Building Supply Chains For Persistent New Realities

As China staged what amounted to a naval blockade of Taiwan and its world-leading traffic in microchips, it became clear to global manufacturing CEOs that supply-chain issues have the potential to dominate the next few years just as they have disrupted the last few years.

The latest geopolitical events have given factory chiefs yet another nudge in the direction of reconstructing their end-to-end logistics schemes around resilience and control above other previously paramount considerations such as manufacturing costs.

“Things are better off than a year ago, but we’re still in the foothills of this recovery,” Duncan Angove, the new CEO of Blue Yonder, a $1.1-billion leader in supply-chain and warehouse-management software that is part of Panasonic Connect, the industrial digital arm of Panasonic. “People are finally looking holistically at the supply chain going forward. It doesn’t look like it did. At the same time, we have management teams that never have had to deal with inflation; these people weren’t running companies in the 1970s. These are new muscles that corporations haven’t had to exercise before.”

Angove notes that supply-chain resilience took a big hit during the last three years. “We lived through decades of prosperity thanks to globalization and technology,” said Angove, who joined Scottsdale, Arizona-based Blue Yonder as chief in July after holding senior executive roles at Info, Oracle and Retek. “You can argue some of that came at the expense of resilience. Then, no one could have predicted a pandemic, the bottlenecks, the regional disruption. The biggest supply-chain disruption we had before the pandemic was ash from volcanoes in Iceland.”

Blue Yonder and its artificial intelligence systems and software comprise the world’s biggest concentration of supply-chain planning and execution management, Angove said. Panasonic has announced that it’s preparing for a stock exchange listing for its supply-chain business, centered around Blue Yonder.

Blue Yonder represents “an incredibly rare asset,” Angove said. “Three years ago, no one knew what the supply chain was. Now it’s one of the most important, mission-critical capabilities of any company. Also, the climate and [environmental] footprint are supply-chain drivers. So [his new job] was a chance to build a cool company doing something incredibly important and saving the planet at the same time.”

Vast supply-chain disruptions have prodded manufacturing executives to react in a number of ways to attempt to build more resilience into their systems, including increasing the number of supply sources, padding inventories and reshoring some production, in addition to turning to Blue Yonder and other software providers to help them make decisions and execute their strategies.

Angove said that some manufacturers, for instance, “are shifting away from pure just-in-time where they’re running very lean, and moving more to a model of using the supply chain to virtually mimic just-in-time, but with more inventory.”

Isn’t that essentially abandoning just-in-time? “No—think of it as Version 2. You’re now going to be sourcing materials from multiple different places and trying to orchestrate their arrival. You’re getting much better at predicting demand and how long it will take something to get from Point A to Point B. For example, what are the delays in Los Angeles when a container arrives [at port]? And then getting visibility to that in real time. We have [features] that can do all of that and lay a prediction on top of that and give you a much better idea of how things are flowing and help you to orchestrate all that complexity.”

The recent era of supply-chain disruption also has fed a growing “reshoring” movement among U.S. manufacturers, Angove acknowledged—albeit with some dismay. “I’m a big believer in globalization, so it’s quite a depressing thought for me,” he said. “For sure, [companies] are going to make sure they cover themselves by having some infrastructure in the U.S. But I believe in specialization and trade.”

Given these swirling and significant dynamics, Angove advised manufacturing CEOs to consider a few principles as they unsnarl and rebuild their supply chains:

• See the entire chess board. Blue Yonder, for instance, offers a primary feature it calls Control Tower that provides dashboard-style visibility and capability across the length and breadth of a global supply chain. “A lot of what resilience looks like comes down to the notion of a control tower for the supply chain,” he said.

• Leverage prediction. “Take advantage of the new set of predictive capabilities,” he said. “The way companies used to forecast demand at any level of the network was based on old school thinking. It wasn’t taking advantage of AI and machine learning. And it didn’t have the computing power that now is available through the cloud. Now, you can run a massively predictive model that brings a completely new mindset to it and can predict demand and everything else.”

• Build a supply chain for now. “Don’t build what you would have built 30 years ago, when you were making decision about individual parts of the supply chain,” Angove said. “Architect from the ground up, with automation, automatic storage and retrieval, cross-docking and flow-through. Microfulfillment centers also are growing and are an explosive part of the business.”