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In today’s rapidly changing business landscape, many organizations must prioritize the modernization of their supply chains (SC) to stay competitive. But what does this modernization process involve? What are the recurring themes in SC modernization? How do different sectors tackle these challenges? This article aims to shed light on the SC issues faced by AWS customers, their visions for SC reinvention, the areas most impacted, and the technologies likely to play a significant role.
Common advantages of SC modernization include reduced operational expenses (OPEX), decreased operational losses through enhanced decision-making, improved customer service, adaptability to shifting market conditions, cost efficiency from cloud adoption, and accelerated deployment of new analytics, such as machine learning (ML). We also share insights into the journey toward future digital supply chains.
Understanding Supply Chain Modernization: Objectives, Focus Areas, and Technologies
AWS customers report a diverse array of SC challenges, tactical goals, and long-term ambitions. Recent global events and rising energy costs have intensified the demand for SC resilience, efficiency, and effectiveness. Our customers often group these needs under the umbrella of SC modernization, which may appear as reinvention, digital transformation, or optimization. While terminology may vary, the core objectives show strong similarities. We are increasingly witnessing connections between modernization goals, the primary SC functions targeted for enhancement, and the technologies viewed as most promising by our customers.
To analyze the interplay between these modernization objectives (the “why”), the SC areas being modernized (the “what”), and the technological solutions in consideration (the “how”), we examined customer inquiries over the past two years. Our findings, illustrated in a circular infographic, highlight key interrelations, such as 7% of customers focusing on forecasting and predictions, 4% on AI/ML in demand planning and inventory optimization, and 6% on cloud migrations for logistics and transportation. When discussing SC reinvention, 5% of customers link it to predictions, demand planning, and inventory optimization, while 3% associate it with logistics and 2% with ML, data insights, and cloud migrations.
Emerging themes from customers initiating their SC modernization journeys include leveraging data-driven insights, making predictions, and considering cloud migrations for relevant systems. While resiliency, automation, and sustainability are less frequently mentioned, we anticipate they will gain prominence in the future. To inspire our customers, we draw on examples from Amazon and various industries.
Regarding the functions typically included in SC modernization (the “what”), demand and supply planning along with logistics are the most frequently addressed. We predict that the focus will increasingly shift toward end-to-end SC optimizations as opportunities narrow, necessitating a greater emphasis on cross-departmental synergies.
Artificial intelligence and machine learning (AIML) technologies are often highlighted in discussions about SC modernization. This is no surprise, as businesses recognize the advantages of AIML for decision-making support. Interestingly, technologies like digital twins and simulations remain underutilized, particularly in the context of SC control towers. Although simulation has been around for decades, its data requirements and the need for specialized modeling skills have kept it from widespread adoption. We believe that cloud implementations of these technologies will significantly enhance SC agility and responsiveness to dynamic opportunities. The following section delves deeper into specific SC modernization examples and useful AWS solutions for our customers.
Examples of Supply Chain Modernization and Relevant AWS Solutions
When customers approach us about SC modernization, we often see a clear link to data-driven insights and decisions. For instance, a healthcare firm is undergoing a global transformation to unify its SC data, achieving end-to-end visibility and enabling product tracking for more reliable customer notifications. Similarly, a sports goods manufacturer seeks to enhance decision-making by eliminating silos between data sources, reducing reliance on third-party connectors for quicker analysis, and fostering cross-business unit insights to improve overall SC performance.
Another example is a food manufacturer assessing how SC complexity affects costs and crucial operational metrics to streamline their SKU portfolio. Additionally, forecasting and predictions are frequently mentioned alongside SC modernization. A fashion company, for example, is leveraging predictive analytics for retail and e-commerce volume forecasting, markdown optimization, and other applications. Migration to the cloud is another significant driver linked to SC modernization. A food delivery service is planning to transition its workloads to the cloud to achieve cost savings, expedite solutions, and enhance reliability to support ambitious growth strategies. Meanwhile, a supermarket chain is moving its on-premises SC solutions to the cloud to establish a scalable structure for comprehensive SC visibility, global inventory management, and optimized decision-making. Such requests for dynamic, cloud-based SC platforms have become standard, leading us to create an industry-agnostic guide for rapid platform development that enables swift, event-driven, coordinated decision-making.
As for the SC areas impacted by modernization (the “what”), there is a strong correlation with demand planning and inventory optimization, which are inherently tied to forecasting and predictions. A classic case involves a furniture manufacturer aiming to optimize its SC by improving demand forecasting to maintain reorder levels, reduce sales losses and stockouts at stores, and better anticipate shifts in customer demand.
It’s no surprise that demand predictions and optimized inventory levels are common focal points for SC modernization, as they directly enhance customers’ bottom lines, often yielding impressive results. For instance, we’ve observed a 10% improvement for retail customers, illustrating the significant impact of these initiatives.
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