Enterprise software provider o9 Solutions has launched its Supply Sensing platform, which helps companies predict supply chain disruptions and mitigate the risks associated.
- The solution helps companies to determine the potential impacts of macro-level supply chain concerns on their specific operations.
- Global supply chains have grown increasingly vulnerable, with just three major events within the past year resulting in $182 million in losses for 1,500 businesses surveyed by Interos.
- As businesses become more aware of their supply chain vulnerability, there will be an increase in demand for digital solutions such as the platform developed by o9.
The Supply Sensing platform monitors internal and external factors, such as agricultural yields, weather patterns, transportation disruptions and employment indices. It then uses predictive machine learning models and digital twin technology to create an impact map of how these macro-level trends will affect the Tier 1, 2 and 3 suppliers of specific manufacturers.
Based on this information, the system alerts manufacturers to potential changes in the availability of key commodities and provides price predictions up to one year before Tier 1 suppliers are affected.
It also quantifies the probability of specific events occurring, and provides customised recommendations on how their impacts can best be mitigated in line with the company’s strategic objectives.
o9 Solutions has identified the prediction of transportation availability, assessment of probable impacts from severe weather events and the prediction of disruption to specific suppliers or facilities as being the three main use cases for its solution.
As explained by o9’s co-founder and CEO Chakri Gottemukkala, “Supply Sensing takes the tried and true methods manufacturers have long been using to understand consumer demand and applies them to predicting and steering clear of future supply disruptions.
“Equipped with the insights needed to react weeks or even months sooner to potential supply availability and pricing changes to key commodities, CPG companies that operate even the most complex global supply chains will benefit from maximised product availability and service levels while avoiding sudden cost shocks.”
Global supply chains are becoming more vulnerable
In today’s rapidly changing business environment, companies around the world are becoming more likely to experience a wide range of unpredictable risks that can disrupt their supply chains.
Indeed, Interos’ 2022 survey of over 1,500 global supply chain leaders found that just three significant events within the past year – not including the conflict in Ukraine – had resulted in $182 million of revenue being lost.
AON (NYSE:AON), meanwhile, has said that weather and climate-related events cost the global economy $329 billion in 2021 alone, making it the third costliest year on record when adjusted for inflation. Notably, AON reported that the frequency of large-scale, highly impactful events was particularly unusual and is likely to accelerate further due to the cascading risks of climate change.
Summarising the current vulnerability of global supply chains, Everstream Analytics’ 2022 Annual Supply Chain Risk Report identifies global water stress, ocean freight bottlenecks, labour shortages, inventory management and increased regulatory scrutiny as the five major threats that businesses must address.
There is, of course, substantial variation in the supply chain risks of different businesses. Factors such as the location and timescale of specific events, as well as the industrial sector, operational strategy and regulatory environment of particular companies should all be considered when making risk mitigation decisions.
Adding to this complexity, many businesses may have hidden dependencies that heighten their supply chain risk but are not acknowledged when making future plans.
For example, industries including the aviation, tourism and real estate have been identified as having less than 15% of their direct gross value added (GVA) being highly dependent on nature. This could lead companies in these sectors to ignore nature risks within their supply chain, oblivious to the fact that more than 50% of their upstream suppliers’ GVA is highly or moderately nature-dependent.
Supply chain risks threaten businesses on multiple levels, from their operational costs to their ability to satisfy customers, comply with legislation and attract investors.
This is clearly being recognised, with Interos’ report concluding that 64% of its surveyed companies plan to make wholesale changes to their supply chain footprint. Wincanton’s (LSE:WIN) poll of over 250 senior leaders of UK retail and eCommerce businesses, meanwhile, revealed that 99% of its respondents believed that improving supply chain resilience was ‘essential’ to growth.
Digital technologies advancing supply chain risk management
As supply chain sustainability is increasingly recognised as a critical factor in corporate sustainability overall, there will be an increase in demand for technologies that support risk assessment and mitigation.
Digital technologies can help businesses predict future shocks by identifying risks as, or before, they emerge, thereby enabling them to develop effective mitigation strategies. Their capacity to automate data collection and analysis can also improve companies’ ability to share information, both within the organisation itself and with suppliers and other external stakeholders.
The benefits of digitalisation are highlighted by Gartner, with its analysis finding that businesses using technology to manage their supply chain were almost twice as likely to mitigate risks. As more companies begin to recognise both the vulnerability of their supply chains and the potential benefits of technological solutions, platforms such as o9’s will be high in demand.