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Supply chain transformation: Building resilience with Process Intelligence
We talk about ‘the supply chain’ as a single entity. As if it’s something simple and uniform that can be neatly packaged and observed.
But of course that’s far from the case. Every business’ supply chain is different, and encompasses hundreds, if not thousands of complex interconnected processes. It can start as early as the sourcing of raw materials, include anything and everything through to last-mile delivery, and often continue on into aftermarket logistics. As a discipline it covers the broad areas of planning, execution and visibility.
With many supply chains feeling the strain of economic pressures and geopolitical tensions – specifically the Red Sea crisis – I spoke to Sahir Jiwani, Senior Product Manager, Supply Chain, at Celonis, about the key challenges supply chain leaders are facing, as well as the role Process Intelligence plays in overcoming them.
Two pressing supply chain challenges
Jiwani believes that two of the biggest challenges faced by the supply chain leaders he works with are improving transportation and logistics operations, and maintaining the right levels of inventory.
He explained how ongoing disruptions mean transportation and logistics has gone from being an afterthought to being a key focus area. Due to uncertainty around shipments and delivery times, supply chain leaders want better visibility of transportation to predict and understand disruptions before they occur.
“With the kind of disruptions we're seeing, it's becoming more and more important to, first of all, get visibly into your transportation and logistics operations and also look to optimize the different inefficiencies. That gives you the competitive edge. So if you’re able to identify and act on inefficiencies and bottlenecks in your transportation logistics operations, you essentially are able to reduce your lead time. Shorter lead times mean being more responsive, more agile.”
On the inventory management side, the challenge has been ongoing for some time. With the COVID-19 pandemic many businesses moved from a just-in-time to a just-in-case model. But they were then left with excess or obsolete inventory, which was particularly problematic for CPG or pharma brands where stock has short expiration dates.
With the current disruptions, Jiwani suggests supply chain leaders are trying to maintain an optimal balance, where they have lean inventory levels to minimize waste and free up working capital, but don’t compromise too much on lost sales or on-time delivery service levels.
“Businesses don't want to have too much inventory, like they did during the pandemic, but to be smarter and proactive about it. They want to maintain lean inventory levels, but they want to be able to respond to disruptions and have the right resolution actions ready, whether that's a stock transfer from another location, or collaborating with the right teams to change dates, update orders and so on.”
Addressing these pressing supply chain challenges needs a mix of quick fixes and longer-term solutions.
Increasing end-to-end visibility for the short term
In the short term, the most effective way to overcome challenges is by increasing visibility into the end-to-end supply chain so it's easier to identify disruptions, understand the downstream impact, and then respond with appropriate action. Jiwani gives the example of a delayed shipment:
“Let’s say you have real-time in-transit shipment visibility through a provider like project44, and your shipment is running late. How do you make sense of that data? Does the delay have any downstream impact? Does the shipment include materials that are backordered? Or that form part of one of your outbound orders? And if so – if there is an inventory impact – what can be done about it?”
Traditionally, supply chain teams wouldn’t necessarily have known a shipment was delayed. By gaining this level of visibility they can get smart recommendations and take proactive steps. They might, for instance, explore the option of sourcing stock from another internal location, taking into account the transport costs, and whether reduced stock levels will adversely impact shipping at that location. Or they might collaborate with demand fulfillment teams to see where orders can be pushed out.
In addition, they can take action to avoid any accessorial or demurrage fees that might be incurred due to the delay, and to optimize load consolidation based on the real-time status of shipments. As Jiwani explains:
“By having more granular visibility into when your truck is scheduled to arrive, you might be able to utilize your shipments more effectively. You might have a new order that came in after your load was finalized, but if you know your truck is scheduled to arrive at a particular time and the order can actually be accommodated, you are able to utilize it more fully.”
Increasing visibility also allows supply chain teams to keep planning parameters up to date. For example, if lead times increase as we are currently seeing with the Red Sea crisis, safety stock levels need to be updated in parallel to avoid material shortages and make sure planning runs are more efficient.
A long-term redesign of supply chain networks
While increasing visibility helps address immediate challenges, many supply chain leaders are taking a longer-term approach and optimizing their entire supply chain network design. This might include diversifying sourcing networks, reconsidering manufacturing hubs in favor of regional or more localized sourcing, reworking trade strategies or rethinking transport routes. While this process has been ongoing for some years, current geopolitical tensions are inevitably accelerating their efforts.
These types of changes don’t happen overnight. When the war in Ukraine disrupted the supply of wire harnesses to car manufacturers all over the world, for example, it took months for suppliers to increase capacity at other locations. For most businesses, network optimization will start with simpler, tactical actions, such as favoring particular suppliers, and then move onto larger changes, such as opening a new plant or changing an entire sourcing region, over a number of years.
“Usually, you'll see a phased approach where you slowly move towards diversifying your sourcing. It could just be introducing a few new suppliers, or updating a preferred supplier based on recent developments. It could be evaluating your supplier performance more closely to see the on-time delivery levels. What's the cost implication and – more recently – what's the climate impact? That's top of mind for a lot of businesses and it's going to be part of network design decision making.”
As you can see, although network design optimization is a longer-term plan, there are decisions and actions that can be initiated in the near term.
The role of Process Intelligence
Process Intelligence has a role to play in both near-term problem solving and longer-term supply chain redesign. It combines process mining with AI and codified process improvement knowledge to enable a true digital representation of the end-to-end supply chain – effectively a digital supply chain twin. This is essential to understanding how your supply chain is performing, where there are opportunities to improve efficiency, and what resolution actions you can take to realize them.
Jiwani outlines how case-centric process mining has evolved into object-centric process mining (OCPM) enabling interrelated objects and events to be connected across business processes. When used within Process Intelligence, OCPM can serve as a basis to assess the impact of changes in one process on other areas or processes – including cost and sustainability implications. It can enable cross-functional team collaboration for response management, decision making and resolution.
“With OCPM and the Process Intelligence Graph, Celonis is able to really connect these different processes together, understand the downstream impact of one event in one process on another, and facilitate collaboration between cross-functional teams so you don’t just sense disruptions, but also act to resolve them and be more proactive. With traditional process mining that's not possible because you're within the realm of one process without understanding the overall impact on the supply chain.”
Supply chain transformation
Far from being a simple, single entity, your supply chain is a unique and complex web of interconnecting processes. Process Intelligence can help you overcome core challenges like improving transportation and logistics operations and achieving optimal inventory levels, by increasing visibility, identifying issues, understanding impacts across all of these processes, and recommending resolution actions.
Read more about how enterprises are optimizing processes and transforming their supply chains with Celonis Process Intelligence:
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