Identifying opportunities in your supply chain through data: Supply Chain Network Design and Supply Chain volatility

Disruptions have rocked the supply chain industry for over two years. As a result, freight rates and lead times have increased and capacity is unable to keep up with demand. The extreme changes to the market have shown that the traditional supply chain industry wasn’t prepared to deal with this level of impact (and possibly traditional supply chain structures and processes were unable to manage the extreme stresses put on them).

A company's network determines its supply chain efficiency AND its customer satisfaction; optimal network design is a baseline to business success.he ability to understand the dynamics, forces of change, behaviour under certain external and internal forces and stress limits of your network is crucial. To add to this, the systems, infrastructure and workflows that support it have never been more important.

In order to build resilience, businesses are finding alternative ways to improve the infrastructure(such as their processes, infrastructure & systems - or even their freight forwarding partners) of their supply chain. Many years of analysing, designing and optimising end-to-end supply chains have shown me that the essential first step to improving infrastructure is accessing robust and accurate data and using it to your advantage.

Since the dramatic changes in our international networks driven by Covid, the Suez, lockdowns, ports and prices, I have spoken to quite a few organisations - large and small - who are now looking at the process of supply chain design as a logical investment. Many of these organisations are trying to understand how they can take cost out and/or add value to their existing networks.

I’ll be attending Navigate Smarter, Zencargo’s conference for supply chain leaders, themed around data analytics and smarter solutions - this will be the key tagline of the discussions. If you would like to join in with the discussion, you can sign up here .?

In the meantime, here is my summary on how you can use your data to identify opportunities for improvement in your supply chain.?

Three levels of strategic supply chain planning

Effectively, what you are doing during the SCP process is creating a supply chain digital twin - a data model of your network.? You can map all of the processes and decisions around it, allowing you to project ‘what if’ scenarios and identify the impacts on cost, lead time, inventory, process and resource. Typically, this approach works on three different levels of scope for the optimisation process:

1. Operational and contingency planning: Data and data analysis can help to identify short term fixes and adjustments that enable you to squeeze out cost or service improvements AND to develop short term contingencies for actions in the extended network. I see this as a defensive tool that allows us to ask ‘what if’ questions and develop contingent actions to things like natural disasters, product recalls and breakdowns elsewhere in the network.
2. Tactical optimisation of existing networks: How to use the existing network, technology and infrastructure to support near term planning decisions (facility use, inventory deployment, transportation optimisation, source selection, product flow, and policies).
3. Strategic network design: How to redesign and change the network, facilities, technology and workflows to help meet overall operational strategies and future corporate goals. This should include growth, market factors, technology changes, new products, new markets, commercial changes and competition.??

This approach creates a myriad of opportunities to improve cost, growth, lead time, flexibility and resilience. You can understand how the network needs to evolve at a strategic, tactical and operational level. To summarise, I’ve identified a few key opportunities for improvement: ? :

1.Improving lead times and lead time stability?

The increase in global supply chain lead times over the past couple of years has been staggering, fuelled in part by the decrease in schedule reliability (currently at 34.4%) and increase in blank sailings.?

This amounts to a significant challenge for businesses. But with so many factors (such as schedule reliability) to account for, where do you start??

From my discussions with peers in the industry, a common subject that comes up is the value of data. Used correctly, data can be used to increase real-time visibility, enable businesses to plan for challenges or disruptions before they occur, and consequently represent an advantage towards any business’s supply chain goals.?

For example, sales data can help businesses understand the volume of goods that needs to be ordered from manufacturers to fulfil customer demand. Once volume data is obtained, this can help with creating a forecast of how many containers you need when: extremely beneficial when it comes to booking space on carriers in advance.?

An accurate container forecast makes you a reliable customer for carriers; knowing exactly what space you’re going to need (and when!) means you’re less likely to pull out of bookings. This will also help businesses negotiate long term freight rates and guarantee the correct space in advance, saving on costs as well as reducing the risk of delays on cargo.?

Historical lead times during peak periods also help businesses calculate how far in advance they should be booking space, cargo and equipment, especially ahead of busy periods such as Christmas when demand is inflated.?

However, this historical data will need to be continually updated as the data has really varied compared to times before the pandemic. But that is not to say that it isn’t valuable, despite so much change. Historical data can still give you a helpful guide on your minimum lead time, on top of which you can add expected delay times.??

2.Evaluating the risk with alternative sourcing areas

Another trend I’m seeing in the market is nearshoring; people are keen to reduce their exposure to geopolitical risks, such as local COVID-19 lockdowns in the Far East and the war in Ukraine. If successful, this can reduce costs associated with supply chain disruptions and increase the reliability of delivering goods on time to consumers.?

Although nearshoring can be potentially good for a business, it also comes with its own risks. Changing your sourcing areas is a long term strategy as the transition process between suppliers can take a while. Therefore, this change in strategy has to be assessed against what might happen in the longer term. However, applying a change in strategy to a longer term situation brings the risks of sudden changes that could happen in the short term future such as political instability and weather disruptions. Businesses will need to do scenario planning to assess the costs and benefits of each choice to find the best fit for their long term strategy.

Even if businesses choose to move their manufacturing closer to their warehouses, they may still be at risk of weather disruptions, political instability, pollution-related exposures, to name a few examples. All of these factors are potential risks, creating added costs as businesses would have to ensure the exposures do not affect their goods.?

So how can data help businesses decide whether nearshoring is beneficial for their supply chain strategies??

With reliable data, businesses can build models that evaluate all the factors of a new supplier, including lead times, transportation costs, transport availability at ports and many more criteria, across a range of different scenarios. The information gathered from this evaluation can help businesses make better informed decisions on whether nearshoring may be better for your goals. For instance, perhaps your business goal is to source cheaper products, rather than speed up transport times. However, although the materials are cheaper, transportation costs may be more expensive.

3. Assessing other modes of transport?

Choosing the right mode for your shipments is important as each (road, rail, ocean and air) offers different advantages depending on cargo specifics.

By using data, businesses can get insights on what type of mode is best for each shipment. For a simple example, your priority may be to reduce shipment times, rather than costs. Commercial cargo aircrafts are often used to ship freight quickly between and within countries. However, this space is often more expensive than space on ocean carriers. Then in this scenario, air mode could be the best option for shipping your goods.?

The next step is using data to identify the thresholds for when you want to use each mode, even when the factors going into each choice are constantly changing. Businesses should have access to data on the cost of the transport, reliability and regularity of services, the type of goods you’re moving and the facilities available at destinations such as warehouses or container handling equipment.?

Once you have this information, work with your supply chain partners to assess and compare the benefits of each mode depending on the shipment specifics and circumstances. From there, you should have more clarity on which mode will best suit your needs when, so you can implement changes to your operations quickly as the circumstances change.

4. Risk Mitigations

One of the key characteristics of the last 2 years has been its unpredictability across the board - in all elements and factions of our supply chains. One key action that we all need to take is to look at the mitigations and contingencies that we need to put in place to counter those lumps of ‘volatility’ and understand the actions and changes that we can (and need to)take to minimise, avoid or overcome them.

Effectively this is a series of ‘what ifs’ around various change and risk factors; at a macro level this is often called ‘scenario planning’.

Getting data into a model that allows a business to flex and test the impact of various sudden or strategic changes allows the business to understand the impact and create contingent actions.

5. Infrastructure and Network shape

Your infrastructure - the facilities, activities, resources and workflows that your supply chain utilises and enables end-to-end visibility - are a key element of the cost, flexibility, agility and capability of the network that you run. Many of the networks that we all utilise across the extent of our supply chains and across the world were designed decades ago and have been slowly iterated and adjusted to fit the changes in our supply chains. In many cases, these are ‘not fit for purpose’ and they simply add to the problems and the issues that we have in today's rapidly changing supply chain revolution.

Creating a strategic map of your end-to-end network and? infrastructure, can create a set of completely new opportunities and infrastructure requirements for the network. Collecting the data, creating a digital twin and then letting loose a number of ‘what if’ and optimisation scenarios will also help build towards this strategy.?

Find your opportunities with your data now

The supply chain market has become extremely volatile over the last couple of years and it is time for businesses to make changes to their supply chain now.?

A number of tools exist around the market at the moment that allow you to create this ‘as is’ network and develop scenarios and ‘what if’s’ to deliver the value that I have outlined above (and more).?

NONE of them work without timely, persistent, accurate, robust and complete data. Believe me, through damning experience over many years, I have seen the impact of trying to do this level of complex analysis with poor data - and I have seen the truly positive impact of undertaking supply chain design well. Often data collection and correlation can take 50% of the timelines in these types of analysis, so having excellent data at the core of your supply chain is an absolute necessity if you are going to understand the true capabilities of your networks. That means using an end-to-end platform - like Zencargo - at the centre of your supply chain is an absolute.

At Navigate Smarter, Zencargo’s virtual supply chain conference for industry leaders, each session is run by influential speakers from the industry. They will be sharing their insights on topics such as sustainability, smarter solutions and data optimisation in the supply chain.?

I’m excited to attend and to join in with the discussion. If you would like to join me, you can book your tickets here .?