The supply chain issues in 2021 are carrying into 2022 and will likely persevere into 2023.
Here’s what the analysts have to say. Goldman Sachs sent an alert to its clients in December to say they expect bottlenecks in supply chains for all of 2022 and into 2023. Moody’s Analytics also put out an advisory to its clients with the warning that headaches caused by supply chains show no sign of subsiding.
The Los Angeles and Long Beach ports handle 40% of sea freight that enters the U.S. and report some minor easing. Mario Cordero, Executive Director of the Port of Long Beach, has a slightly different opinion than the analysts. He believes you will see some normalization by the summer of 2022.
Supply chain planning isn’t just affected by port traffic though. There are other factors that are impacting production capacity, including the continued labor shortage in the trucking industry and the inability to get replacement parts for broken equipment. On top of that, the lead times for new tractors, trailers, or chassis extend out to more than a year for some manufacturers due to the difficulty in getting materials.
As such, analysts predict sustained regional pressure on freight trucking and intermodal transportation well into the future.
Supply Chain & Demand Planning
Perhaps the biggest change in supply chain management has been the shift in planning. For years, the focus was more on cost control than anything else. Today, optimizing the supply chain long-term is more about survival. Moving forward, organizations need an efficient and agile infrastructure to deal with a rapidly changing environment.
Forget the spreadsheets, manual tracking, and traditional inventory management software. You need real time data and a more efficient way to plan demand and supply. Here’s where you need to focus your efforts in 2022.
Balancing supply and demand has always been challenging. Demand forecasting done accurately allows you to maintain the inventory levels you need to take advantage of market conditions and avoid out of stocks or excess inventory. The right planning and pricing platform can help you forecast demand using historical data and current trends. This allows you to account for seasonal demand, slow-moving inventory, promotions, competitive threats, and new/obsolete items.
This lets demand planners make data-driven decisions earlier, which is essential in today’s unstable supply chain. If you’re importing goods from China, for example, it’s currently taking nearly twice as long as before the pandemic to get into port, and then there are delays with drayage and trucking.
Inventory and Supply Chain Optimization
Many organizations are still managing their inventory and supply chains manually or on separate systems. To optimize your operations and meet customer demand, you need a holistic view of the allocation and replenishment of your goods or services. In short, you need to analyze your entire supply chain network as a single, holistic unit. This not only includes restocking, but moving goods from one location to another, such as warehouse to store.
When changes or delays occur upstream, you need to see the impact across your entire operation so you can be proactive about your inventory needs and your supply chain planning process.
Sales and Operations Synchcronization
The demand planning process and active demand management are just one aspect of your entire production planning. Effective supply chain management needs to synch sales and operations (S&OP) to create a collaborative demand-based supply chain management process. It’s the only way to create a complete and unified demand and supply plan.
Sales and operations planning takes a coordinated effort to manage profitability, especially during uncertain supply chain pricing. For example, the cost to ship freight from Asia to West Coast ports is more than 3X the rates from a year ago. As companies tried to avoid West Coast pot logjams by rerouting raw material, products or services through Europe, freight pricing jumped 5X.
Not only do you need real-time data to forecast demand, but you need to track supply chain lead times and costs as part of your overall management process. Combined with sales data, you can adjust your pricing and sales and marketing plans to stay profitable.
This is one area where a single version of the truth is essential. If data is not in real-time, or sitting in unconnected silos, effective demand planning, forecast accuracy, and supply chain management are difficult if not impossible. You need an integrated business planning process that combines demand planning software with AI and machine learning to stay ahead of the challenges.
Agile Decision Making
One of the keys to maintaining a balanced supply chain to meet predicted demand will be the ability to make timely decisions. This requires an agile mindset to respond rapidly to changing market conditions and emerging opportunities.
Your supply chain planning needs to integrate a statistical forecast for demand with supply planning, inventory allocation, replenishment, and strategic investment opportunities into one unified platform to allow you to make informed decisions. You should also be able to run scenarios within your software to simulate the financial outcome of procurement and price changes.
How agile is your supply chain? Take this quiz to find out.
Cloud-based Smart Automation
Planning is the process of merging demand, supply, and opportunity to maximize value. With today’s supply chain challenges, that requires advanced forecasting and tracking tools. AI and machine learning are essential in optimization, especially for operations that juggle hundreds or thousands of SKUs.
Smart automation can do the heavy lifting for your demand forecasting and auto-select the optimal forecast model for each SKU and adjust the forecast automatically. This can optimize your replenishment, suggest strategic investment, and allocate inventory efficiently based on stock levels and micro-demand in each location.
Then, the right supply chain planning (SCP) solution can sync with your supply chain — using real time data — to calculate your inventory needs based on customer demand and the configuration of your network up or downstream. This helps mitigate supplier volatility, fluctuating lead times, buying schedules, and cost constraints to drive better ROI.
Robust smart automation requires a consolidated, end-to-end solution designed specifically to handle your entire supply chain.
Move Forward with Confidence
Blue Ridge is the leading supply chain platform for manufacturers, distributors, and retailers. We believe that demand forecasting and pricing strategies are not individual activities, but need to be consolidated to create value and account for erratic supply chain conditions.
When everything works in concert, you can more rapidly adjust to new opportunities with confidence.
Request a demo from Blue Ridge today and let us show you how we can help create a more resilient supply chain and improve your ROI.