Supply chain management enables enterprises to source the materials necessary to create a product or service and deliver that product or service to customers.

Over the last two decades, the supply chain of providers and users across all industry verticals from consumer goods to automotive and pharmaceutical manufacturers to distributors and retailers have become ever more sophisticated, intertwined and criss-crossed.  Broadly, there are four major categories of factors that define today’s sophisticated supply chain, i.e.:

Uncertainty

There are too many moving parts and each with their own sets of unknowns and variables.  These include unpredictable demand, unknown quality issues, varying supplier performances, volatile market conditions, unknown competitive activities and unpredictable external and internal events.

Velocity

Things are changing so fast it is impossible, if not almost impossible, to keep up with the pace of change.  The ripple effects of variable changes such as real-time market shifts, sudden demand surges or dips, rapid product movements at any node verberates across the supply chain, often leaving stakeholders with little to no time to react effectively and efficiently.

Complexity

There are, not only, so many stakeholders from raw materials suppliers, service providers, manufacturers, logistic providers and distributors, number of warehouses and locations, sales channels and retail outlets but also so many SKUs (stock keeping units) to manage. The sheer number of SKUs alone is enough to incapacitate efficient and effective planning execution.

Systems

There are numerous disparate MRP, ERP, DRP systems used and deployed throughout the supply chain resulting, in most cases, a siloed supply chain operation.  Admittedly, existing systems are still stuck with rule-based methods that have been proven to be inherently inaccurate.  Most importantly, however, is the fact that there is a glaring disconnect between consumption data and ERP or MRP systems resulting in not only inaccurate forecasts but often, to varying degrees, forecasts that are simply wrong.

These factors make managing today’s sophisticated and complicated supply chain beyond human capacity.  This, in turns, contributes to supply chain inefficiencies in terms of expirations, overstock and stockout, and cross warehouse movements, all of which result in either direct or indirect losses.  

Relying on inaccurate forecasts (not to mention, wrong forecasts!) is a recipe for disaster.  The advent of Artificial Intelligence (AI) and specifically the application of AI into procurement and inventory planning have, thankfully, given the industry an impetus towards an autonomous procurement and inventory planning system that does not rely on forecast!  To be continued...

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Amer Razelan

Supply Chain Specialist

LeadUS USA