How Can Supply Chain Reconfiguration be Done?

by Vital Shpakouski Published on March 22, 2024

International supply chains are a key element of the global economic system. According to M. Christopher, a classic in the study of supply chain management, in the modern economy, it is not companies that compete, but the supply chains in which they participate. The global supply chain system has long operated on principles that have at some point maximized the potential of economic globalization.

Why reconfigure your supply chain?

Changing the composition and number of links in the supply chain or the relationships between them is called supply chain reconfiguration. Changes may be in the length, width, intensity of channels, or specialization of channels in certain sales markets (geographical, product). In almost any supply chain, sooner or later there comes a time when it is necessary to rethink the characteristics of the supply channel and reconfigure it by the characteristics of demand and competitive factors of the process of delivering products to customers. This is done for several reasons:

Cost optimization. This may be the search for more efficient supply partners, revision of logistics schemes, reduction in the number of intermediate stages, etc. All this will help reduce the costs of production, logistics, and storage of goods.

They are improving the quality of the supply chain. Reconfiguration can improve the quality of products or services by selecting more reliable suppliers, improving quality control at various stages of production, etc.

They are reducing risks in the process. Any risks (such as natural disasters, product quality problems, or changes in legislation) that could interrupt supply can be reduced by distributing supplies among different suppliers or changing the geographical location of deliveries. Risks also include DDoS attacks, which unfortunately are not uncommon in the modern world. Attackers very often try to steal data from large companies. For reliability, you can read the article with detailed statistics.

It reduced response time. An efficient supply chain allows you to quickly respond to changes in demand and market conditions, which reduces response time and speeds up production and delivery processes.

Improving the level of customer service. Service levels will improve through faster delivery, improved product quality, and greater flexibility in responding to customer requirements.

Supply chain management: Ways of reorganization

Business does not stand still in this matter. McKinsey, in the article “Building the Supply Chain of the Future,” believes that the reorganization of supply chains is carried out in two directions. First, traditional supply chains are being “split” into smaller ones. This makes them more flexible, and better prepared to work in turbulent environments. Second, traditional supply chains are being reconfigured to hedge against uncertainty.

Implementation and use of AI in supply chain reconfiguration

Modern technology allows us to improve logistics networks by selecting the best delivery routes while accounting for many characteristics like time, cost, road conditions, and others. This is made possible by machine learning and route optimization algorithms. People may now focus on other aspects of the supply business optimization at the same time, as this makes their jobs much simpler.

AI can analyze large amounts of data on past sales, seasonal fluctuations, market trends, and other factors to predict future demand. In addition, at the moment, artificial intelligence is designed in such a way that it is constantly learning and developing. When using AI, allows companies to more accurately plan production and inventory, avoiding unnecessary costs or shortages of goods.

The applications of artificial intelligence are diverse. Another example would be AI’s capacity to optimize inventory levels while taking into consideration variables such as demand dynamics, delivery delays, storage costs, and more. This reduces inventory costs, reduces stockouts, and improves overall supply chain performance. And, given the current state of affairs, this is an excellent opportunity for firms to reduce expenditures while increasing income.

AI may be used to locate the most trustworthy and efficient suppliers, improving the supply chain’s quality and reliability by reviewing data on supplier performance, product quality, delivery deadline compliance, and other indicators. AI may help automate decision-making activities, such as identifying ideal order parameters, distributing resources across the supply chain, and providing solutions to decrease risks and optimize costs.

Optimization Using AI Simulation

AI excels at interpreting data and predicting consequences. Supply chain companies may take advantage of this opportunity to enhance their operations with AI modeling. AI can assess the configuration of a certain process, identifying bottlenecks and potential issues.

Simulation allows supply chain organizations to optimize their operations while avoiding actual delays in the process. In 2021, Google unveiled one such AI-powered digital twin product, meant to assist supply chain organizations save money through efficiency. These tools may be incredibly useful for any stage of the supply chain.

For example, a warehouse manager can construct a digital duplicate of their whole facility. He may then utilize AI logistics modeling on this digital twin to test various optimization tactics. In this approach, he may determine the best logistics plan for the warehouse without disrupting current operations.

Supply chain cybersecurity

Cybersecurity has never been more critical for supply chain enterprises. In reality, by 2022, ransomware as a service has grown into an entirely new underground market in which hackers may buy malware to execute rapid assaults on enterprises. It’s not just large businesses that will suffer. One incident in 2022 affected as many as 2,000 individual SMEs.

To keep up with these dangers at every level of the supply chain, supply chain management requires strong and adaptable cybersecurity. Because of its capacity to discern patterns, artificial intelligence is a very effective technique for reaching this aim.

For example, a warehouse may utilize AI to constantly monitor login activity on its servers. If the AI identifies any suspicious or illegal login attempts, it may notify security personnel and potentially disable the questionable account.

Automated inventory management

Warehouses play a key role in the supply chain. If a warehouse operates inefficiently or handles inventory inefficiently, it can have a significant impact on the whole supply chain. AI can help warehouses automate inventory management, saving both time and money.

For example, blocks can be outfitted with IoT tags that monitor the status of each part. If the products within each unit are perishable, the IoT tracker will monitor how near their expiry dates are. IoT tags may send data like this back to the AI center, which maintains all of the inventory data. AI may then notify warehouse managers when inventory products are about to expire or when inventory levels exceed or fall below a certain threshold.

Tracking supply chain resilience

In recent years, sustainability has been a primary focus across the supply chain. On the one hand, this benefits the environment as well as those who work in and support the supply chain.

Furthermore, sustainability projects frequently focus on waste reduction, which is a significant step toward decreasing the load on the supply chain, particularly for raw material suppliers. AI can help businesses assess the sustainability of their supply networks, boosting transparency.

A notable example is route optimization with AI logistics algorithms. Businesses may lower their supply chain’s carbon impact by selecting the most effective shipping routes, whether on land or water.

AI and IoT devices may also assist firms assess the sustainability of their partners and suppliers. AI algorithms can monitor where all of the components of a final product originate across the supply chain. This will boost transparency and help firms better evaluate possible sustainability issues.

For example, a supplier may utilize toxic colors throughout the production process. If a company can remain on top of this owing to AI, it may select a more sustainable supplier.

Reduce loss and errors

Artificial intelligence may be a very useful tool for decreasing material waste and enhancing overall quality control in the supply chain. This is primarily due to machine learning’s extraordinary capacity to do tasks such as computer vision and automate complicated procedures. Businesses in the supply chain may use AI and IoT to decrease waste and mistakes quickly and precisely.

For example, a manufacturing business may wish to automate the quality control of its cardboard boxes. An AI-powered camera may be used to scan boxes as they move through a manufacturing line, finding faults quickly and without causing bottlenecks.

Similarly, IoT devices may be used to gather information about how much raw material is utilized in the manufacturing process. AI data analysis algorithms can utilize this information to discover where materials are consumed and squandered the most.

These concepts enable firms to use raw materials more efficiently while reducing the total load on the supply chain.

Artificial intelligence-based demand forecasting

Manufacturers and merchants can benefit greatly from artificial intelligence. These organizations may employ AI data analytics techniques to forecast supply and demand in the coming quarters. AI algorithms may examine different data sets, such as sales data and consumer patterns, to forecast future demand for a certain product.

Accurate demand forecasting may alleviate the overall stress on each stage of the supply chain. Manufacturers do not have to overload their raw material suppliers with additional orders if they know exactly how much of a certain commodity they will want.

The same is true for merchants who outsource their orders to manufacturers. Finally, this can assist decrease waste in the supply chain.

Tasks within the framework of supply chain optimization

Companies that reconfigure supply chains often offer the following services:

Medium or long-term planning, broad coverage across the entire supply chain.
Optimization of flows, production, investments, delivery frequency, lead times, CO2 emissions, transport fleet, customer delivery, omnichannel supply chains, and network optimization.
Demand sensitivity and returns logistics.
Inventory management, routing, and building an optimal supply chain from scratch.
Cost-to-Serve analysis.
Sales and Operations Planning (S&OP).
Supply chain segmentation and risk management.

It is worth noting that each company has its services and its packages of services, so this is only an approximate list of services that companies provide.

What is a sustainable supply chain?

By reconfiguring supply chains, you can achieve a resilient supply chain. But what is it?

Supply chain resilience is defined as the capacity to adapt swiftly to operational disturbances through flexible planning and contingency forecasts, including materials procurement, logistics, and final product and service delivery.

A resilient supply chain is defined by its capacity to withstand and recover. This entails being able to minimize most supply chain interruptions and greatly reduce their impact. Operational risk and disruption may endanger numerous aspects of the supply chain, as well as a company’s long-term viability. As we saw with COVID-19, global disasters may have far-reaching consequences for supply chain logistics, suppliers, and workforces. Other supply chain disruptions might take the shape of unexpected competition, unanticipated market movements, or even quick changes in purchasing behavior.

The most resilient supply chains do more than simply resist and recover. They are developed utilizing methods and contemporary supply chain technology that enable them to predict, anticipate, and respond promptly to any dangers and opportunities that may arise in the future.

Conclusion

International supply chains, a key element in the functioning of the global economic system, are fully affected by crisis processes caused by the global recession, the COVID-19 pandemic, and so on.

Along with external negative factors, the emergence of gaps is due to the inapplicability of traditional approaches to supply chain management that have developed over years of stable development. These include management with insufficient observability of processes in the chain, focus on a limited number of resource sources, the imperative to reduce costs at the expense of reliability, and the lack of mechanisms for prompt recovery and restructuring.

Generalization of the results of theoretical research allows us to identify several conditions for increasing the stability of supply chains. These include using AI; choosing more reliable suppliers; creating resource redundancy; increasing flexibility of response and speed of decision-making; developing interaction between supply chain participants and increasing information transparency in supply chains; and innovations aimed at increasing the flexibility and adaptability of supply chains.