Building Resilient and Sustainable Supply Chains

By Simon Bowes

On a day-to-day basis, supply chains are disrupted by a wide range of complex problems. The consequences can range from short-term efficiency issues to global financial damage and, at the same time, the industry is under pressure to focus on growth and sustainability. How can the supply chain ecosystem balance these competing issues in the years ahead?

If the pandemic was good for anything, it showed us how unprepared we are to react to supply chain disruptions and that supply chains are not resilient enough to drive good, sustainable decisions for the environment.

Today’s supply chains remain volatile. From the ongoing Red Sea crisis, US port strikes, rising inflation and new global pandemic health emergencies, businesses are under immense pressure to identify and manage systemic risks in supply chains.

Recent research from Blue Yonder revealed that the overwhelming majority (84%) of global businesses have experienced the problem within the last year. Part of the challenge is that there is a diverse range of factors that can put barriers in the way of efficiency and effectiveness. For example, shortages of raw materials (48%), extended delivery times from material suppliers (47%), lack of labour (44%) and lack of shipping vessels (41%) are among the most disruptive issues.

These have a variety of knock-on effects, with delays for customers (42%), stalled production (42%), and loss of compliance with new regulations (39%) among the most common. Add the burden of inflation, and globally, 46% of organisations’ profit margins fell amid rising costs. These are difficult problems to solve, and in an environment where economic growth and environmental sustainability remain top priorities, how can the supply chain ecosystem respond?

A role for governments across Europe

Introducing a government-mandated electronic supply chain trading network with end-to-end visibility would aid organisations with insights to see, understand, act, and learn from real-time information from the entire digital ecosystem. This should be based on an AI-powered unified platform that enables multi-tier orchestration, planning, and collaboration to accelerate processes with autonomous and semi-autonomous decision-making.

A role for AI

AI technologies are certain to play an increasing role in the way supply chains are orchestrated. There is a wide range of areas where improvements can be delivered, including scenario planning, where supply chain performance dynamics can be modelled. For example, when organisations experience the kind of disruption seen across the industry, automated scenario planning can provide a proactive framework for improved decision-making. In this context, an organisation can use advanced algorithms to analyse vast data sets, identify patterns, understand external factors and assess future demand trends with remarkable accuracy. This insight can then be applied to real-world situations to mitigate the effect of supply chain disruption and crucially, to identify and capitalise on opportunities that would have remained hidden using legacy planning and decision-making processes.

Scenario planning with AI goes beyond forecasting and dealing with the ‘here and now’. It allows organisations to pre-empt future scenarios and the possible impact. As organisations deal with sudden spikes in demand, supply chain disruptions or geopolitical shifts, automated scenario planning provides them with a proactive framework for decision-making and a quicker response to possible events. This level of preparedness not only minimises the impact of any disruptions but also positions organisations to capitalise on emerging opportunities.

This represents the tip of the iceberg, with AI also being used to enhance performance via the availability of context-aware, data-driven insights, assisted decision-making and the automation of repetitive workflows. For instance, supply chain teams can analyse data, interpret connections and understand the nuanced details of their supply chain components.

The implementation of predictive AI will also drive improvement across key components of the supply chain lifecycle, such as production schedules, resource allocation and distribution channel optimisation. Organisations that successfully integrate these capabilities into their existing workflows will put themselves at a distinct advantage compared to those who fail to innovate quickly enough.

According to the Blue Yonder study, AI has being widely adopted by organisations around the world, with over half of global organisations applying it to supply chain planning (56%), transportation (53%), and order management (50%). In fact, most global organisations (80%) have implemented this technology in their supply chains at some level, whether fully (12%), partially (33%) or piloted (35%).

A role for sustainability

Despite the enormous emphasis on AI across the industry, for almost half (48%) of global organisations, sustainability is their key area of investment, followed by AI-based technology (41%), developing new strategy (40%), additional workforce (39%), and digital transformation (37%).

This indicates the widespread recognition that legacy supply chains continue to significantly contribute to the current climate crisis. Corrective action is focusing on a number of areas, from sourcing, production and logistics to inventory and data management. In each case, the objective should be to improve efficiency as part of a holistic strategy to improve sustainability across organisations as a whole.

This is another situation where policy can play its role in ensuring supply chains continue to prioritise sustainability and are held accountable for environmental performance. Examples include the EU Corporate Sustainability Due Diligence Directive (CSDDD), which aims “to foster sustainable and responsible corporate behaviour in companies’ operations.” Among its various provisions, it sets out an “obligation for large companies to adopt and put into effect, through best efforts, a transition plan for climate change mitigation aligned with the 2050 climate neutrality objective of the Paris Agreement.” Clearly, organisations reliant on complex supply chains will need to assess their obligations carefully, which will be subject to Supervisory Authorities and the prospect of civil liability.

Both individually and collectively, these issues will shape the future of supply chains for many years to come. Above all, however, they represent a transformational opportunity to deliver a win-win of improved business efficiency and strong environmental performance.

About the Author

Simon Bowes is the CVP of Manufacturing Industry for Blue Yonder. Having graduated as an Engineer, Simon spent many years working in the engineering industry before joining Blue Yonder 25 years ago. Starting out as a consultant, he has since held Leadership roles in Sales and Marketing, before taking on his Industry responsibility. Simon is responsible for representing Blue Yonder’s vision for Manufacturing with Customers, Analysts and Partners and also works to drive Blue Yonder R&D with EMEA specific direction for Manufacturers.