Supply chain disruptions creating uncertainty - and opportunity

While supply chain disruptions are causing significant uncertainty, they also offer great opportunity for innovation and transformation. How? Digitalization is offering a path forward, thanks to rapid advancements in digital technologies.??

Supply chain issues severely impacted businesses in 2022, making it more difficult to source materials and operate efficient manufacturing and logistics ecosystems. Many companies struggled to source enough materials or components to meet the demands of their customers, underscoring the brittleness of many global supply chains.??

The issue isn’t just a short-term problem. While businesses work to reinforce their supply chains for today, they must be looking toward the future and how they can produce the next generation of products.?

Take the automotive industry, for example, which has been dealing with a persistent shortage of key electrical and electronic components crucial to the advanced features and functions demanded by vehicle buyers.?Though the shortages of these components eased somewhat toward the end of 2022, demand for advanced vehicle features will continue to grow. Additionally, new disruptions to critical supply chains are on the horizon. For example, as automakers bet big on electrification in 2023, the sourcing of raw materials for battery manufacturing is poised to become the next great supply problem.??

The energy industry also has faced major disruptions, as an acceleration in the demand for green, sustainable energy production has outstripped the current ability to supply key components for green energy plants. And of course, almost all industries have dealt with production delays, transportation disruptions, and competition over limited suppliers for key materials or components.??

One thing is certain, many of these challenges will continue through 2023 and beyond. In addition to immediate responses such as reshoring existing production capacity, developing partnerships with new suppliers, or bringing the production of certain key components in-house, what can companies do?? Businesses are working to become more agile and resilient to the next major disruption with strategies that improve their ability to predict supply shortages, economic downturns and various other factors that may affect their ability to do business.?

Since they can no longer rely on simple means of tracking and managing supply chain processes, companies have turned to the digital twin for help understanding and proactively managing their supply chains. Though we often think of the digital twin in terms of product design and engineering, it can also model supply chains and business processes to help companies gain a better understanding of the complexities of their own value chains, and to see through the complexity to identify problems and prescribe solutions.??

Digitalization can add new levels of transparency in the supply chain, enabling data-driven decisions to be made earlier in the lifecycle process including cost, availability, lead time and even the carbon impact of selected components or alternative components. Using advanced digital technologies such as AI and machine learning coupled with the digital twin is helping enterprises gain perspective to see, understand and respond to fluctuations of today’s complex supply chain. And as the industrial metaverse evolves, companies will be able to harness the power of large-scale computing and in-depth visualization for even more insights into their supply chains. As companies adopt digitalization to transform their business processes, they can gain greater insights into their supply chain, manage their risks and become more adaptable to avoid the next disruption.

Stay tuned for my next post discussing the second big challenge for the coming year(s) – sustainability. ?