Building a Smart(er) Supply Chain: How Industries Could Have Avoided the Chip Shortage
Blog: The Tibco Blog
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It seems like every day there’s a new story about supply chains and the related disruptions across different industries. Supply chains today are more disrupted than ever before. The recent pandemic has contributed to this disruption through the sudden alignment of multiple factors within a short period of time:
- Fundamental changes in customer behavior
- Reduced or halted productions
- An inability to quickly evaluate alternative suppliers
- An inability to forecast shifting demand of markets
- Increased distribution complexity
All of these have come together to create the perfect supply chain storm, resulting in unexpected changes for many industries. For example, the lockdown contributed to a 66 percent increase of Peloton bikes, boosted the sales of laptops, tablets, gaming consoles, and, conversely, led to a substantial drop in car sales. Consumers have learned to explore alternatives and to shop more or exclusively online.
Look Out for Growing Disruption Trends
The scale of the pandemic’s impact hasn’t been seen by any supply chain leader before. A recent study from Accenture has shown that supply chain disruptions have impacted 75 percent of companies, but what is worrying is that shocks are increasing in frequency and severity. On average, industries have experienced material disruptions lasting a month or longer every 3.7 years. All these signs demand more agile supply chain management.
What Can You Do to Minimize Disruption?
But how can a technology vendor help build a smart(er) supply chain to minimize future disruptions? Fortunately, many enterprises have started to understand that the underlying cause of being unable to forecast and prevent or minimize supply chain shocks is that they just don’t have the right tools.
They have accumulated a tremendous amount of technical gaps in demand planning, data analysis, and connecting with partners and third-party services. End-to-end transparency, agility, and real-time data processing are key drivers in creating a lean, responsive supply stream. With concepts like Industry 4.0, AI-based decision-making on data and IoT are crucial to a company’s success in operating in worldwide networks.
Learn From the Auto Industry’s Mistakes
In fact, with smarter supply chains, many industries could have avoided the chip shortage that resulted from the pandemic. For example, in the first half of 2020, the auto industry faced a substantial drop in demand, while new vehicle sales rose in the second half of the year. But while other industries increased their chip order for all the working-from-home-necessary devices, especially gaming console manufacturers, automakers didn’t meaningfully increase their semiconductor orders.
When the auto sector’s demand recovered, the semiconductor industry had already shifted production so that there weren’t enough chips available, causing the chip shortage crisis in the automotive industry.
This highlights the importance of being able to integrate with third-party, now often cloud-based, providers and analyze market intelligence data to understand and predict how the market will move. Without the right tools, it will be very hard to avoid being disrupted again in the near future.
The underlying cause of being unable to forecast and prevent or minimize supply chain shocks is not having the right tools.
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