How a digital supply chain can help combat inflation risks?
World economies no longer operate in isolation. One speed bump halfway across the globe sends ripple effects far and wide (such as the COVID-19 pandemic and the Russian invasion of Ukraine). A perfect example of a sudden price rise would be the shortage of wheat due to the invasion. Everything from crude oil and palm oil to semiconductor chips remind us that disruption in supply chains and inflation go hand in glove. The strength of the global economy depends on seamless supply chains. Given the ever-prevalent global volatility that can disrupt supply chains anytime, organisations must digitise their supply chain and procurement functions to cushion themselves against events that cause inflation.*
Shifting from short-term responses to long-term strategies
These three areas help businesses shift from picking the low-hanging fruit to forming long-term strategies to ride the next cycle of inflation:
- Align costs with points of differentiation: Businesses need to reconsider costs to address deeper issues within the supply chain that may have exposure to inflation-based risks and have been undermining profitability. By allocating investments in true points of differentiation, such as proprietary services, companies can gain a competitive advantage.
- Assess the supply chain surface area: A long-term strategy to build resilience against inflation-based risks is to reduce or expand the supply chain surface area. The objective is to minimise the chances of costly disruptions that your supply chain may face.
- Pay monitoring: To adapt to the market conditions, CFOs and the HR teams must work together to invest in people. Adjusting the organisation's pay practices is a great way to invest in roles to deliver the maximum value.
How does a digital supply chain help combat inflation risks?
Develop predictive capabilities
Businesses that can predict changes in customer demand and the effect of global events can react faster and realign their supply chains. Digital supply chain systems develop key performance indicators (KPIs) that help businesses act quickly, which indicate early signs of trouble:
- Supplier delivery time that indicates possible future shortages and longer cycle times
- Items scheduled for production indicate that stocks are available for the future
- Consumer demand forecasting
- Maintenance forecasting for planned and unplanned activities within a facility
By gathering data-based KPIs, organisations can mitigate the impact of supply chain disruptions and inflation risks. They can increase stock levels, optimise replenishment strategies, diversify supplier base, and increase manufacturing capacities to deal with possible price rises.
Improving supply chain resilience
Supply chain disruptions do not affect all industries equally. Therefore, businesses cannot rely on a fixed model to predict disruptions. The methods must be dynamic and tailored to the individual needs of a business. It is best to assess supply chain resilience across three parts, including the source (supplier ecosystem), make (manufacturing network), and delivery (sales channels and customers). Supply chain resilience requires real-time data, flexible reports for analysing KPIs, and dashboards that provide a detailed view of each issue. A robust solution should help you answer these questions:
- Which suppliers are not performing?
- How is the lagging supply affecting our customers?
- Are the suppliers based in or heavily skewed in volatile locations?
- Do we need to diversify the suppliers for critical goods?
- Are we paying our critical suppliers on time?
Technologies that build inflation-resistant supply
Control towers with machine learning (ML) and artificial intelligence (AI) help businesses predict, plan, and organise processes to handle the disruptive impact of global inflation on supply chains. Businesses determine the sources of challenges in demand planning using predictive and prescriptive analysis. With real-time tracking of shipping delays, inventory production capacity, and sales, businesses can manage the cost-to-serve and cash-to-serve operational levers. Using the right technology, organisations can identify specific use cases and implement measures to combat risks. With real-time data readily accessible across the organisation, your ship can steer before the iceberg gets too close in the dead of night.
How can Infosys BPM help?
With extensive experience in the domain, we help organisations accelerate their journey towards digitising and streamlining their supply chains, thus reducing the risks due to inflation. Our portfolio includes end-to-end solutions across consulting, technology integration, and managed services.
- Supply chain diagnostics
- Supply chain shared services advisory
- Supply chain control tower
- Forecasting as a service
- Inventory optimisation
View the supply chain optimisation services from Infosys BPM.
*For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like living organisms will be imperative for business excellence. A comprehensive yet modular suite of services is doing precisely that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.