strategy need?
These requirements can only be met by digital structures, supported by artificial intelligence (AI). In an ideal situation, these use algorithms such as predictive analytics and combine them with AI-generated solutions (prescriptive analytics). But these and similar technologies only form the basis for a supply chain network. The following functions and solutions can be built on top of this.
Online visibility has become an essential element for the creation of business networks in the digital era, and their importance will only continue to grow. That's why it's important to initiate, establish and strengthen contacts across as many channels as possible. But this has to be based on a sophisticated omnichannel strategy that takes into account areas such as e-commerce, direct-to-consumer, retail, distribution and B2B platforms.
The direct line: direct-to-consumer (D2C)
Among the examples just mentioned, the direct-to-consumer aspect plays a central role. D2C refers to direct, close contact with individual stakeholders – without intermediaries. This makes it easier to reach agreements and put them into practice, right up to the last mile. Despite tech support, this approach requires considerable commitment from logistics professionals, so it may be advisable to fall back on intermediary agents, such as B2B platforms. Good providers will establish contacts reliably and quickly.
Better real-time systems and processes
In the face of extremely volatile market conditions, a high level of responsiveness is key. That's why the use of real-time systems and processes is becoming increasingly important: it means you can prevent time lags and delays in information delivery which are triggered by unexpected events.
Optimal matching of supply and demand
Closely linked to real-time tools is global demand supply matching. This approach leverages technologies such as cloud-based networks for on-demand supply chains. Instantaneous matching of supply and demand minimises inventory, shortens lead times and maximises sales.
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More collaborative workflows
Logistics professionals need to display greater openness: they must coordinate and share more information with other stakeholders, including plans, forecasts, orders, deliveries, estimated times of arrival and available stock. A supply chain network based on these principles leads to fewer enquiries, sources of error and misunderstandings. This improves delivery speed, transport processing and costs.
Reduction in separate ERP instances
Enterprise Resource Planning (ERP) is an important part of modern business and is well established in many companies. However, individual departments often carry out demand planning independently, without company-wide agreement or synchronisation. This results in ERP silos, which cause information delays, impact service levels and incur considerable IT costs for interfaces, maintenance and upgrades. It is more effective to rely on a collaborative enterprise network platform for individual supply chain workflows.
In conclusion: why supply chain networks are important in logistics
Internal supply management is good - but a more expansive, strategic supply chain network is better. It gives logistics much-needed agility in times of highly volatile, and sometimes chaotic, markets. Digitalisation and AI provide the appropriate technology. However, many logistics professionals will rely on these tools, which will result in strong competition in 2024.
This makes it all the more important to take individual precautions at an early stage for the realignment of your own supply chain organisation. Only with a focus on greater workflow automation and new capabilities around generative AI, prescriptive analytics and autonomous agents will companies improve efficiency and adopt new supply chain software technologies to increase resilience and competitiveness.