4 Steps to Building Supply Chain Risk Resilience With AI

As geopolitical and environmental events become more volatile and unstable, so can a retailer’s supply chain.

Right now, war in the Middle East is causing shipping in the Red Sea to become more dangerous. In the U.S., the government has raised tariffs on some Chinese goods. Globally, shipping prices are soaring. All of these events can provoke product shortages and delays within a retailer’s supply chain, forcing it to rethink how to evaluate risk inside its organization.

Building a supply chain that’s risk-resilient is impossible to do at scale without the right collaborative approach and technology. Retailers need true supply chain collaboration with their suppliers to achieve accurate, two-way visibility into inventory. Artificial intelligence-powered supply chains open up communication and keep brands and retailers running in sync, resilient against unforeseen change.

The Risks of a Disconnected Supply Chain

In a global supply chain report from Inspectorio, nearly 80 percent of the supply chain professionals surveyed said they have yet to integrate AI into their supply chain. At the same time, more than 40 percent of executives said risk management is a leading priority. To reduce risk, retailers can use AI and data analytics to build transparency, create supply chain collaboration, invest resources in high-value activities, and monitor critical events in real time.

Establishing true collaboration and connectivity helps supply chains weather even the most disruptive events without breaking. A lack of resilience stems from not knowing where suppliers are located, what their capacities are, and where they’re vulnerable. In other words, poor collaboration leads to risk blindness.

Matters are made worse by retail teams relying on time-consuming manual objects like Excel and PDF reports as well as pen-and-paper assessments to make decisions around supply chains in turmoil. To proactively manage risk, retailers must know where that risk lies, and quickly.

To make timely decisions, operations teams can benefit from full visibility into their supply chain structure, knowing where their suppliers are, and building interconnectivity across all tiers of their consumer goods partners. Here are four steps for companies to consider when building a more resilient supply chain:

1. Digitize the supply chain to build transparency and improve performance.

Data analytics is the leading force behind today’s most resilient supply chains. First, a retailer must digitize its supply chain. Doing so allows retailers to objectively evaluate risk at the facility and product levels. AI and digitization enables retailers to continuously aggregate and update verifiable data throughout the supply chain. Then, by granting real-time visibility across the supply chain, AI can help build dynamic risk models that strengthen the results of its predictive analytics.

For example, a retailer could set up a risk threshold to provide an alert when a facility or product is at risk. If the facility or product becomes high risk, the retailer can tighten oversight, or decrease oversight when low risk.

2. Manage risk with full supply chain collaboration.

Retailers often only interact with their Tier 1 suppliers, excluding communication with smaller CPG partners in their vast network. By only working with leading supplier partners, the retailer isn’t seeing a true picture of its entire supply chain. Any nuances happening with lower-level partners get missed or assessed inaccurately.

A resilient supply chain benefits from total collaboration. This begins by mapping out a retailer’s entire supply chain and assessing the capacity of each supplier. Retailers can then accurately invest in the right infrastructure and personnel to manage performance long term.

Building collaboration throughout the supply chain isn't a quick fix, but it’s an effective one. And the payback is substantial, delivered via reduced costs and increased sales.

3. Invest resources in high-value activities.

Digitization and AI allow retailers to effectively allocate resources directly to areas of high risk. By standardizing quality and compliance across different factories, product lines and countries, retailers can objectively compare data and performance.

Additionally, new learnings are automatically incorporated into each subsequent round of production to continuously improve supply chain performance. Because digitization frees up time across the supply chain through the automation of previously manual tasks, employees can now spend their working hours on more important tasks that drive additional value.

4. Establish a production-monitoring control tower.

In the production of goods, think of a control tower as a system that alerts the retailer to critical events and risks in its supply chain. Establishing an effective control tower with AI allows a retailer to respond and pivot quickly when needed.

Just like how a control tower monitors the airways in real time, alerting airlines of flight patterns and bad weather, a supply chain control tower monitors performance and the flow of operations. Any bump in the road drives out an alert and retail teams can respond immediately. Every second counts when it comes to products and profit margins.

Supply Chain Visibility Reduces Risk

AI-supported supply chains help retailers communicate with all suppliers in real time, helping to stop potential risks before they escalate. A retailer can resolve problems with precision by effectively allocating resources to high-risk areas of supply and elevate supplier collaboration. With a sophisticated, AI-driven platform, retailers can transform even the most complex supply chains to one with full end-to-end visibility, communication, and accountability.

David Klein is co-founder and president of Inspectorio, a supply chain management platform.