The Corona pandemic or the accident of the container ship "Ever Given" have shown how vulnerable the supply chain of many companies is. In particular, when demand for certain items increases rapidly or there are delivery and production bottlenecks, the necessary flexibility and responsiveness is often missing.
A survey conducted by the German Engineering Federation (VDMA) in March 2020 already indicated the impact of the emerging corona pandemic: according to the survey, 84 percent of the companies surveyed said they were struggling with impaired operations and almost half complained of disruptions throughout the supply chain. The reason lies in the strong interconnectedness of global value chains, which makes the consequences of unforeseen events fundamentally difficult to predict. Many German companies rely on supplies from abroad, especially from China. However, factories there were at a standstill for long periods and could not produce, so that preliminary products, individual parts or complete products were not available. At the same time, demand in Germany for individual consumer goods and merchandise increased. The short-term consequence was a shortage of materials, which ultimately sparked a veritable battle for the goods.
Challenges within the crisis
Expansiveness and continuous planning preclude crisis-related, short-term adjustments to the supply chain for most companies. At the same time, there is also a shortage of personnel due to hygiene requirements and a shortage of skilled workers. In addition, many companies have reduced their safety stock over the years to keep inventory costs to a minimum and tie up less capital. This strategy had a negative impact in the current Corona pandemic, as safety stocks were quickly depleted. Although production in China has now stabilized again, many companies are still unable to meet the sharp rise in customer demand, and a lack of freight capacity in the container sector is further exacerbating the situation. The accident of the "Ever Given" and the associated blockade of the Suez Canal led to further delivery delays worldwide.
Balancing inventories flexibly and up to date
Companies can only meet these major challenges with forward-looking planning and flexible replenishment. New solutions are needed to position themselves crisis-proof and to consolidate their relevance in the competitive environment. More and more companies are successfully relying on the support of digital processes. These help to create detailed sales forecasts with the help of daily updated data. Combined with a management-by-exception approach, daily or intraday sales forecasts and order proposals make it possible to react even at short notice. How well companies can prepare for the market situation depends on the flexibility of the order proposals. The larger the product range, the more important it is to be able to react and adapt. A conventional ERP system reaches its limits here, as it usually makes calculations using static data. This means, for example, that safety stocks cannot be changed at short notice.
However, the precision of sales planning also plays an important role in the success of the company. Collections and the product range should be planned with a view to reliable sales forecasts and with the regular involvement of all relevant departments. The integration of sales, product and supply chain planning ensures holistic and forward-looking merchandise management. Software solutions that work with artificial intelligence are primarily suitable for this purpose. These include, for example, seasonal influences or trends in their calculations and create precise forecasts. This allows supply and demand to be perfectly matched.
Advantages of intelligent software solutions
In addition to flexible and well thought-out sales planning, there are other factors that need to be taken into account to optimize the supply chain. These include the utilization of capacities in truck and container transport, time requirements for imported goods or the flawless connection of suppliers. Specialized software solutions also provide a remedy here:
Functions of intelligent software tools for supply chain optimization at a glance:
- Sales forecasts and order suggestions based on daily updated data
- Consideration of trends or seasonal influencesOptimum utilization of load carriers by consolidating current and subsequent orders in a single shipment
- Include processing and delivery time in the calculation of optimal order times and quantities
- Demand forecast for planning demand coverage and free capacities
- Real-time data transfer for shortened order and delivery processes
- Networking with suppliers for fast communication and easy implementation of last-minute changes
- Detection of outliers and other special impacts
Requirements will continue to increase in the future
Coupled with the failure of the Suez Canal as a trade route, the Corona crisis exposed major weaknesses in companies' supply chains. Many need to rethink their existing strategies. Accordingly, we have learned that specialized IT solutions are essential to remain viable and, in exceptional cases, to win the "battle for the goods". For the decisive competitive advantage, it is advisable to consolidate and manage existing information on a central platform. Finally, the market will continue to make strict demands on companies in the future. Flexibility and transparency will then be required in order to be able to react immediately to the variable and rapidly changing market conditions.
Would you like to position your company for the future with digitalized processes? REMIRA is at your side with expertise and experience as a specialist for AI-supported and cloud-based software solutions for the entire supply chain. Arrange a non-binding consultation now!