Enhancing Supply Chain Risk Management Supply Chain Strategy and Planning Enhanced

Supply Chain Strategy and Planning Enhanced

This paper identifies an often overlooked supply chain risk management approach that examines current supply chain strategy and planning to reduce costs and improve customer service. While most companies think of supply chain risk management as focusing on suppliers, they often overlook day-to-day opportunities in supply chain strategy and planning. Risk managers in the SCM (Supply Chain Management) space must consider these opportunities to eliminate supply chain risk and drive crucial metrics.

The strategic approach to supply chain risk management

Implementing a comprehensive supply chain risk management (SCRM) strategy involves using data analytics, establishing contingency plans, and ensuring compliance with industry standards. By doing so, companies can better navigate the complexities of modern supply chains and maintain their operational integrity. The key components of the traditional approach to risk management in SCM are below, but I have added questions (in blue):

1. Risk Identification: Recognizing potential risks that could disrupt the supply chain, such as natural disasters, geopolitical issues, cyber threats, and supplier failures.? What about planning failures that could occur any day?
2. Risk Assessment involves evaluating the likelihood and impact of identified risks, as well as analyzing each risk's vulnerabilities and potential consequences.??
3. Risk Mitigation: Developing strategies to minimize the impact of risks. This can include diversifying suppliers, maintaining safety stock, and implementing robust cybersecurity measures.? What if adding safety stock at the wrong time adds cost and hurts service?

Metrics for supply chain risk management

How many companies talk about reducing SCMR, providing enhanced resilience, and improving supplier relationships, but these are very hard-to-measure concepts.? I guess we know it when we see it.? More measurable metrics include:

• Cost Savings for example lost sales, expedited shipping, and production delays
• Improved Customer service –improved on-time and in-full shipments?
• Compliance let’s not break the law

Cost savings and improved customer service good measures of competitive advantage.

Current supply chain strategy and planning generate significant risks.

Here are some risks that most people often overlook – – but they occur every day in supply chain planning and operations:

• Planning over a short horizon causes volatility in day-to-day deployment (See diagram). Using the metrics above, volatility is associated with a significant incremental cost.??
• These include:
• Supply chain planning systems and the whole planning strategy do not understand operational constraints. This somewhat mirrors the above issues. Planning systems assume that carriers have infinite capacity and that the incremental capacity cost is the same as the first few trucks. Additionally, the assumption is that there is space in the receiving warehouse. Most of the metrics above can be reapplied.
• Trucks are improperly loaded and stopped at the weigh station, or loads are damaged in transit. Again, this is both a cost and a customer service issue.? It is also a significant potential legal liability?

Mitigating these supply chain risks: Planning

Most planners look ahead 3 to 5 days to determine what should be deployed. Planning over this short horizon misses significant events, such as quarter-end demand surges, which result in significant replenishment volume. Planners work alone on their lanes. Any receiving site may get products from multiple ship points, each with its own planner. Coordinating their volume to ensure that the receiving location doesn’t drown in trucks to be unloaded on any given day is a further challenge.

Many years ago, SAP introduced the concept of Supply Network Planning (SNP). While some say this was not well executed, the principles made a lot of sense. Today, a new tool from ProvisionAI understands and plans for the next 30 days. It’s called LevelLoad, and it’s a new breed of SNP.

LevelLoad mitigates supply chain risk by looking ahead to the next month and planning what should move on each lane for each day based on location capacity and transportation costs. It clearly understands that missing a customer shipment must be avoided at all costs, so it prioritizes what is most needed.????

Here is how LevelLoad measures up against the metrics mentioned earlier:

• Resilience: Having a 30-day plan should increase the ability to react to potential future problems
• Supplier relationships: N/A
• Cost savings: in one major client, the 4% cost premium disappeared. The result was savings of millions of dollars annually.
• Customer service: in-full, on-time, showed marked improvements for the same company
• Compliance:? N/A

Mitigating these supply chain risks: Loading trucks

Most truck loading is done by tribal knowledge. For the same shipment, ask five forklift drivers how to position the product on a truck, and you’ll get at least six different “best” approaches (Don’t believe me—ask some loaders). Loading a truck in North America is a complex problem that must meet a number of criteria:

• The axles must be legal.
• The product should not shift when the truck brakes or makes evasive maneuvers.
• Weak products should be on the top, with stronger products supporting them.

As you can imagine, this is quite challenging. Mathematical optimization and artificial intelligence can help mitigate the risks of in-transit damage and ensure legal compliance with the various state laws in which the load will transit.

The solution here is AutoO2.? AutoO2, which stands for Automatic Order Optimization, uses advanced algorithms to guide order selectors on how to stack pallets and loaders and how to arrange those pallets on a truck. Proven through repeated applications across multiple continents, AutoO2 was developed in the warehouse. It has proven its worth in eliminating reloads and substantially reducing the time it takes to pick and load an order.

Here is how AutoO2 measures up against the metrics mentioned earlier:

• Resilience: repeatability is clearly resilient
• Supplier relationships: N/A
• Cost savings: In addition to labor savings and the elimination of reloads, having a repeatable process is highly valuable. One major consumer products company informed its customers that the amount they had to order to get the best pricing increased by 5%. They saved millions.
• Customer service: in-full, on-time improves, and on-shelf availability has been enhanced
• Compliance:? For all states and provinces

Look at what is right in front of you?

Supply chain risk management involves examining all potential risks, including those right in front of you. The metrics show great opportunities.

www.ProvisionAi.com