Speaking at the June SEUS-CP conference in Savannah, Xtivity’s Managing Director, Andrew Jordan, presented on Mitigating Supply Chain Risk with Inventory Optimization. His talk was part of a roundtable leadership discussion exploring innovative and vital ways to strengthen the North American supply chain to remain competitive in the post-COVID economy.
Jordan’s contribution highlighted the need to return to the fundamentals of balancing
supply chain risk and cost, and the opportunity to increase resilience with intelligence
technologies that can help us monitor, predict, and get in front of change in both supply and
“With the availability of more comprehensive and real-time data, supply chain intelligence software becomes more valuable, providing alerts on process or cycle time deviations that enable proactive action,” said Jordan.
Key points from his talk are summarized below:
- For the past 20 years, unprecedented global cooperation and coordination have allowed us to depend on a supply chain model grounded in offshore manufacturing and multi-mode international transportation.
- With more than 40% of global demand for consumer goods being fulfilled by China and 74% of shipments using 4 to 5 different modes of transportation between manufacturer and end consumer, we focused on driving down cost while increasingly accepting higher risk of service failure. For years we simply assumed this extended supply chain would keep working. Trade wars, paired with capacity and labour constraints, made this assumption increasingly tenuous. COVID-19 brought it to a head.
- The global pandemic accelerated the deterioration of an already vulnerable North American supply chain. Yet it also created an unprecedented window for change and opportunity, where the probability of getting funding for projects targeted at increased supply visibility, redundancy, and surety has never been more likely.
- Going forward, 93% of senior executives say they intend to take the necessary steps to make their supply chains more resilient.
- As data sources become more comprehensive and real time, supply chain event management software solutions have become more valuable, providing alerts on process or cycle time deviations that enable proactive action.
- To mitigate future supply chain disruptions, we need to both employ the right technology and get back to the basics, including:
- Returning to sourcing fundamentals – diversifying sourcing and establishing more regional/national suppliers to balance the risk presented by extended supply chains.
- Leveraging predictive analytics – using ML/AI models to predict change and identify correlations and patterns that may not be intuitive.
- Approaching inventory management strategically – relying less on JIT, taking a strategic approach to stock holdings, and understanding where and why stock is required.
- Digitizing the supply chain – improving transparency, workflow, and administrative efficiency with a digitized supply chain from origin to final destination.
- We need to return to the fundamentals of balancing risk and cost. Risk that must be taken should be carefully monitored and predicted to provide maximum time to respond.
- Local sourcing should not be overlooked. When we consider total landed cost, reliability, and flexibility, sourcing locally can become much more attractive. “For fabricators of service parts and specialty MRO,” noted Jordan, “I believe there is a great opportunity to reinvent the game with a focus on cost and service advantages, given proximity to market and available technology such as 3D printing.”
- Overall, improving the supply chain will require creativity, collaboration, and technology advancements, such as using AI and ML models to perform predictive analytics to identify correlations and patterns that may not be intuitive, and help us get in front of change in both supply and demand conditions.
“Now it’s easier than ever to ask and answer, ‘What If?’” said Jordan. “It’s a line of questioning we need to ask more frequently if we are to avoid supply chain disruptions in the future.”