Supply Chain Modernization: Key Considerations for Future Planning | Amazon IXD – VGT2 Las Vegas

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In light of the current global disruptions, many organizations have little choice but to modernize their supply chains (SC) as they prepare for the future. But what does this modernization actually involve? What are the prevailing themes that characterize SC modernization? How do different industries tackle these themes? This blog post aims to shed light on the supply chain challenges faced by AWS customers, their aspirations for SC reinvention, the areas most impacted, and the technologies anticipated to play a role. For further insights, you can also check out this engaging blog post here.

Common advantages of SC modernization include reductions in operating expenses (OPEX), minimized operational losses through better decision-making, enhanced customer service, and increased agility to adapt to shifting business conditions. Additionally, cloud adoption facilitates cost reductions and scalability while enabling faster deployment of new analytics, such as machine learning (ML). We will also offer our perspective on the transition towards digital supply chains in the future.

Understanding the Web of Interlinked Objectives, Focus Areas, and Technologies in Supply Chain Modernization

AWS customers approach us with a diverse array of current SC challenges, tactical goals, and strategic ambitions. The recent economic climate and rising energy prices have heightened the demand for SC resilience, efficiency, and effectiveness. Often, our customers encapsulate these needs under the term SC modernization, which may also refer to reinvention, digitalization, transformation, innovation, optimization, and overhaul. While the terminology may vary, the core objectives share common threads. We are beginning to observe interconnections among customer requests for modernization, the key SC functions they wish to optimize, and the technologies they consider most promising for achieving their goals.

To better understand the relationships between the modernization objectives our customers aim for (i.e., why?), the SC areas they wish to enhance (i.e., what?), and the technological solutions they envision (i.e., how?), we mapped customer requests from the past two years. The goal of this analysis was to evaluate the interrelations between these criteria. The most notable connections include 7 percent of customers mentioning forecasting and predictions, 4 percent considering AI/ML in demand planning and inventory optimization, and 6 percent looking into cloud migrations for logistics and transportation systems. In terms of SC reinvention, 5 percent of customers associate it with predictions, demand planning, and inventory optimization, while 3 percent connect it to logistics, and 2 percent each for ML, data insights, and cloud migrations.

High-level insights reveal that emerging themes from customers pursuing SC modernization encompass data-driven insights, predictive analytics, and cloud migrations for relevant systems. While resiliency, automation, and sustainability are less frequently linked to SC transformations, we anticipate they will gain prominence in the future. To inspire our customers across these objectives, we draw on examples from Amazon and other sectors.

When examining specific functions typically associated with SC modernization (i.e., what?), demand and supply planning as well as logistics frequently emerge as focal points. In the future, we predict that end-to-end SC optimizations will become increasingly vital as narrower opportunities diminish; the emphasis will likely shift towards leveraging cross-department synergies.

Artificial intelligence and machine learning (AIML) are technologies commonly linked with SC modernization. This trend reflects the growing recognition among businesses of the advantages of AIML-driven decision-making. However, it is surprising that digital twins and simulations remain less mature, particularly in the context of SC control towers. Despite being a long-standing technology, simulation is data-intensive and often requires specialized modeling skills, which may explain its current commercial nascence. We believe that cloud implementations will play a crucial role in enhancing SC agility and enabling companies to seize more dynamic opportunities.

Customer Examples of Supply Chain Modernization and Relevant AWS Solutions

When our customers initiate discussions about SC modernization, they often express desires for data-driven insights and decisions. For instance, a healthcare organization is undertaking a global initiative to synchronize its SC data, aiming for end-to-end visibility and improved product tracking for reliable customer notifications. A sports equipment manufacturer seeks to streamline decision-making by eliminating data silos, removing third-party connectors to accelerate analysis, and fostering cross-business insights to enhance overall SC performance.

Another example involves a food manufacturer examining how the complexity of their SC influences costs and key operational metrics as they rationalize their SKU portfolio. Additionally, forecasting and predictions are commonly mentioned alongside SC modernization. For instance, a fashion retailer is implementing predictive analytics for retail and e-commerce volume forecasting, markdown optimization, and other applications. Cloud migration is the third most significant driver associated with SC modernization, with a food delivery platform aiming to transition its workloads to the cloud for cost efficiencies, quicker solutions, and greater reliability to support an ambitious growth strategy. A supermarket chain is also looking to move its on-premises SC solutions to the cloud to achieve scalable end-to-end visibility, dynamic inventory views, and optimized decision-making. Recognizing the demand for dynamic, cloud-based SC platforms, we have developed an industry-agnostic primer for rapid platform development to facilitate fast-moving, event-driven, and coordinated decision-making.

In terms of the areas affected by SC modernization (i.e., what?), there is a strong correlation with demand planning and inventory optimization, which are closely tied to forecasting and predictions. For example, a furniture manufacturer aims to optimize their SC by improving demand forecasting to maintain necessary reorder levels, reducing sales losses, and anticipating changes in customer demand.

It is not surprising that demand predictions and optimized inventory levels are common starting points for SC modernization, as these directly impact our customers’ bottom lines, often yielding impressive results. For instance, we have documented 10 percent improvements for retail customers.

For a comprehensive understanding of the implications and strategies in SC modernization, you can refer to authority on this topic. Additionally, for those curious about the experience of working at Amazon, this resource offers valuable insights.

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