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Your Supply Chain May Just Recover This Year Featured

In 2020 and 2021, supply chains reached their breaking point due to the pandemic. However, in 2022, there is some semblance of recovery as most services come to their pre-pandemic levels. Despite the challenging times in the past two years, there are many lessons that businesses can take from the occurrences. Businesses need to rethink their approaches to material sourcing and logistics. Businesses can capitalize on the problems they faced last year to ensure that their supply chains recover fully and are resilient enough to face the potential problems they encountered in the past year. This comes down to investing in artificial intelligence (AI), Machine Learning (ML) and automation, all of which are critical in the digitization of the supply chain and diversification of manufacturing.

AI, automation and machine learning investment

The global supply chain was made unbelievably unstable during the unprecedented COVID-19 pandemic. This caused a shift in thinking about how to recover and create a robust future supply chain. With these challenges, companies are now focused on improving processes, minimizing time, and creating transparency. According to Gartner, at least 50% of large global companies will invest more in AI, advanced analytics and the internet of things to advance their operations by 2023.

With AI, Machine learning and automation, enterprises can become more transparent and develop a 360-degree view of the supply chain while proactively dealing with the possible disruptions. Furthermore, AI can analyze vast amounts of data, provide operations visibility, and improve decision-making. AI has the power to do everything ranging from demand forecasting to end-to-end transparency, which are some of the most critical components in the supply chain. AI, for instance, can alert businesses on the upcoming severe weather event and the possible disruptions. The systems can also suggest how to counter the identified bottlenecks in real-time. By predicting disruptions to the transportation, positive or negative demand problems and production issues, companies can intervene and adjust their supply chain processes accordingly promptly. According to McKinsey, logistics costs will improve by 15 percent, inventory levels by 35 percent and service levels will improve by 65 percent compared to the competitors. Generally, the payoffs made possible by AI, automation, machine learning and the internet of things are a lot, and businesses can take advantage of them to enhance their recovery post-pandemic.

Supply chain and manufacturing localization and diversification

The pandemic has shown us the effect of depending on manufacturers far from home. Chip manufacturing is one of the industries that suffered the most during the pandemic. As such, companies and countries have learned the need to keep chip manufacturing localized and also diversified. The pandemic made countries aware that lack of diversification leaves the supply chain vulnerable in case a disruption of a high magnitude occurs. For example, with China being the leading manufacturer of various products, the world would have a dire shortage if its supply chains were affected by a serious disaster. Although companies previously moved their manufacturing operations abroad to reduce the cost of operations and for greater profits, efforts are being made by most of them to bring their operations closer home because they have learned the challenges associated with overseas manufacturing. According to a report by the European Commission, Europe is highly dependent on the Asian nations of China, Vietnam and Taiwan, as well as Brazil in imports of items like batteries, raw materials and semiconductors. With this revelation, the European nations have bolstered their supply chains by supporting diversification of sources and creating new policies that will open up other sources of imports instead of depending on the above countries.

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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