Supply chain optimization

Retailers, manufacturers and other organizations are exploring ways to better understand and act on changes in the market as they occur. They need to balance protecting margins, utilizing store and warehouse capacity and meeting delivery expectations. Sourcing decisions can dramatically increase profits, especially during peak periods.

In addition, organizations are exploring how to create a more environmentally-sustainable footprint. Their goal is to redefine sustainability across the entire enterprise.

This article provides an overview of the steps organizations can take to optimize their supply chains. It is part of an eight-part series that focuses on use cases that were derived from analysts and organizations such as Gartner, McKinsey, Harvard Business Review, IDC and IBM Institute for Business Value; they’re also grounded in IBM and Red Hat customer implementations.

Let’s begin with the business problem.

Business problem

Chief Supply Chain Officers (CSCOs) face major challenges related to supply chain disruptions, technology infrastructure, sustainability and market shifts. Yet when addressed with an open mindset, challenges create opportunities within the enterprise.

A Harvard Business Review article, Three steps to prepare your supply chain for the next crisis, reports:

"Companies that are well prepared and as a result prosper in a crisis can expect to recover more quickly than their competitors. In a review of corporate performance during the past four U.S. downturns (since 1985), Boston Consulting Group (BCG) found that 14% of companies increased their sales and their profit margin.

Investors are starting to reward companies that build for the future by becoming more innovative and more resilient. In June 2020, during the depths of the Covid-19 pandemic, BCG surveyed major institutional investors and found that nine out of ten believed it was 'important for healthy companies to prioritize the building of business capabilities—even if it means lowering earnings-per-share guidance or delivering below consensus.'"

Business challenges and business drivers

Supply chains present challenges related not only to direct disruptions but also supply chain-related technology infrastructure, sustainability initiatives and rapid market shifts which can shift demand patterns almost overnight. But these challenges can also create opportunities. It just takes an open mindset.

What does capitalizing on those opportunities take?

You need resilient inventory management systems that handle unexpected events and disruption—and match customer demand. Doing so will enable you to better meet (or exceed) customer expectations by delivering the right product at the right time. As a beneficial side effect, you can increase margins and get closer to net zero sustainability targets by reducing waste and spoilage.

What might such a solution look like?

Solution overview

The following diagram provides a high-level overview how systems work together for the desired outcomes.

It shows how Red Hat OpenShift interacts with a variety of personas both inside and outside of an organization and a variety of core application systems through an event-driven interface.

The following logical diagram goes into more detail.

The technologies can be grouped into several main categories:

• User applications. Applications where supply chain activities are reported and used by customers, colleagues, suppliers and logistics partners. In particular, the inventory controller interacts with an Inventory Optimization Platform.
• Core application systems. These are often customer-provided technologies, such as order management and facilities management. They include services, data and systems currently used within the organization.
• Integration services. Manages the events and data between systems.
• Supply assurance platform. Systems provide data and artificial intelligence (AI) for a modern supply chain.
• Omni Channels. Applications for customers, vendors and internal supply chain managers.

Action guide

From a high-level perspective, we suggest several main areas for your organization to concentrate on to help drive innovation and modernize your supply chain.

Automation

• Accelerate automation in extended workflows
• Use AI to make workflows smarter
• Cultivate collaborative ecosystems that interact in automated and event-driven ways

Sustainability

• Link environmental and social initiatives with business solutions
• Optimize workflows with AI to manage carbon, waste, energy and water consumption
• Meet customer sustainability requirements with new sustainable products and services

Modernization

• Architect modern cloud-native infrastructures
• Build scalable hybrid cloud platforms
• Increase awareness of cybersecurity vulnerabilities and provide solutions for them

For specific steps associated with this approach, see the Action Guide details in Own your transformation survey of 1500 CSCOs across 24 industries.

Summary

Retailers, manufacturers and organizations are exploring ways to better understand and act on changes in the market as they occur. CSCOs have helped to identify multiple scenarios, from addressing supply chain disruptions and emerging technologies to evolving sustainability needs and dynamic market conditions, outlined in the Action Guide. This offers a set of concrete steps, framed around an open mindset, that drive a comprehensive supply chain optimization strategy for your organization.

If you are interested in more solutions built with these and other Red Hat products, visit the Portfolio Architecture website and the Supply Chain Optimization Portfolio Architecture in particular.

References

• McKinsey: How COVID-19 is reshaping supply chains
• Harvard Business Review: Three steps to prepare your supply chain for the next crisis
• Gartner: What is a Supply Chain Control Tower and what's needed to deploy one
• Gartner: Fulfillment Forecasting: The Key to Optimizing Retail Inventory Positioning
• Gartner: Supply Chain Risk Management (SCRM): What & Why Is It Important
• IBM Institute for Business Value: Own your transformation
• IBM Institute for Business Value: Balancing sustainability and profitability
• What is sustainability in business?