Something you need out of stock? From bicycle parts to a single chip needed to complete a new car or truck, supply chain disruptions are killing many businesses—as well as impacting the consumers who use those businesses.
In 2020, the retail sector experienced drastic global inventory distortion due to the pandemic. The estimated value for out-of-stock items was $1.14 trillion. The value of inventory distortion costs in the global retail industry in 2020 was $580 million at the store level, $512 million for supply chain, and $677 million for the manufacturer, according to the IHL Group.
This is truly a classic dependency problem. If you’re building a product with 1,000 parts and all are available except one, that product doesn’t get sold. The 999 successful supply chain events are overshadowed by the one failure that did not allow a company to gain revenue for that product.
Some of this is self-inflicted. By leveraging technology correctly, many of these problems can be avoided, or at least better understood and mitigated proactively. I’m often taken aback by the number of businesses that are wholly dependent on a supply chain and have not automated ways of dealing with management, disruption, or optimization.
To run a supply chain effectively you need near-perfect information that reflects the current supply chain status. This means that you can see the delivery status of a needed part or product as well as the supply chain that links to that part or product, and any nesting supply chains that deal with them.
In other words, if a component can’t be shipped because of a weather event where the factory exists, that’s known in real time. The business understands that the part will be late and can proactively and automatically find alternatives. This occurs without humans having to view, analyze, or correct the processes. It’s fully automated.
Now, consider the power of public clouds to provide data storage, centralized integration of remote systems, predictive analytics, and even full-blown supply chain automation software as a service. The power is available and cheap, but enterprises are not taking advantage. It’s about time to change that.
If there is any silver lining from the pandemic (besides working from home and not having to commute), it’s that we have seen how our supply chains are vulnerable. Even something little can disrupt them. Many of these disruptions are avoidable and can easily lead to bankruptcy or at least shrink the business.
The businesses that learn to automate and master their supply chains using public cloud technology will expand quickly. Events such as the pandemic will become opportunities for growth. We saw some businesses explode in 2020: those that had processes in place and automation to manage their supply chains effectively. Most of these success stories also leveraged cloud.