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Good OM Reading: Automating Supply Chain Resilience

January 30, 2017

supply-chain-risk“Substantial investments in supply chain resilience have enabled companies to vastly improve their capacity for bouncing back after a disruption,” writes MIT Sloan Management Review (Jan. 2017). With the benefit of digital technologies, companies are using Big Data to identify supply chain risks and create early warning systems with much greater speed and precision. A digital supply chain is defined as “a customer-centric platform model that captures and uses real-time data coming from a variety of sources.” If a potential disruption is detected, the system decides on the best mitigation strategy and executes that strategy.

 A recent survey of 30 global companies found that 88% have incorporated elements of the digital supply chain into their business model. All of the companies surveyed were working to adopt game-changing technologies such as the internet of things and robotics. To keep pace, companies need to develop ways to automate resiliency. There are various strategies to make the supply chains more resilient, including diversification of the supplier base, establishing safety stocks, and planning for spare transportation capacity.
 One example is a loaded freight container equipped with sensors that track the temperature and humidity of the goods in real-time. The data is analyzed using business intelligence rules and shared with authorized entities in the extended supply chain. These parties can take action should a problem be detected. For example, if the container readings indicate that perishable cargo has been damaged due to an equipment malfunction, an order is automatically placed for replacement supplies while the damaged shipment is still in transit. Such remedial actions are not confined to logistics; financial and contractual terms can also be adjusted when an unexpected disruption occurs.
 Risk-prone supply chains are generally perceived as less secure by governments, and for that reason are more frequently selected for auditing, control, and inspection. These activities create unnecessary delays in supply chains.
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