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In recent years, if global supply chains had been hit by only a single large disruption, it is doubtful supply chain professionals would have taken the time to reevaluate operational models. But with a string of disruptions, including trade wars, the pandemic, the Suez Canal closure, and other significant disruptive events, industry professionals have begun to look at whether the previous strategies were strong enough to withstand future disruptions.
One challenge in recent years has been that these disruptions risk introducing the “bullwhip effect” in even the most stable supply chains. McKinsey's analysis indicates that category consumption was bifurcated during the pandemic, with many supply chains seeing massive drops in demand. In contrast, others, such as grocery and staple items, saw record demand. This meant that the bullwhip effect in many industries was due to ramping up of supply, while in others, it was focused on shedding production capacity quickly.
But the pandemic was only one disruption of many. As others have occurred with greater frequency, consumers changed their purchasing habits, abandoned brands, and categories, and adopted new brands and goods to adjust. Because of this, supply chain professionals have had to cope with these changes while devising strategies to improve against future disruption.
These unprecedented events have highlighted the weaknesses of previous supply chain models. Here are a few critical areas where supply chain professionals are taking stock of current realities to chart a course for improvement:
Data shows that as many as 76% of US businesses plan to move some capacity from China to closer countries like Mexico. By reshoring and nearshoring some capacity, or critical components with high impact on production, companies can spread the risk and shorten lead times to address swings in demand in either direction.
– Recent world events have also highlighted the need for complete transparency in supply chains. The ability to see a single source of truth end-to-end will help improve response and decision-making. With improved transparency, higher degrees of collaboration can help manage events as they occur and impact demand.
Automation tools must be able to sense demand and provide dynamic forecasts. Because disruptions cannot be predicted, software and automation tools need to offer scenarios to different paths to allow managers to game the situation and know their response to sudden extremes, including minimum and maximum demand.
Having tools to sense demand is not enough. Planners need to be able to respond with agility. To do this, companies and their demand and supply teams need to have the resources and plans in place to allow them to spot issues quickly and act to address them before they become critical. This operational agility means linking plans to execution and tighter interconnection between crucial areas such as demand, supply, inventory, and production.
Taking stock of system requirements in an age of disruption suggests that companies need to move from “lean” supply chain strategies to “demand-driven” ones instead. And the only way to get there is with real-time or near real-time data that feeds a high degree of digital transformation and automation through software.
The speed of analysis and insights involved in developing new strategies to cope with world events cannot be achieved by human interaction alone. With robust demand and supply planning software from Plex DemandCaster, supply chain professionals can synchronize demand and supply strategies to create an agile response that includes tactical adjustments, what-if planning, and end-to-end visibility. With these tools in hand, accurate forecasts and rapid execution will follow demand patterns to minimize risk and avoid the bullwhip effect.