26 Feb 2021


Top 3 Strategies for Supply Chain Planners in 2021

Tommy See
Blue Yonder


In today’s ever-changing business environment, supply chain planners have a challenging task at hand. They need to understand the ongoing impact of COVID-19 and align short- and long-term supply chain plans to maximize market share and revenue targets.

Some challenges supply chain planners are facing include:

  • How will external variables such as disruptions and supply shortages impact my demand forecast?
  • If we are expecting a revenue gap due to tracking errors or weather, how do we pivot?

Across all sectors and industries, supply chain planners are pressured to meet real-time demand while balancing long-term organizational initiatives such as revenue growth, supply chain agility and resiliency to future shocks.

To navigate the new normal, here are three strategies supply chain planners should consider:

 

1. Consider External Variables at Scale

To make informed decisions in the middle of an economic recovery, supply chain planners need to consider the impact of external factors in real-time. Let’s look at the automotive sector as an example, which was hit hard by the pandemic but showing signs of recovery.

Over 30% of the world’s vehicle production is based in China. [1] For many automotive manufacturers and suppliers, the initial shutdown of manufacturing in China due to the pandemic fully halted production in 2020, which exposed the risk of a single-country dependency model for many companies. But even as the situation in China is slowly stabilizing, automotive manufacturers globally are temporarily stopping production due to lingering supply shortages. Toyota Motor has recently shut down production lines due to semiconductor chip shortages in China, GM has closed plants in North America and cut production activities in South Korea, and Volkswagen is anticipating issues in 2021 in its factories located in China, Europe, and the United States. [2,3]

In addition to the COVID-19 impact, supply chain planners for automotive manufacturers and suppliers are tasked to consider industry trends such as the shift to direct-to-consumer sales, volatile consumer demand across regions, increase in connected cars and mobile devices, and the EV market growth. The industry trends are an important variable for supply chain planners to consider when aligning supply plans with demand. For example, with the widespread adoption of connected devices for automotive manufacturers and suppliers, supply chain planners are relying more heavily on semiconductor providers for its finished product, which is contributing to a global chip shortage as production can’t meet demand.

When you combine these factors with hundreds of other external variables such as dependencies on third-party suppliers, logistics data, weather, and economic factors such as interest rates and GDP, scaling your supply chain processes will seem difficult if supply chain planners are limited to Excel and legacy supply chain solutions.

Looking ahead, organizations will need to rethink their supply chain networks and consider the external variables at scale to appropriately mitigate risk. This will allow organizations to respond better to future shocks such as another natural disaster, temporary shortages in supply or a sudden rise in tariffs.

 

2. Normalize Demand History & Evaluate Scenarios

Supply chain planners will need to normalize their demand history to consider outlier events, specifically the continued impact of COVID-19 and the long-term implications. This is important because planners do not want outliers to skew historical data for future projections. For example, safety stock calculations will need to be scrubbed to reflect the wild swings and short-term anomalies caused by the virus, otherwise, it can lead to excess inventory. [4]

In addition, supply chain planners will need to evaluate what-if scenarios to solve current gaps and adjust for future disruptions. It can be a natural disaster such as an earthquake or the current pandemic, or it can be a more common disruption such as delays in shipping or quality issues. Regardless of the event, supply chain planners will need to work together in real-time, across multiple functions to evaluate scenarios and determine the best way forward to close gaps. Delays in this process can cause a domino effect that can lead to more significant losses for an organization.

 

3. Leverage Artificial Intelligence (AI) and Machine Learning (ML) in your Supply Chain

AI and ML today is a mature technology and has transformed the role of the supply chain planner. When you consider that supply chain planners spend on average 70% of their time firefighting disruptions, it may seem impossible to manually consider external variables, normalize demand history and evaluate what-if scenarios at the same time. But what if we flip this paradigm? AI and ML enables supply chain planners to spend two-thirds of their time on strategic planning instead of manual set-up and constant tuning, allowing them to be more impactful in their organization.

With AI and ML, supply chain planners can automate external variables into their supply chain plans at scale, analyze hundreds of variables and scenarios, and receive prescriptive resolutions to evaluate and act.

 

Automotive Manufacturer Drives Profitability

A company that has implemented these strategies and succeeded during the pandemic is Mahindra & Mahindra, a global automotive manufacturing company based in India, operating in 100+ countries. To improve their supply chain efficiencies and customer service levels, they turned to Blue Yonder to replace their manual segmentation processes, which resulted in inefficient allocation levels and inaccurate inventory stock for their spare parts business unit.

By using Blue Yonder’s Luminate Planning solution, Mahindra & Mahindra applied ML to classify automotive spare parts into various demand clusters and attributes at scale. As demand data changed, customers with similar fulfillment requirements were automatically grouped together for distribution.

As a result, Mahindra & Mahindra were able to reduce overall inventory levels by 10% with autonomous segmentation, leading to a more profitable spare parts business unit.

The Luminate™ Planning solution suite is powered by AI and ML, processing over 50 billion transactions per month for clients across all sectors and industries. Supply chain planners globally are relying on Luminate Planning to meet real-time demand while aligning long-term initiatives including revenue growth, supply chain agility and resiliency to future shocks. Our glass box approach to AI and ML offers transparency into the machine’s thinking, so supply chain planners can act confidently in their decision-making processes as they navigate the new normal. To learn more visit the Luminate Planning web page.

Sources:
[1] https://www.statista.com/topics/1050/automobile-manufacturing-in-china/
[2] https://www.nytimes.com/2021/01/13/business/auto-factories-semiconductor-chips.html
[3] https://www.cnbc.com/2021/02/10/general-motors-gm-earnings-q4-2020.html
[4] https://blog.blueyonder.com/6-key-supply-chain-planning-strategies-to-prepare-for-the-new-normal/

 

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Last update 10 Sep 2021
Marked improvement in operating conditions amid strong demand conditions
   Source: Markit US Manufacturing PMI   -  IHS Markit
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