Data Analytics Can Fix the Supply Chain. Eventually

Can data, analytics, and artificial intelligence save the supply chain? It’s a question corporate boards might ask their CEOs. After all, technology has come to the rescue to help many organizations face challenges brought by the COVID-19 pandemic such as remote work and online commerce.

But problems with the supply chain remain a sore reminder of how upside the world has been, even as office workers return to their pre-COVID routines a few days a week. Ships are still stacked off the coast of Los Angeles.

According to experts, it will take a long time to restore flow to the supply chain that has been blocked by unforeseen changes in supply, demand, production and labor shortages. Investing in technology to gain visibility and transparency into the supply chain is one of the few steps CIOs can recommend to the rest of the C-suite to gain ground against existing issues if they’re affecting your organization, according to experts. On the flip side, companies that keep failing to invest in supply chain technology may not survive. Investing in technology is mandatory…but it is not enough to fix the current crisis.

“The current state of supply chain is the new normal,” says John Fay, who joined multi-enterprise supply chain networking solutions software provider True Commerce as CEO in December 2020. Even as organizations struggle with a disrupted supply chain in the physical world, they look to applying technology for the help it can provide. Fay says his company has seen a 90% increase in shipping orders in the past year as manufacturers bypass stores and physical warehouses to take their products directly to consumers. This is one of the many changing patterns in how products are delivered in response to supply chain problems, retail store closings, and other restrictions imposed by the pandemic.

Who won the pandemic supply chain?

If your CEO or board needs proof that supply chain technology can, in fact, help with supply chain problems, just look at the winners who succeeded during the pandemic itself versus those companies that struggled or failed. Top performers like Lowes, Walmart, Target and Amazon have all invested in technology and other solutions to help them gain visibility and transparency in their supply chain, according to Cindy Elliott, head of business strategy for GIS (Geographical Information Systems) data, mapping and technology Esri.

“These companies were able to be more immediately responsive to ripples that are occurring elsewhere and make adjustments faster,” she says.

But many other companies did not make technology investments before the coronavirus crash. Elliott points out that the supply chain is considered a cost center by companies, so there has always been a “how do I get it cheaper” approach.

“There are industries that are slower to adopt technology. When you digitize an environment, it is a game changer,” says Elliott. “The supply chain is an industry that has been slower to adopt technology, and this leads to a variety of different dilemmas. Leaves us where we are now.”

Companies like Amazon were able to take advantage of their technological edge in the supply chain, and gained an advantage over companies that were unprepared for supply chain disruptions.

“As a consumer, I make my choices based on who helped me or who had something in stock,” says Brian Kilcourse, managing partner at retail research and consulting firm RSR Research. “Who has the best supply chain in the world and who has killed it in the last few years? Amazon has been crushing on it. It wasn’t about price or variety. It’s all about the next day,” he says.

Amazon has a technological advantage. It also has a size feature. Like some other giants, over the past few years even before the pandemic, Amazon had purchased its own shipping containers and even its own vessels, providing it some insulation from competing with other companies for shipping space in a system with a limited number of ships and containers. It’s also a big plus at a time when the shipping cost has increased a lot. According to the Drewry Supply Chain Advisors World Container Index for the week of November 11, 2021, the compound price for a 40-foot shipping container is 250% higher than it was a year ago.

Experts agree that transparency — the ability to see where items are in the supply chain in real time — is a huge advantage some organizations have over others. Amazon definitely has this advantage. Other giants are looking to gain more advantage in this area as well. Given the rapid level, in April 2021, Japanese giant Panasonic acquired AI software supply chain Blue Yonder in a $7.1 billion deal that looks to create an “independent enhancement of the entire supply chain”.

The big companies that have been able to invest in supply chain technology are the success stories right now. Esri’s Elliott says it’s a K-shaped rebound right now as “first movers extraordinarily outperform the market.”

The next group is quickly investing and bringing their technology to catch up. Then there is the next group that is struggling without technology.

“A lot of retailers are going to fail,” she says.

Aside from the technology acquisition and Amazon’s overnight size, what can other companies affected by the supply chain crisis do about it now?

Brian Keare, Incorta’s CIO for unified data analytics platform and former VP of IT at HVAC manufacturer Nortek, recommends using the data you already have to determine where you’re most at risk. The data you use should be the most recent – as close to real time as available. “Winners are defined by how quickly they analyze and respond,” he says.

Then look at the mistakes you made before and fix them. Diversify so that you have fewer points of failure. Also, re-examine your business model. You may have built a business offering less differentiated products at a lower cost, but does that still make sense in today’s economy? Maybe not.

The retail end of the supply chain

In years past, the best signal or order data to tell the retailer what they needed to order was what the customer had just bought. But the pandemic has shattered many of the models for analyzes that relied on previous data. People didn’t want the discretionary goods that were already in the supply chain in March 2020. They wanted paper towels and toilet paper. But before those products could be shipped, the supply chain—all the loaded ships, trucks, and warehouses—had to be emptied of discretionary merchandise that no one wanted anymore.

What demand signals – or data – can retail traders look at when none of the past data shows what customers want now? RSR Research’s Kilkors says his company has helped retailers find several alternative data sets to predict what customers want. One of them was web traffic. The company considered search volume in various search engines to form leading indicators of consumer demand. For example, what ingredients have been rare and in demand among grocery shoppers. Was it black beans? Was it accurate for all purposes?

Another tactic for retailers is to pay attention to costs. You can’t always cut it out, but it’s important to improve what you buy.

For example, at a time when shipping costs are very high, retailers who fill a shipping container need to really focus on what they’re going to put in it, Kilkors says.

“If it’s going to cost me that much more, I really need to make sure I have the right stock in it,” he says. “If it is a seasonal element that gets here too late, it is not good. If there is something to support the promotion, it will not be good if it is not reached in time.”

For retailers who have done whatever they need to to survive in 2020, these supply chain issues are just another fly in the ointment, says Dan Mitchell, director of global retail practice at analytics software provider SAS. Retailers are rushing to add customer self-service options at point of sale, e-commerce channels for ordering, sanitation steps for store experience, services like click-and-collect, and more.

“Our research shows they did everything they needed to do in 2020, and now they’re back to doing it right.”

For many companies, there is a lot of catching up to do. Fortunately, most other organizations are facing the same crisis and the same arduous ascent.

“There is no short-term cure for these supply chain issues,” Mitchell says. “Supply chain reform is not a technical problem in the short term. In the long term, it is a huge technical problem.”

What to read next:

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The CIO’s role in maintaining a strong supply chain

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