BALTIMORE, MD, January 28, 2022 – New audio is available for media use featuring David Simchi-Levi, a professor of engineering systems at Massachusetts Institute of Technology (MIT) and the head of the MIT Data Science Lab. He is also a member of INFORMS, the largest association for the decision and data sciences.
In this audio content, Simchi-Levi discusses the steps needed for digitizing and modernizing the supply chain. All sound should be attributed to David Simchi-Levi. There are 4 questions and responses. These responses were provided on January 27, 2022.
Question 1: What is the current status of the supply chain in terms of digitization and modernization?
Time Cue: 00:31, Soundbite Duration: 01:05
“I want to distinguish between the status of the supply chain before the pandemic and during the pandemic. Before the pandemic, very few companies focused on supply chain digitization. And the reason for that was because the perception is that it will require extensive financial investment. It will take four to five years. It requires instrumentation of every facility of every product, and companies were reluctant to invest in supply chain digitization. But the pandemic changed everything. Companies realized that with moderate financial investment, by combining available data, advanced analytics, and some automation, by modifying existing processes and designing new processes, they could achieve almost all of the benefits of supply chain digitization in a relatively short period of time, between 12 and 18 months. And so what we see today is very different from what we saw pre-pandemic.”
Question 2: What will it take to digitize and modernize the supply chain?
Time Cue: 01:43, Soundbite Duration: 01:41
“The work that we have done with a variety of companies – companies in high tech, retail, appliances and consumer packaged goods, and manufacturing companies - allow us to identify four key capabilities for implementing supply chain digitization. They include a move from consensus forecasts and into a unified view of demand, where data comes from a variety of sources, internal, external, macro-economic data, some social media data, is used to generate a single view of demand. Replacing a one-size-fits-all strategy that was used by many companies, with supply chain segmentation, distinct for their customers. We designed for them a specific supply chain strategy. Smart planning where companies use data and analytics to plan for the next 80 weeks, week by week, product by product, and finally smart execution. Smart execution recognizes we may have a great plan, but there are deviations from that plan, there are supply disruptions, there are demand disruptions. With smart execution, some companies will try to quickly identify the deviation and the disruption, and effectively respond to this disruption and deviation. All of these capabilities, the four capabilities that I just described, are all driven by data, advanced analytics and automation.”
Question 3: What is the expected outcome if proper steps are taken to digitize and modernize the supply chain?
Time Cue: 03:34, Soundbite Duration: 00:46
“As I mentioned, we have implemented these capabilities with multiple companies in a variety of industries. We saw four different significant outcomes. The first is better forecasts. The ability to improve forecasts by 10 to 10 percent. The ability to improve forecasts allowed us to improve service levels, which implies a better customer experience. The ability to improve forecasts allowed companies to reduce lost sales, which implies higher revenue. And finally, the better planning allowed companies to reduce inventories, and as a result lower costs in their business.”
Question 4: What is the impact of supply chain modernization on resilience and ability to recover from disruption?
Time Cue: 04:29, Soundbite Duration: 01:39
“Excellent question and this received a lot of focus immediately after the pandemic. But my team had started working on supply chain digitization way before the pandemic happened, when things like the tsunami in Japan, and the flood in Thailand in 2011, we developed a new way, a digital tool that allowed us to identify hidden risks in the supply chain and as a result mitigate and respond effectively to any disruption. Few companies followed our framework, our concept, our technology, but everything changed since the beginning of the pandemic. In mid-February, I submitted a short paper to Harvard Business Review, where I predicted that what’s happened in China… Just remember mid-February that Covid-19 was hitting only China, not North America, not Europe. I predicted that this would have a big impact on supply chains in North American and Europe by mid-March, and this is exactly what happened. And immediately after that publication and the realization that our technology was very helpful, we saw a flood of interest in analytics, in digitizing for supply chain resiliency. And so supply chain resiliency, and the ability to recover from disruption are highly effective by the use of technologies that we all focus on. Data, analytics and digital tools.”
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