Disruption Scared Half of Supply Chain Execs Into Investing to ‘Weather the Storm’

Date: Friday, May 5, 2023
Source: Sourcing Journal

As many as 78 percent of supply chain executives are leveraging artificial intelligence (AI) or machine learning (ML) in their supply chains as the majority of businesses feel the heat from disruptions.

A report from supply chain management and omnichannel commerce fulfillment provider Blue Yonder indicates that companies are turning to AI and ML for reasons that range far and wide.

Inventory and network optimization is the favorite among supply chain executives, with 33 percent saying they use AI/ML to improve efficiencies in those areas.

Coming in second place, 29 percent of executives are using the technology to bolster their warehouse resource management capabilities. Twenty-six percent indicated that they use AI/ML technologies for supply chain risk management, the survey said.

After the top three, AI and ML appear to have wide application in the quest to make the supply chain more efficient. This includes demand forecasting (25 percent of executives), transportation (23 percent), manufacturing analytics (22 percent) and business planning with autonomous scenario management (19 percent).

Dynamic pricing and promotion optimization (18 percent) and robotics process automation (15 percent) are two additional areas where some supply chain professionals employ AI/ML technologies.

Beyond identifying the reasons for AI/ML implementation, the report also revealed that just about everyone got hit by supply chain constraints—87 percent of businesses reported they experienced supply chain disruptions within the past year.

More than half (52 percent) of the 300 C-suite and senior executives surveyed cited customer delays as the most frequent outcome of the disruption.

Despite prolonged logistics challenges, however, most respondents (62 percent) indicated their supply chains were reliable enough to withstand the pressure.

“Business leaders have come to expect the unexpected,” said Chirag Modi, corporate vice president, industry strategy, supply chain execution at Blue Yonder, in a statement. “After the initial supply chain shock in 2021, organizations sprang into action and invested in tools and technology that would help them preempt and weather the storm. More than half (52 percent) of respondents have increased their supply chain investments in the last year, with 38 percent reporting investments of at least $10 million. Most (56 percent) of these investments are going toward technology.”

The Blue Yonder Supply Chain Executive Survey collected responses from more than 300 C-suite and senior executives across manufacturing, retail, 3PL, transportation, planning and warehousing, with responsibility for supply chain and manufacturing operations in the U.S.

The survey touched on other areas of concern. For example, inflation remains top-of-mind for supply chain leaders, with 43 percent reporting increased costs of raw materials as a result.

Inventory (15 percent), transportation (14 percent) and labor (14 percent) have become more expensive due to prolonged inflation, while 12 percent of respondents said their supply chain technologies cost more.

And the added costs are clearly impacting the bottom line. Nearly half (48 percent) of respondents reported shrinking profit margins over the past six months. But there is hope—39 percent of the executives said their margins increased over the same period. Another 13 percent reported no change in profit margins.

In response, supply chain executives have sought avenues for strategic investment to handle both the expected and unexpected logistics disruptions. Most of these investments (56 percent) are in technology, including warehouse management systems (44 percent), order management systems (39 percent), supply chain visibility tools (36 percent) and transportation management (30 percent), according to Blue Yonder.

The continued pouring of resources into these systems suggests that the widespread shift toward omnichannel commerce and fulfillment has not yet reached its conclusion, Blue Yonder said.

Outside of technology, 42 percent of the respondents surveyed said they are investing in both additional workforce and sustainability initiatives. It’s not just staffing that companies are trying to better develop—47 percent of execs said they plan to invest in enhanced workforce training procedures.

Amid the tight labor market, 87 percent of organizations say they have made internal changes to attract and retain talent.

There are four major areas where these businesses are taking that leap, with most trying to entice with better compensation—51 percent of respondents said they were offering more competitive pay and bonus structures. Forty percent are opting to create or offer more flexible scheduling options, while 38 percent are providing higher levels of training to upskill current employees. Finally, 29 percent say they plan to be more lenient on specific job/industry experience of candidates.

The investments in both staffing and technology have delivered various benefits, with a majority (54 percent) citing improved efficiencies as a top outcome. Forty-two percent cite fewer disruptions, while 39 percent say they’ve experienced revenue growth.


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