Industrial Manufacturing and the Digital Supply Chain, Part 2
In a series of blog articles, the Product/Solutions Marketing team explores new business challenges and innovation solutions to change the game and manage disruptions. The following are the insights gained from my discussion with Sunil Roy, who leads Blue Yonder’s Industrial Manufacturing Industry Strategy, during a recent Blue Yonder Live and executive customer events that we prepared for jointly.
In Part 1, we covered the global complexities industrial supply chains face and the leapfrogging benefits of digitalization. This Part 2 blog post will explore the innovative solutions and initiatives that will ensure success for the digital journey.
Crucial Supply Chain Needs
Terence: What are the crucial supply chain needs faced by industrial manufacturers? And how should they be solving for them?
Sunil: It’s important to start with metrics. What are the key metrics that are driving the industrial manufacturers supply chain?
Broadly, there are three key metrics:
- First is customer service level so as to increase customer loyalty through on-time in-full customer engagements. We have to make information readily available.
- Second is cost to serve. To maintain a profitable business, we have to make sure that we are servicing our customers at the lowest cost. We have to ensure that we are not building up inventory to service the customers.
- And lastly, it is throughput. It is about how to minimize setups in your operations, to build large campaigns, and make sure that setup times are optimized. While at the same time ensuring that we service our customers.
Terence: Did the COVID-19 pandemic change anything?
Sunil: In the pandemic era, because of the sourcing, raw material, and labor problems, service levels were impacted. But now conditions have changed again. Companies are now having to get around the increase in variability in their supplier network.
Terence: Variability means uncertainty. What is the impact?
Sunil: Companies have built up inventory as a result. Over the past several months, inventory has almost doubled for many manufacturers. To win in this time, the dynamics is not to worry about the amount of inventory as much, but to have the right mix of inventory instead.
The capabilities required to do this include forecasting. But forecasting has also become challenging in the last couple of years where history does not determine your future. This creates enormous hurdles because customers have been using statistical forecasts. They looked at historical shipments and tried to predict the future in terms of what they can supply.
The adoption of artificial intelligence (AI) and machine learning (ML) technology is a game changer. This enables consumption-based forecasting. A lot of our customers who have adopted AI/ML technology, especially for the near-term forecasting, are seeing their forecast accuracy go up by as much as 10%. Any increase in forecast accuracy reduces the variability in the supply chain. As a result, manufacturers can provide better demand projections to their operations and their suppliers, which further reduces variability in the supply chain. With our solutions, we are helping our customers identify the right mix of inventory that can increase customer service levels.
Terence: With variability and uncertainty, how can company’s plan for the various risks?
Sunil: The second ability that our customers are looking for is scenario planning. We can look at the various scenarios from a demand perspective, factoring in risks. How do companies accommodate disruptions, such as COVID-19, Suez Canal blockade, and Brexit? Whether companies are doing long-term or tactical-level planning, they would like to accommodate risks. How do they optimize changeovers and increase throughput in their manufacturing to lower cost while maintaining high service levels?
Terence: These improvements are very close to our heart here at Blue Yonder. What are other capabilities that will accelerate the improvements in supply chain performance?
Sunil: Our customers would like to leverage our experience to reduce the variability and improve the predictability in the supply chain. The main priority that most companies are looking for is a successful journey to build a digital twin of the enterprise. They would like visibility to materials, customer order levels, and supplier performance. This is so that they can make better decisions and without latency. Digital twins are becoming a foundation for visibility, analytics and building better supply chain solutions.
A close second priority is to look for an integrated demand and supply planning solution. This is very important because it is not only about the demand process or the supply process, but how do they have a single platform in which they can conduct demand and supply planning together? Whenever there is a change in demand, we can easily see the impact in the supply or vice versa. When there is a shortage in a certain raw material from a supplier, we can see the impact against which orders and forecast. We can quickly make informed decisions in terms of how we allocate the materials, find an alternate supplier, or leverage a different part. Integrated demand and supply planning is what all companies are driving towards.
Now we offer integrated demand and supply planning in our Manufacturing Industry Cloud. The pre-configure, role-based workflows, data management and integration accelerators, and process-based advanced analytics can highly reduce deployment time and learning curve.
The third crucial priority for discrete manufacturers is regarding the distribution network which includes warehousing and transportation for supplying items to B2B customers. Companies are trying to restructure their warehouses and what inventory they maintain in each warehouse, so that overall cost of warehousing is brought down. There is also an emphasis on transportation especially in the last two years, because transportation costs have almost doubled. They are looking for ways to build better loads, reduce the number of trucks, and supply to their customers faster. Integrated execution of warehousing and transportation is very important.
Key Success Factors in Digital Journeys
Terence: You have interacted with and helped a lot of customers in their digital transformations. What attributes are needed most for these journeys?
Sunil: I have been in the supply chain space for 24 years and spent my earlier life deploying these supply chain transformation solutions all over the world. There are three main things that make supply chain transformations successful. The order of priority is people, process and technology.
The people aspect is the most important for a business transformation. They need to understand that it is not an automation of the current activities using better tools, but it is actually transforming the business, which can enable them to run their operations much better. For example, one customer that I worked with used to input orders manually and it would take them almost 10 days to get an order back to the customer. One of their transformation objectives was to get orders in real-time. To change from a 10-day lead time to a real-time order and keep promises made required a different mindset. They needed their colleagues to look at the future and be willing to break down barriers of the past to make their business run much more effectively and in a very simple manner.
The second part is the process. It is not about re-doing the same thing with a new technology, but it is re-designing and simplifying processes. We analyze the steps from the time we receive the order to manufacturing timeframe and subsequent steps. There are hundreds of variants to the process: credit checks and quality checks impact the process. How do we modify the process and make it more sustainable?
The final aspect is technology, which is enables the sophisticated processes. For example, our technology is making it possible to make decisions in real-time and to ensure the company is available 24×7 to their customers.
Visit Blue Yonder’s website for more information about industrial manufacturing use cases and benefits.
More Insights to Come
In an upcoming LinkedIn Live, we will discuss in a fireside chat setting with several experts on “How to Solve New, Complex Industrial Supply Chain Challenges.”