The Important Role of Logistics in Enabling Risk Mitigation and Resilience Strategies

Over the past four years, due in large part to the Covid pandemic, there has been significant discussion about the importance of risk management in logistics and how companies must create more resilient supply chains. Logistics operations are key enablers in this process. We were reminded of this again recently when a cargo ship crashed into the Francis Scott Key Bridge in Baltimore causing it to collapse. What other key supply chain and logistics challenges are companies facing today? How are leading companies leveraging logistics transformation to mitigate risks and increase supply chain resiliency? And how is technology helping? Those are the main questions I discussed with Martin Verwijmeren, Managing Director of Industry Practices at Kinaxis, on a recent episode of Talking Logistics

Key 2024 Supply Chain Challenges

We began our discussion by addressing the key challenges facing logistics and supply chain professionals today. Martin points out that it is more than dealing with potential disruptions. 

“Supply chain professionals are under continuous pressure to beat the competition and stay ahead of the game and excel at operational excellence. It also involves keeping customers happy with exceptional customer service and dealing with near-constant disruptions. When you look at the ship that caused the bridge collapse, for example, if you look at the number of containers, pallets within each container and products per pallet, something like 12 million products could be impacted. This reverberates throughout supply chains and economies.”

Martin notes that CEOs are asking supply chain executives what plans they have to mitigate disruptions, become more resilient, and at the same time, develop more sustainable operations. These pressures are in addition to the everyday pressures of running cost-effective, customer pleasing operations.

Mitigating Risks and Creating Resiliency

How are leading corporations accomplishing all this?

Martin comments that leading companies recognize the strategic importance of supply chains as the heart and soul of company and customer success, and not just as a cost center. Disruptions like the Baltimore bridge collapse can require adjustments to procurement needs, manufacturing schedules, distribution plans, delivery dates and future transportation planning. 

“What this has made clear is that current supply chain practices aren’t working anymore,” Martin says. “Cascading methods of production planning may take a week to complete. Similarly in logistics, the cascading method of distribution and transportation planning down to the last mile is slow. There is recognition that this will not be sufficient going forward. It is siloed, slow, sub-optimal and static.”

Martins says leaders are looking for a process that is more real-time and concurrent, where all parties have a seat at the table. This includes suppliers and logistics service partners across the network. They want a process that is orchestrated across the continuum from procurement to the end customer.

Technology’s Role

This need for an orchestrated approach also applies to the supporting technology, which has tended to be siloed in multiple, single function systems. I asked Martin what is required to achieve this.

“What is required is integral collaboration across teams and partners. It must be instantaneous, not batched or sequential. And it must provide intelligent optimization. It should include closed-loop planning and execution with feedback loops, and it should include your external partners. Most companies have multiple ERPs, multiple warehouse management systems, and so on. So, the need is for a cloud-based platform that can span all of these systems, processes, and parties to transform into the next level of digitization.”

AI technology can play a big role in this transformation. This includes its mathematical capabilities to do massive amounts of calculations instantaneously, as well as its generative AI for simple interactions with users. This also includes advanced heuristics capabilities for optimization.

“We see AI as a blend of machine learning, heuristics and optimization capabilities that are transparent for companies and end users,” he says. “The digital cloud platform supports these technologies to produce answers to all the difficult questions.”

He also points out that AI must be believable and explainable so that users trust the results. And it must be deployable in ongoing production processes so it can learn, self-correct and use built-in models to adapt to changing business requirements and produce real results. 

Right People, Right Processes, Right Technology

If you are on this journey of reducing risk and building resiliency in your supply chain, the question becomes do you have the right people, processes and technology to drive this forward? Martin has a number of insights on these topics, so I encourage you to watch the full episode for all the details. Then post a comment and keep the conversation going with your questions and comments on this topic!