Achieving greater resilience in supply chain control with artificial intelligence

© Adobe stock

Greater complexity and rapid changes in demand are an increasing challenge in supply chain planning. Artificial intelligence offers the possibility to combine external influences and internal requirements. 21strategies offers third-wave artificial intelligence that even allows real-time decision support. This can make supply chains more resilient and better coordinate specific influences.

Geopolitical changes and instabilities, the COVID 19 pandemic or even the 2008 financial crisis have left their mark. On the one hand, companies face exogenous shocks. On the other, companies must also renew their structures and transition into more agile organizations to be flexible in responding to changes. This not only requires a change in thinking, culture and processes. Here, current artificial intelligence approaches can provide a good opportunity. Companies must be able to react just as quickly to sudden changes in demand as they do to sudden changes in supply. The management consultancy McKinsey recommends predictive models, such as those offered by artificial intelligence technologies, for this problem. In a study, McKinsey also showed that companies could increase supply chain throughput by 10 to 15 percent in the short term without changing other parameters by using intelligent supply chain planning.

In a recent article on this topic, McKinsey was able to identify five benefits of how optimizing supply chain planning with predictive models like artificial intelligence can work. Overall, it is important to note that optimized supply chain planning does not just act on the supply chain itself. Rather, intelligent supply chain optimization is also making companies increasingly agile, flexible, and more responsive to change overall. A core capability in current times. Optimizing closed-loop supply chain control allows agile and fast responsiveness to customer requirements and thus customer centricity. Changes in demand in terms of number and volume can be actively adjusted through intelligent control. This is a fundamental advantage in the consumer sector but also in the manufacturing sector. Another advantage is a bridging between day-to-day and long-term planning. Day-to-day planning is often driven by current constraints. Whereas long-term planning also reflects part of the company's vision. To be able to respond effectively, the bridging phase is crucial: intelligent and agile strategies and tactics that are broken down to the near term. Because they also offer the potential to stay one step ahead of your competitors. This is because trends, e.g. price movements of preliminary products, already become apparent in the near term. Identifying these in advance is a major advantage. McKinsey also identifies a further advantage in a better flow of information between different departments. Intelligent supply chain control systems can take a large number of parameters into account. This also includes the requirement criteria of different departments. Intelligent supply chain planning systems can thus contribute to a better flow of information between departments. As a result, it allows frictionless end to end information flows. McKinsey also sees in intelligent supply chain planning systems the advantage that they can directly detect unrealistic plans, as a realistic data basis can quickly expose them. This can identify operational constraints, save costs and avoid employee frustration. McKinsey also sees a major advantage in scenario analysis. Only a what-if analysis actually provides information about the most advantageous alternatives. Only then can decisions be made.

With Third Wave Artificial Intelligence, 21strategies can optimize supply chains. In real time, this next-gen AI offers decision support for companies. Pre-defined parameters can be tracked and their changes analyzed. However, the core of 21strategies' technology lies in identifying strategies and tactics to control supply chains in real-time or close to real-time. Decision-making can be optimized on the basis of models. A scenario analysis determines optimal decisions. Strategies and tactics can be planned based on this. 21strategies uses their technology to control commodity and currency price changes and hedging. In this way, 21strategies' artificial intelligence provides an opportunity for more resilience in supply chain planning in the context of increasing volatility and complexity. Visit our website for more information.

References:

Aghai-Khozani, Hossein et. al. (2022). A more resilient supply chain from optimized operations planning. https://www.mckinsey.com/business-functions/operations/our-insights/a-more-resilient-supply-chain-from-optimized-operations-planning [09.09.2022].

Author: Tanja Zimmermann