The Supply Chain Of The Future Isn’t Afraid To Pivot

The COVID-19 pandemic quickly proved how unprepared the supply chain was for a global business disruption. 

The scale of disruption is staggering — 94% of Fortune 1000 companies have seen supply chain challenges, and a recent survey showed only 10% of supply chains felt completely prepared to handle the disruption. Even shortages of basics like toilet paper are a comical example of a supply chain losing pace with unpredictable public demand during an emergency. 

However, we shouldn’t let the disruption overshadow the progress that was quietly being made within the supply chain in the form of IIoT (Industrial Internet of Things). Before the pandemic, more than 5.8 billion endpoints were predicted to make up the intelligent IIoT ecosystem by the end of 2020. 

Now, as McKinsey points out, the rollout of IIoT in the supply chain will require a more strategic focus as part of the short and mid-term response to coronavirus. For example, companies can see a 20-40% increase in labor productivity through a digital performance management strategy and remote assistance.  

While the pandemic may have stalled or modified plans for IIoT integration, it’s imperative they don’t stop here. Despite the disruption caused by the pandemic, IIoT efforts must continue to ensure the massive and pervasive disruption caused by COVID-19 won’t happen again. 

COVID-19 makes the case for IIoT 

When the dust settles, none of the Fortune 1000 companies who lost revenue due to supply chain breakdowns will accept that outcome again — nor will their customers. Manufacturers, distributors and others in the supply chain ecosystem must learn from the challenges we’ve experienced since March and imagine what a better, more connected future through IIoT could look like going forward. 

Ability to pivot locally

The Present: Manufacturers in the U.S. missed a small but critical window to pivot their businesses in response to shifting demand. When supply lines in Europe and Asia struggled before a surge of COVID-19 cases in the U.S., manufacturers lacked technology that allowed them to turn over product lines and reconfigure operations. By the time they were able to accomplish it, the gaps in the market were already filled by recovering populations in those markets. 

The Future: Manufacturers will have the enterprise resource planning (ERP) and material resource planning (MRP) systems, IIoT networks and other technology components to shift business faster and more efficiently. With advanced IIoT-enabled sensor networks and in-line process automation running on each line, manufacturers have all the data and information they need to make quick decisions and pivot business without being overwhelmed by logistics. 

Managing a supply chain built on traditional sales

The Present: The coronavirus left many manufacturers and distributors in unfamiliar territory — demand is so significant they must make judgments on which customers have the greatest need for supplies. Some have even described shortages of essentials like janitorial supplies as an “all out war.”

The Future: IIoT provides the intelligence manufacturers and distributors need to determine where to shift resources. AI ordering applications, for example, can order certain supplies automatically when it detects a shortage. IIoT also has real-time transparency into material supply — when applied correctly, IIoT-enabled inventory management systems have the potential to reduce overall inventory levels by 36%.

Managing the “bullwhip”

The Present: The Wall Street Journal sums up the “bullwhip” in the supply chain as occurring when companies significantly reduce or add inventories, causing materials up or down the supply chain to overcompensate. The result is a “bullwhip” demand curve that can throw off supply chains on a global scale. A pandemic does a good job of illustrating this concept. Imagine a test tube manufacturer ordering massive amounts of raw material to make sure they can meet demand. In the process, every other customer now puts a run on that type of plastic, and in a panic, the raw plastics supplier ramps up production exponentially. 

The Future: Better real-time demand data and increased intelligent IIoT endpoints will provide a more reliable picture of the supply chain during disruptions. Additionally, AI assisted ordering and predictive analytics into material use will help avoid the ripple effect of the bullwhip in the future. 

IIoT is key to keeping the supply chain stable amid future business disruptions. COVID-19 should be a wake-up call for the entire supply chain ecosystem that better technology is needed in this effort.