For supply chain professionals, the only certainty is uncertainty.
No one can predict the future — we saw that with the COVID-19 pandemic, the Suez Canal blockage and even KFC running out of chicken back in 2018. You could argue that uncertainty is increasing all the time. Brexit continues to distort the market; global economic challenges are varied, and widespread and global conflicts are pushing us into an era many people haven’t experienced in their lifetimes. But it’s also true that uncertainty has always been present in some form.
Dealing with uncertainty is a huge challenge, and one we all have to manage in our daily lives. But for supply chain leaders, uncertainty is compounded by complex global networks, material procurement challenges and other factors that most people never have to consider in their own roles. With each of these added extras, what can leaders do to navigate the unexpected.
Luckily, there are two fundamental concepts that make this a lot easier for supply chain leaders.
The first is preparation. For supply chain teams, this comes from an accurate demand forecast — a crucial tool for any supply chain manager. While you will always face uncertainty, it should come as no surprise that the clearer your forecast, the better position you’ll be in to make informed decisions. And even when issues do arise, it’ll be easier to manage. Being able to precisely forecast demand for a future product or service is integral to business output — and one where artificial intelligence (AI) is really starting to help.
The second is arguably even more important than preparation. Whilst preparation is crucial, it often matters more how you respond when faced with the unexpected. This is what separates the leaders from the rest. In the example above, even the most accurate forecasts in the world couldn’t predict some of the issues supply chains are having to deal with. Forecasts should be a tool to enable great decision making for resilient operations; understanding demand should enable you to hold the optimal levels of safety stock for every stock keeping unit (SKU), balance cost and service levels, plan work schedules and more. In an age where supply chain resilience is what everyone is striving for, the way you respond to uncertainty makes the key difference and will ensure longevity for your business.
Above all, it’s about asking an important question: are we in the best position to respond effectively and efficiently to the unexpected? So, how exactly are supply chain leaders navigating uncertainty and building improved ways of operating in today’s world?
Expecting the Unexpected
In order to respond swiftly to unforeseen challenges, companies should already have their strategy mapped out. When unexpected events happen, they can then tailor and adapt it accordingly, rather than having to start from scratch. Are there different suppliers who can fill a void? Are there ways to repurpose products if trends change? Supply chains aren’t massively agile, and by the time changes have taken place, demand is likely to have moved on again. It’s equally as important to ensure other team members are clear about what this strategy is. In this case when a challenge does arise, everyone will be on the same page as to how to respond.
However, building and communicating such a strategy takes time. If organizations can invest in advanced technologies such as AI to support strategic decision making, they can claw back time over the short and long-term and funnel it into strategizing. For example, it can cut time and costs by producing risk assessments and scenario simulation, freeing up leaders to direct their energies towards broader strategizing and growth.
Let AI Handle the Heavy Lifting
The challenge for any supply chain manager is finding the balance between holding too much stock, where they risk obsolescence and too little stock, where sales opportunities are missed. While there is always a level of uncertainty, the use of AI by forward-thinking companies has become an invaluable tool for optimizing their inventory levels and delivering highly accurate forecasts.
Without AI, achieving near-perfect inventory levels is incredibly difficult, especially with the data silos that exist across so many organizations. When using tools like spreadsheets, the process of balancing inventory levels in line with metrics such as product availability, life cycles, consumer demand and shipping costs can take days, even weeks. So, when uncertain events take place, there can be a delay in responding to them swiftly.
But by leveraging AI, companies can monitor inventory levels in real time, automatically match stock quantities to changing demand, and make decisions in the moment. Having this skill means these brands can respond far quicker than their competitors in uncertain climates.
Consumer Communications: Don’t Mess it Up
Communication plays a significant part in customer loyalty and satisfaction. If brands have strong lines of communication set up between themselves and consumers, they can inform them of any changes as and when required and keep on top of shifting trends. For instance, if a supply chain issue arises which is expected to impact the consumer, they can harness their social media and email channels to let consumers know when stock is likely to be available or share creative campaigns for when they need to shift more. Ultimately, if you have a strong communication in place, you can easily adapt to unexpected changes in the market and keep consumers on board.
Let the Past Power the Future
Historical data holds great value and can be used to your advantage. It is an essential resource for both informing a supply chain manager’s strategy and for training AI models. By analyzing factors such as customer behavior, sales data, marketing output, operational costs and weather, a manager can see how inventory levels and the pricing of products impacted business performance in different contexts.
This data is crucial for building a more accurate picture of the future. For AI models, even small amounts of data can start to generate significantly valuable insights. As organizations gather more detailed and vast data over time, the more each model learns and the better the outputs become.
More broadly, brands can assess their response to uncertainty. For instance, examining whether a strategy might have fallen short in adapting to supply chain delays, or how successful marketing campaigns were in stabilizing inventory levels in response to events.
Didn’t See Something Coming? No Problem
Tackling uncertainty hinges on preparation and response. A huge part of that involves having an accurate forecast and effectively using such insights to respond to such uncertainty.
AI is transforming how accurate forecasting takes place and has become an essential tool to have in a supply chain manager’s locker. But it’s also vital to have a robust strategy, adaptability and strong communication capabilities to be able to use predictions effectively and react to changes in demand. Lessons from the past must be taken onboard and not neglected, as they hold valuable insight into forming predictions for the future.
We never know what’s around the corner but integrating these supply chain tools and skills will put you in the best position possible to navigate the unexpected times ahead.
