In recent years, a number of supply chain issues have blighted the holiday season. From stocking up on gas to fuel heating in European homes in the wake of the Russian war on Ukraine to the effects of the Covid-19 pandemic on production cycles, disruptions in the supply chain are close to becoming the norm. Retailers across the globe, especially, as they stock up for their best season of the year, should urgently address their levels of preparedness as the countdown to this holiday offers more new hurdles to tackle.
Attacks in the Red Sea, rail strikes in Canada, and global weather incidents are all reminders of the vulnerabilities affecting the supply chain. What’s more, in a global economy, these incidents are not isolated events but have severe repercussions that see retailers in Europe, Asia Pacific, and the US, for example, bracing when an issue affects a port in China like Ningbo, which handles nearly 29 per cent of China’s total vessel traffic. With the holiday season just around the corner, the pressure is on.
Any stage of the logistics network can cause issues, and often, although a workaround is found, it can lead to further knock-on consequences. One example are the cost increases and longer routing times that were caused by Houthi attacks in the Red Sea that impacted Asia Pacific retailers trading with international markets. Sixty-six per cent of ships have in fact been forced to divert around the south of Africa to circumvent the Suez Canal, adding 10 to 12 days to three weeks to timelines to move stock by sea from Asia to the UK. For retailers, this means that the goods ordered in anticipation of the Christmas season need to be ordered earlier to compensate for longer shipping times. The risk is reputational damage and customer churn caused by stockouts and customer frustration.
Businesses need to leverage all skills and technology to ensure that their supply chain is resistant and flexible enough to accommodate sudden change. In particular, the integration of predictive AI technology and automation into existing procurement and supply chain management systems has become an urgent need for businesses wanting to stay competitive, avoiding potential risk and deescalating a crisis before it impacts the bottom line.
While larger retailers typically plan ahead, it is imperative for them as well as medium and smaller outfits to ensure they take into account potential risks and amend their usual planning accordingly. Key dates such as Black Friday, Christmas, Boxing Day, and Valentine’s Day remain critical for driving sales, and in today’s competitive environment, retailers must start planning earlier than ever and develop robust contingency plans. Safeguarding the ability to meet customer demand and capitalise on these crucial shopping periods remains key for the overall business health.
Although consumers may initially be understanding of delays due to well-publicised global events, they will shop with their feet and rapidly turn to retailers that can guarantee their must-haves are well-stocked.
Take, for example, predictive analytics: these can help forecast potential supply chain bottlenecks based on a huge range of data, both internal, such as historical supplier performance and vulnerability to specific geopolitical events (flooding, hurricanes etc), as well as external market data and even integrating with ad hoc risk management tools. AI-driven automation can also streamline the procurement process, reducing the risk of human error and ensuring that critical decisions are made based on accurate, real-time data. Generative AI can help analyse supplier proposals, identify key risk factors, and generate recommendations that align with organisational goals such as carbon reduction, diversity supplier selection, and many more. In addition to supporting risk prevention and automation, AI plays a key role in helping businesses pivot rapidly when they need to change their sourcing strategy and select a new supplier.
With supply chain disruptions emerging more and more often, retailers need to leverage technology in their strategic planning. AI’s role in supply chain management is poised for significant growth, with emerging technologies like generative AI offering even greater opportunities to enhance procurement strategies and improve efficiency.
Looking ahead, building a resilient supply chain is more critical than ever. Companies that take proactive measures to integrate AI-powered analysis to manage risk now will be better equipped to handle future uncertainties. The data to make rapid and informed contingency plans exists; it is now necessary to harness the tools for retailers to take their decision-making to the next level in the face of ongoing disruptions.
This article was written by Anthony Larratt, Managing Director, Asia Pacific, at JAGGAER.
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