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How to Solve Supply Chain Disruptions — It’s Not What You Think

As 2019 wound down, who would have predicted that how to solve supply chain disruptions would become one of the top headlines? Especially throughout the next three years? Not just in trade publications, either. Supply chain disruption has become something that all of us see in the headlines every day: online, in newspapers, and in magazines. The topic has become the subject of documentaries. There are even podcasts dedicated to the issue.

Shortages and disruptions have been at the forefront of everyone’s minds. Supply chain disruption has been blamed for many things:

  • The shortage of toilet paper and disinfectant wipes at the beginning of the pandemic
  • The inability to find the laptop you wanted when remote work began to rise in popularity
  • Car dealerships across the country with empty lots, empty showrooms, and year-long waiting lists for new vehicles
  • Gas at record-high prices
  • The outrageous price of lumber to build that deck you always wanted in the backyard
  • The furniture store that doesn’t seem to have any new furniture for your renovations — and doesn’t know when it might be in stock
  • Your fast-food takeout bag that doesn’t have any of those ketchup packets in it
  • Most recently, baby formula is missing off the shelves of nearly all stores.

 

What Are Supply Chain Disruptions Blamed On?

Rising demand gets part of the blame. When millions of people suddenly find themselves working from home, of course, there is going to be a rush to buy new laptops. Early in the pandemic, there was also hoarding of products like toilet paper. 

After we were through the worst of the pandemic and shortages remained, we found new culprits for supply chain disruption. Transportation, logistics, and scarcity of materials were to blame. Microchips for vehicles, labor, lumber — the list of rising demand for products and people go on and on.

 

Black Swan Events and Supply Chain Disruptions

In 2021, the Ever Given and its 17,600 containers blocked the Suez Canal for six days, causing an epic lineup of ships. Last November, the lineup of container ships anchored off the coast of California hit 109, an all-time high. The ships waited their turn to unload at the Ports of Los Angeles or Long Beach. Before the pandemic, these ships could sail right into the harbor. It’s not just those massive cargo ships bringing in all the goods from overseas. National logistics have been a problem. In October 2021, the American Trucking Associations estimated the U.S. was short 80,000 truck drivers.

In 2021, lumber smashed all-time record prices, and home improvement stores were often sold out. It must be that lumber shortage…

Rising demand and logistics challenges may be there, but they are not the real reason why we have been living through supply chain disruption. For example, look back to 2015, and you’ll see a similar red flag raised about a shortage of truck drivers. Freight being transported was ballooning, yet the US The country was nearly 100,000 drivers shy. Do you remember empty shelves through 2015? The same holds true for shortages in raw materials. The lumber companies have plenty of trees available to process.

 

How Procurement Can Help Explain Supply Chain Shortages

To understand the underlying cause of what’s been going on, you need to be plugged into the world of procurement.

Our CEO, Edmund Zagorin, published an article in Supply & Demand Chain Executive. In it, he makes the argument that procurement capacity is the root of the problem.

He explains that we’ve repeatedly encountered the scenario where the speed of selling cycles in a market has picked up due to increased demand. Yet the process required to complete purchase order approvals is so complex and dependent on manual actions that procurement teams are overwhelmed.

By the time they’re ready to go with an order, the supplier has sold to another organization. When this is repeated, an inflexible approval process creates what appears to be a shortage. This, in turn, causes those selling cycles to be even faster, compounding the problem.

In the Supply & Demand Chain Executive piece, Edmund uses an example from an Arkestro customer operating in the automotive space. This company processes an average of 900 purchase orders every week. An exception (such as a price hike) would require an additional approval process for each of those 900 orders.

Even if that manual process were to take just one minute per order, that’s 900 minutes or 15 hours. Or almost two full working days in the week for someone on the procurement team—assuming there’s someone even available for that additional time. The likely outcome is that at least some of those orders end up being late, kicking off a self-perpetuating perceived “shortage.”

 

How to Solve Supply Chain Disruptions

How can organizations solve supply chain disruptions?

There is a result because of the demand on procurement and additional review steps. In fact, the additional time required for manual review steps has a big ripple effect throughout the supply chain. This includes delayed customer orders (resulting in empty store shelves) and lower profitability, and it also contributes to inflation.

It can be addressed through automation and Predictive Procurement Orchestration. Companies that can adopt automation to replace some of their manual procurement processes have the opportunity for a massive value creation opportunity.

By using predictive machine learning, game theory and AI like Arkestro, procurement teams can add speed, agility, and visibility into processes. Added speed, agility, and visibility helps put a halt to perceived shortages and supply chain disruptions.

Technology can evaluate potential threats to your supply chain. Solutions like AI-enabled mapping, outlier detection, price alerts, and even evaluation of potential cyber threats will solve these problems. And the best part of Arkestro? You don’t need to remove tools and apps you already use. Arkestro can pull in the data from all of your AI procurement tools and put it into one place.

Curious to see what else Edmund had to say? Check out the article, and reach out to us for a demo if you have more questions.      

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Rob DeSantis

Founder

As a former co-founder of Ariba running sales, Rob has deep expertise in the procurement space, having helped propel Ariba from zero to $250 million in revenue in four years and IPO of the year in 1999 before its acquisition by SAP a decade later. In addition to co-founding Ariba, Rob was also an early angel investor and board member of LinkedIn, the world’s largest professional online network.

More recently, Rob served as an investor and advisor to a small portfolio of companies including Bloom Energy, AEye, Inc., HiQ Labs, Agiloft, USEND and more. He is also a co-founder of Dibbs Technology and TrueParity. Rob holds a BSME from the University of Rhode Island.

Marty Meyer

Chief Financial Officer

A trusted partner and advisor on the executive team, Marty has a unique background having been the CFO of nine venture backed technology companies. Marty has raised over $300M in venture funding and has closed six strategic M&A transactions with a combined value of over $1B. Marty has deep domain expertise in ecommerce, consumer internet, networking, data security, data privacy, media technology and enterprise software industries. Marty is especially experienced in the finance and operations activities of SaaS companies and is driven by data and metrics to help create outstanding customer experiences and drive efficient growth.

Neil Lustig

President and Chief Operating Officer

Neil is a seasoned executive with over 30 years of experience leading and building teams in Tech. Neil brings insights from a variety of market spaces and company sizes. Most recently Neil was the CEO of GAN Integrity, an innovative SaaS Compliance technology company serving enterprise customers in North America and Europe. Before that Neil was the CEO of Sailthru, a leader in ML driven personalized multi-channel marketing communications for media and e-commerce markets. Prior to that Neil was the CEO of Vendavo, the leader in B2B price optimization and management for large enterprises. Before Vendavo, Neil led the commercial team at Ariba, the market pioneer that defined and created the eProcurement space. Neil served as the GM of Ariba Europe and subsequently the GM of Ariba North America. Neil started his career at IBM where he spent sixteen years, initially as a software developer, and then twelve years in a variety of Sales and Marketing roles

 

Neil has a BS in Computer Science and Applied Mathematics from SUNY Albany. He is a native New Yorker, Brooklyn born, and still resides with his wife and three children in New York City.

Bonnie Adams

Director of People Operations

Bonnie is a People Operations and HR veteran, with over a decade of experience establishing successful people and culture functions for early to mid-stage tech startups going through high growth phases. She has a passion for supporting and creating inclusive and collaborative work environments and is well-versed in driving positive changes in her organizations as a trusted leader. Prior to joining Arkestro Bonnie worked as the People & Culture Coordinator for Ionic Security, helping them scale from 5 to over 200 employees in addition to a $120M funding round. Most recently she was the Head of People & Culture for blockchain innovator Storj Labs and was the Director of Human Resources at PrizePicks, the largest independently owned Daily Fantasy Sports platform in North America.

Arym Diamond

Chief Revenue Officer

Arym Diamond joined Arkestro in January 2022 bringing over 20 years of experience in the enterprise software and consultancy industry.  He is responsible for the worldwide go-to-market revenue strategy. Prior to Arkestro, Arym was Chief Revenue Officer at CalAmp focused on Telematics and Logistics. He also served as the area vice president of North American Sales within the Salesforce.com Enterprise Business unit for Einstein Analytics & AI, where analytics and machine learning were re-imagined for the front office.  Prior to that, he spent over 10 years at Oracle in various sales positions. Arym holds an MBA from the University of Southern California Marshall School of Business, and an undergraduate degree from California State University.

2022 Gartner® Hype Cycle™
for Procurement and Sourcing
includes Arkestro.

2022 Gartner® Hype Cycle™ for Procurement and Sourcing includes Arkestro.

Gartner® Hype Cycle™ are registered trademarks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.

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