Having good data is fundamental, but it won’t help you reallocate inventory in real-time or alter supply deliveries to ensure production stays on schedule. Here, Kearney’s P.S. Subramaniam and Hieu Pham, discuss applications of the Sense and Pivot model of high tech supply chain optimization.Â
Today’s high-tech manufacturers are at a critical crossroads. With the right decisions and strategic investments, they have the potential to grow revenue by 50 to 100% in the next five years as the demand for consumer and business electronics continues to increase.
However, recent times have shown many challenges to a healthy business realizing profitable growth. Supply chain pressures are creating numerous roadblocks, from stockouts and excess inventory to constraints on delivery due to geopolitical and trade tensions, natural disasters, and increasingly unreliable climate forecasts.Â
Even as the pandemic has eased over the last several months, we still see turbulence across the high tech industry, from record inventory levels to rapidly changing demand. In this article, we look at how adopting advanced digital capabilities such as intelligent modeling, machine learning, and other technological solutions can build resilience in the supply chain.
Driving Supply Chain Efficiency with Data-based Solutions
The road to the best results is paved with data. We know, of course, how critical data analytics is to the supply chain. Still, data alone won’t reallocate inventory in real-time or alter supply deliveries to ensure production stays on schedule.Â
Instead, a data-driven framework is required to help companies build the capabilities to detect problems in advance and proactively solve them. Adopting such a framework can support the deployment of solutions that access insights and data in real-time, then translate that information into immediate action. That way, companies can navigate turbulent times with greater success.Â
Building Resiliency into Supply Chain Design
Instituting a Sense and Pivot framework can deliver a profound impact. It can make a high-tech manufacturer more resilient, building its ability to sense disruptions and pivot to mitigate negative consequences quickly. Risks can be identified, and the right levers pulled to address a wide-ranging set of challenges with immediate results.
The “sense†part of the model is advancing rapidly. Drawing on artificial intelligence, machine learning, and other advanced technological capabilities can help us identify potential risks far ahead of what was previously possible. End-to-end visibility is becoming increasingly achievable and accessible, with readily available solutions able to conduct real-time simulations to test systems and predict present and future hazards.
To “pivot,†the manufacturer needs to interpret the messages its technology has “sensed†and act on them—using an agile and collaborative operating model.Â
Ideally, a Sense and Pivot approach would be incorporated early in supply chain development so that the framework can sit at the core of a manufacturer’s enterprise resource planning (ERP) system. Realistically, this isn’t always practical. Companies dealing with significant technical debts and a complex legacy ERP landscape often find additional investment in legacy software can dampen plans for a full-scale overhaul of supply chain infrastructure from both cost and speed perspectives. However, there are now better solutions.
Middleware to Rescue
Once upon a time, carrying out a digital transformation that could build this type of cutting-edge capability would take two to five years and involve lengthy data migration, checking, testing, and training processes. Today, the pace at which a Sense and Pivot model can be enabled has greatly accelerated.Â
The shift from relational to graph databases means that technology can now be more flexible and adaptable. Anchoring data to entities rather than table schema allows for the rapid harmonization of data with point solutions.
Implementing middleware solutions can greatly speed time to usefulness, allowing companies to keep moving quickly to enact a Sense and Pivot philosophy and get the data insights they need. The result is a new ‘cognitive layer’ that creates greater flexibility but doesn’t require a complete internal overhaul.Â
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Sense and Pivot in Action
At Kearney, we have seen Sense and Pivot work in various scenarios. In one example, a manufacturer of semiconductors and optical materials saw skyrocketing demand for its products—triggering an order backlog that put billions of dollars of revenue at risk because supply chain issues prevented it from filling its orders timely. The company could not tell customers when it could deliver its products, as its supply of raw materials was constrained.
In this instance, a single product sold by the company could contain thousands of raw material inputs. If just a few of these inputs were delayed, it would throw the entire production schedule off.Â
The company, therefore, opted for a middleware’ solution. This included an analytical model that could be rapidly designed and implemented to accurately allocate thousands of available raw materials to different products, customers, and manufacturing sites.
The company was able to design, build, and operationalize this tool in a matter of weeks to help it intelligently model the scenarios which would boost profitability. That, in turn, meant it could provide and deliver on accurate commitments to its eager customers, despite challenges with availability. As a result, it was able to maximize revenue and profit.Â
In another example, a consumer company with retail outlets across the United States and thousands of products was losing sales because it did not have the right products in the right stores at the right time. It also faced other cost inefficiencies, such as shipping and inventory costs.
They chose to deploy a tool that could “sense†demand using a variety of internal and external demand signals as part of a machine learning model. This tool fits into the company’s existing processes and infrastructure and could be used in weeks.Â
The result? The company generated a more accurate and granular forecast that reported which products (down to the SKU level) would be sold at what location. Following this forecast allows the firm to properly manage its inventory and ensure more accurate product availability in stores.
Optimizing the Supply Chain Faster
Sense and Pivot, is quickly proving to be the most significant development in supply chain technology in decades. It allows a manufacturer of virtually any size to operate a resilient and agile supply chain without the heavy investment in dollars and time needed to put infrastructure through a digital transformation overhaul.Â
Which strategies have you implemented to overcome high tech supply chain challenges? Let us know on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .