Dynamics Matters Podcast Ep 74: 3 trends impacting global supply chains

Welcome to episode 74 of the HSO Dynamics matters podcast.

Your regular sonic dive into the world of Microsoft technology related matters and much more besides.

I’m your host, Michael Lonnon.

Recent political and geo-political turmoil won’t have escaped your attention. Much of it noise in the media. So how much of it will directly impact you? The answer is, a lot.

I grabbed HSOs Head of Manufacturing, Chandra Shankar, for a chat about how uncertainty is impacting global supply chains and their ability to weather the disruption.

So, grab a brew, sit back, relax, and enjoy the show.

Michael Lonnon

Cut back or invest?

Chandru Shankar

Yeah, good question. I would say at this point, I would like to see organisations invest, obviously. But because it’s a tough period, they’re probably cutting back, but this is also the time to get some of those projects done by investing. So yeah, it’s hard.

Michael Lonnon

Do you think, from a manufacturers point of view, and from a supply chain management point of view, that given the state of flux that the economy and the world is in at the moment that it is important to continue to invest? Do you think that’s the right thing to do for most of these organisations?

Chandru Shankar

Yeah, I think so, it’s a hard question. So, when you think about the state of the economy, you could make the case for now’s not the time to invest and now’s the time to be more cautious and that probably is true. At the same time, you could also look at it as you know what, whilst the business is still normalising, you might take the time to invest in projects that are important that you might not have the resources to get done, while the business is flourishing. So now might be the time to invest in those kinds of projects.

Michael Lonnon

In terms of going back to the whole the world is in a current state of flux and supply chains are difficult to manage, what are the three main challenges for manufacturers managing their supply chains at the moment?

Chandru Shankar

So certainly, when you when you look at the reports like Gartner supply chain Executive Reports, you see Forrester reports, you see the IDCs and McKinsey reports, I think the biggest problem right now are related to visibility of supply. 70% of supply chain leaders have been responding to disruptions since 2019, which is no surprise when you think first the pandemic and now the war. So that’s been the main focus for these leaders and part of that is visibility. Many of these leaders have visibility for the next year so, like the first year of suppliers, but then it stops. They don’t have a tier two, tier three, etc and that makes a big difference because it’s a ripple effect. Every time there’s a problem with demand, it ripples down to the supply, but it goes all the way down multiple tiers, and it keeps the bullwhip effect, it keeps getting worse as you get further out. So having the ability to have visibility across the supply chain, all the way down to the second and third tiers and even beyond, if necessary, is key for supply chain leaders.

Michael Lonnon

Does it help with control? If you’ve got better visibility of the different tiering, does it help you as a manufacturer with controlling how its operating?

Chandru Shankar

To an extent, it will, but the other aspect also gives these manufacturers ability to change course. If they know there’s problems that’s going to happen and cause issues for supplier X and supplier Y then maybe they can look at supplier A and supplier B. That’s also another trend we’re seeing where these leaders going into dual sourcing. So, they’re looking at not just implementing what they already had with a certain set of suppliers, but they’re looking at how can we have multiple supply chain networks and how we can join them. If there is a problem here, we can go into that area but they’re also not just doing the deal sourcing, they’re also starting to develop regionalised supply networks. So that in years past, there was a huge reliance on China and there’s geopolitical issues now, a lot of manufacturers are pulling some of those suppliers closer to home. So now, you’re starting to see leaders position multiple suppliers. So, you have a strategy A and a strategy B, if things go wrong, and maybe even additional strategies.

Michael Lonnon

How are manufacturers trying to overcome the difficulties within gaining visibility or finding a way to create dual sourcing environments and multiple networks?

Chandru Shankar

I think the number one thing they’re trying to do is increase visibility, like, we talked about, and that’s investing in technology, and also big investment in AI because now they’re getting terabytes and terabytes of data. I don’t even know what the adjective is now, I think it’s first of all, petabytes. It’s just multiple billion tonnes of data and there’s only so much a human brain crunch through, and that’s where AI comes in, because AI is able to comb through all of this data and find patterns in there and then serve it up to the analyst and say, okay, here’s something I’m seeing maybe that’s an area of concern, maybe that’s an area we’re continuing to do really good and we should duplicate that in other areas. So, AI is becoming a huge element, simply because it can surface up not only patterns, but also surface potential actions that the analyst can take, and then circle up to the leaders. So those are, big areas, we’re also starting to see more reliance on systems for matching demand and supply simply because over the last couple of years, there’s been a huge increase in inventory build-up, simply because the leaders have had to build up buffers. When you have so many disruptions in your supply chain, you have to build up buffers, but if you build the buffers that increases your cost. So now companies are looking at, okay, how can systems help us better connect demand to supply and we’re seeing theories like demand driven MRP, things like that work that connect up and create. So, this theory is, interesting, it’s something that HSO does really well. We’ve been working on this technology for a while, this theory for a while, but it’s really about not just static buffers, but how do you put these dynamic buffers in different points of the supply chain, and let that system readjust itself as you keep re-planning due to disruptions. So, it’s really interesting to see.

Michael Lonnon

The move to AI driven modelling and managing demand and supply in this way that you talked about there, I’ve heard the phrase smart factory has been mentioned quite often in relation or creating smart factories in relation to using these technologies to create AI driven modelling.

Chandru Shankar

Absolutely. So, I think that one of the key areas is smart factories, but companies also use other terms, such as factory of the future. It’s really a complex system of self-regulating machines. So, you’re able to take all the data and allow the system to adjust itself. When it sees disruptions, and again, that’s where AI comes in so first off, you have to connect the data points from across all of the world, across your supply chain, across your own production, but also across other data points coming from your different suppliers. When you have all the data, then being able to use the data and use AI to regulate and manage these machines and manage the output in a way that it reduces disruptions in the supply chain, and, at the end of the day, manage the output and match it with demand signals. We’re seeing that another major area, whether you call a smart factory, people still use the term industry 4.0 but at the end of the day, you’re trying to create an environment that A links all the data together and B it’s able to self-regulate itself.

Michael Lonnon

Not so much smart factories it’s just smart practices. From your point of view, and from your experience, what advice would you give to manufacturers looking at ways to improve supply chain connections, predictability, efficiency?

Chandru Shankar

I mean, I’m a big believer in cloud technology. There are still manufacturers who feel they need to protect the data, it needs to be within the four walls etc .. But even for them, when you think about their salespeople or their technicians, their servicemen, service people, when they’re out there, going to the customers, they need access to the data and how they’re going to access it, they’re going to access it through the internet. So, they are still exposing certain elements of the data. So, I think people need to get over the fear and really transform their business into the cloud. It offers so much flexibility for one, it’s not your business. Your business is manufacturing and making parts and provide the services that you are so good at for your customers. Let the technology providers manage your technology, you know, let them keep the solutions up and up and running and up to date as the solutions evolve. I think cloud transformation is huge. It should be the number one priority of the customer if your solutions not already in the cloud. If they are in the cloud, then start to look at AI. That’s obviously a huge area simply because the petabytes of data coming and how do you manage that data and find patterns quickly with the data.

Summary
Chandru suggests that the best way for manufacturers to improve their understanding and management of supply chain is to move to cloud technology.

He believes not all manufacturers have identified the value of doing so. And argues that moving more systems into the cloud makes it easier to connect data between them, improving insight and making it easier to adjust to meet the situation at that time. It also makes it easier to embed more innovative technologies like Artificial Intelligence to further improve productivity and efficiency.

Thanks for listening, until next time, take care of yourselves.