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The importance of early planning in supply chain management

It’s no secret that the COVID-19 pandemic has had a devastating impact in supply chains around the world. Despite the progress made to curb the pandemic, the high levels of vulnerability in this sector have not diminished. In fact, in July 2021, the Stastica Research Department reported that 56% of retailers had to face some form of supply chain disruption in 2020 and at least 12% suffered from serious problems.

The massive growth in e-commerce since the start of the pandemic, coupled with global trade restrictions and changes in consumer behavior, have put the robust supply chains. And many sectors have suffered the consequences. What’s more, 23% of all global outages during the first half of 2021 occurred in Europe.

To avoid these problems, which cause significant lost sales and negative customer experiences, companies must strive for greater resilience in their supply chain management (SCM) strategies. According to the Boston Consulting Group, the most effective way to achieve this is by betting on flexibility, digitization and early planning of the entire supply chain management.

Important challenges

The global shortage of semiconductor chips affecting organizations around the world is a clear example of the consequences that poor SCM planning can have. From computers and smartphones, to cars and household appliances, semiconductor chips are behind the most electronic devices that we use daily.

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As families adjusted to movement restrictions, confinements, telecommuting, and virtual education, the demand for digital devices and cloud computing services skyrocketed. This led to massive spikes in supplier orders which, in turn, depleted supply and slowed production.

Meanwhile, companies in the sectors most affected by the pandemic, such as automotive and industrial manufacturing, which initially canceled their orders in response to reduced demand, did not carry out effective planning that anticipated a return. to normal. With inefficient supply chains and operating models that relied heavily on delivering parts on time, the automotive industry lacked the resilience and flexibility to withstand business interruptions caused by a shortage of materials.

Changes in consumer behavior

An effective SCM strategy is essential to manage demand volatility caused by rapidly changing consumer behavior. The pandemic has altered our purchasing habits (increase in electronic commerce) and has generated new behaviors such as the so-called “panic purchases”, which makes it even more necessary for companies to improve their planning and cross-sector collaboration with their suppliers. By doing so, they will be able to:

  • Adapt quickly to changes in consumer behavior that cause swings in demand.
  • Take advantage of supply chain flexibility to avoid disruptions.
  • Prevent, identify and alleviate bottlenecks in real time to avoid out-of-stock.

By avoiding out-of-stock situations and, in turn, meeting consumer demand, companies will be able to offer more consistent customer service, helping to build brand loyalty and increase profit margins.

Take advantage of new technologies and data analytics

Betting on the digitization of the supply chain is key to developing effective SCM strategies and linking early planning with execution. Using advanced SCM solutions that integrate artificial intelligence and machine learning can help make data analysis more automated and provide real-time visibility into each stage of the supply chain.

This will allow companies to optimize their inventories and resources. to better meet customer expectations. Additionally, insights generated by automated analysis of inventory data and point of sale (POS) will aid supply chain planning, telling all stakeholders what specific actions need to be taken at any time to resolve or prevent problems.

Companies that are able to combine SCM early planning, their resilience and advanced foresight, they will be much better positioned to take full advantage of business opportunities, generate income and continue on the road to recovery.

Guy Yehiav, General Manager of Zebra Analytics.

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