The Fragility of the Global Supply Chain (and How to Fix it)

A note from HPE:

Amid global supply chain uncertainty and disruption, many businesses have found themselves with unpredictable needs. However, some businesses may have financial constraints preventing them from buying or building more assets/products/materials than are required, “just in case”.

Below, we explore the forward planning and investment challenges wrought by current supply chain issues. While this is not a HPE Greenlake article, it demonstrates a growing use case for a “just in case” infrastructure deployment model with a “just in time” deployment and cost structure which Greenlake can facilitate. As your IT partner we can advise you on how Greenlake can help your business alleviate supply chain stress and mitigate disruption. 

As COVID-driven turmoil extends into its second year, continued breakdowns in the global supply chain have shown the folly of taking logistics for granted. 

Most of us think of supply chains as the things that bring us—or lately, deprive us of—toilet paper, toys, cars, and other products we want and need. But supply chains do much more than that. Global supply chains form a life-giving web that routes lifesaving medicines to the places they’re needed, allows California farmers to feed consumers in Asia and Europe, and enables factories in China to provide components for the technologies that power daily life. 

“The supply chain should no longer be considered an afterthought and something that happens in a dark corner,” says Mark Bakker, senior vice president and general manager of global operations at Hewlett Packard Enterprise. “It’s having a huge impact on society.” 

Why the ‘new normal’ won’t be normal

Don’t expect supply disruptions to end anytime soon. In fact, more frequent interruptions in supply chains are likely to become the so-called ‘new normal’. 

Bakker lists all the factors that can cause logistics to break down: power outages, factory fires, extreme weather, tsunamis, earthquakes, volcanos, and even ocean vessels that get stuck, blocking hundreds of other ships. “Those kinds of things are happening more frequently with a bigger impact than ever before,” he says. 

Thanks to climate change, we can expect more extreme weather. And, as global supply chains move more and more goods, larger ships like the Ever Given will present new logistical challenges. Geopolitical challenges also cause disruptions. For example, Brexit has impacted trade with the U.K. and led to a shortage of truck drivers that has slowed deliveries within Britain. 

While no one was prepared for the level of havoc on global supply brought on by COVID-19, companies that had adopted automation and AI pre-pandemic were in a better position to react in real time to sudden changes in consumer demand and supply chain operations. “If it were not for automation, as well as advancements in AI, over the past five years or so, we would be in worse shape than we are now,” says Randy V. Bradley, associate professor of supply chain and information systems management at the University of Tennessee at Knoxville’s Haslam College of Business. 

“Artificial intelligence and machine learning can help simulate scenarios,” Bakker says. “If a disruption occurs, what will the downstream impact be?” AI tools such as digital twins allow companies to run scenarios to strengthen their supply chain operations. “Having more data and using new technology can help you plan and replan faster,” he says. 

The supply chain environment is rich with data across the value chain. That includes data on customers: what they have, what they want, what they buy, and when they buy it. Using AI and ML, supply chain managers can gain insights to better prepare them for the next disruption. 

“A technology product such as an HPE server has many components,” Bakker says. “Each of those components has its own dataset, characteristics, and specifications. There are different suppliers producing the parts that go into a final product. Each facility has production schedules. In between, those goods need to move from location A to location B to location C. All of that comes with a ton of data that then can be subject to technologies such as AI and machine learning.” 

Humans remain essential links

The 2021 MHI Annual Industry Report found that almost half of companies boosted investment in supply chain innovations because of COVID-19, including inventory and network optimisation, cloud computing and storage, robotics and automation, and sensors and automatic identification. The report predicts that the use of robotics will double within five years. And while only 17 percent of respondents currently use AI to aid in supply chain management, an additional 45 percent expect to adopt AI tools in the next five years. 

However, better tech alone won’t solve the problems plaguing supply chains. While some of the top challenges listed in the MHI report, including better forecasting and demand for faster response times, can benefit from increased adoption of automation, the No. 1 issue was hiring and retaining qualified workers. 

Bradley notes that supply chains were struggling with a labour shortage even before the pandemic. “That’s been one of the top two or three issues for the past five years,” he says. “The difference was that we didn’t have the volume of materials moving that we do now.” For example, the current shortage of shipping containers and trucking capacity are indicators of too few workers rather than a lack of physical capacity. 

“There is this notion that the more we automate, the more we are going to eradicate tasks that were performed by humans,” says Bradley. But he sees technology as enhancing the work experience rather than replacing humans. By giving mundane tasks to what he calls “intelligent appliances”, technology can free supply chain professionals to leverage skills that even the most advanced AI currently lacks, such as intuition and creativity. “The humans do the critical thinking,” Bradley says. “The artificial intelligence just aids you in what to think about.” 

As well, automated processes don’t work in a vacuum. “There is no machine learning model that can do something by itself,” Bakker says. “The biggest misconception about machine learning is that it does what it needs to do without human intervention.” Even robots need humans to teach them how to move. 

In other words, while automation can improve supply chains, we can’t program ourselves out of the labour shortage. 

Automation will take businesses from disrupted to disruptor

“Resilience is just the ability to keep going in the face of adversity,” Bradley says. “Don’t just go through it; figure out how to come out better.” 

The pandemic has given businesses a chance to reinvent their supply chains. Companies can develop operations grounded in emerging technologies rather than overlaying new technologies on top of old processes. Bradley notes that this allows companies to become disruptors rather than being disrupted. 

With frameworks like technology as a service and even robotics as a service, smaller companies can also benefit from supply chain automation and compete with large enterprises. “That’s a game changer for a small to medium enterprise,” Bradley says. “The bigger companies actually struggle to transform.” Plus, smaller businesses are nimbler and more able to change rapidly. 

The future of the global supply chain will include significant innovation and seismic operational changes. For example, during the past two years, many companies moved from just-in-time inventory management to just-in-case models. But the JIC (just in case) approach involves holding unsustainably large amounts of stock, and those holding costs can drive up consumer prices. Bradley sees the next inventory model as JE: just enough. But it will take some time to make the transition. “That’s not a light switch that you can flip overnight,” he says. 

There’s no doubt that supply chain managers work on the front lines of some of the most significant technological challenges facing society—and they’re hiring. “Younger generations should consider supply chain as a profession,” Bakker says. “It is a lot of fun.”