Various events over the last few years have given us a much bigger insight into our supply chains, their weaknesses and vulnerabilities. COVID-19, inflation, the continued conflict in Ukraine along with worker shortages have placed our global supply chains in the spotlight. (1)
Although we have seen these vulnerabilities reveal themselves, these events have opened up the opportunity for change and development on a scale we’ve never seen from supply chains.
Research has highlighted 3 key goals supply chains will be prioritising to protect, develop, and strengthen their network in the future.
The COVID-19 pandemic uncovered the fragility of global supply chains incredibly quickly. The complexity of global supply chains requires precision, and unpredictable disruptions such as natural disasters or the pandemic can have an instant impact on availability of supplies & resources (employees, access to manufacturing centers etc.)
Costs rapidly build under these circumstances, and have a ripple effect throughout the chain. However, this isn’t always the case - In 2013, Toyota was hit by the Tohoku earthquake and tsunami, which resulted in a 6 month halt of production. However, in 2016 another earthquake hit Japan, but Toyota was able to resume production after just 2 weeks. They were able to do this by reevaluating their “production strategy, regionalized supply chains, and addressed supplier vulnerabilities” (1) following the 2013 disaster.
Although this is a rare case of incredibly resilient supplier infrastructure, the lesson learnt was the value of reevaluating and refining production processes, addressing potential risks and future-proofing the operation accordingly.
By identifying potential vulnerabilities and risks, introducing certain technologies and refining processes, supply chain businesses can alleviate the potential risk that unpredictable disruptions can have on both their business and their networks.
“The complexity and diversity of supply chain risks require smart management tools, and leading companies are applying a range of new techniques”
Predictive tools have, for this reason, seen a huge increase of use over the past few years. Alongside becoming more widely accessible, predictive analytics enable businesses to identify their weaknesses, address pain points, and cut out inefficiencies that are costly, and place a supply chain network in a position of vulnerability.
These tools can learn market, or customer trends, predict purchasing or sales habits, and learn traffic patterns over time. For supply chains, this means being able to plan more effectively with thorough accurate data and track and avoid disruptions that they would otherwise be blind to.
Alongside predictive analytics tools, supply chain businesses are implementing smart management tools that help them work more efficiently while avoiding disruptions associated with their available resources. These resources may be different vehicles, trucks, trailers, or drivers, with digital systems segmenting and organising these assets so they can be used in the most effective way.
As an example for hauliers - certain HGV's or trailers are too large or heavy to use certain roads, pass through low emission zones, unable to drive through bridges or tunnels, or drivers may not have the required licenses. These factors have to be incorporated into route plans, and assigning inappropriate vehicles or drivers will only cause disruptions down the line.
These route plans become more complex for hauliers as they grow, and this complexity increases alongside the impact of disruptions. For this reason, advanced route planning systems that organise resources & allocate them automatically to avoid risk and minimise disruptions and build resilience have become an integral part of haulage operations.
The same goes for all supply chain processes, and every member of a supply chain network benefits from the improved resilience and reliability of each other.
Supply chain agility represents efficiency and proximity to customers. All markets are making, or have already made a transition towards a consumer-facing economy. This means prioritising consumer demands, and adjusting operations to suit these needs. Businesses are doing this for a number of reasons, the key reason being to remain competitive in saturated marketplaces. It is easier than ever for a consumer or customer to switch suppliers, and so businesses are under pressure to adhere to these needs and demands, to maintain customer retention.
In the B2C marketplace, it is exclusively consumer-facing, and so we saw this transition take place decades ago. Retailers are a key example, who began to prioritise efficiency, sustainability & transparency to resonate with customers and improve loyalty.
“These same pressures increasingly hold true for B2B businesses as well, as increased consumer product complexity and demand volatility trickle down the supply chain.”
In the B2B marketplace, they have rarely been put in the spotlight, and for decades, their priority was exclusively efficiency. COVID-19 & supply chain shortages and disruptions meant these businesses were put in the focus of the general public, the media, and their customers.
When supply chains are looking to improve agility, this predominantly means improving flexibility to changes and adapting efficiently.
We saw this happen at the beginning of COVID, when consumers couldn’t access their usual stores. We saw over 77% of consumers change the way they shop or who they shop from, and those businesses that rapidly adapted were the ones who succeeded and continued to profit. (1)
Successful wholesalers ramped up e-commerce and retailers began home deliveries - They acknowledged the trend and re-adjusted how they work to make the most of it.
Another trend we have witnessed have a considerable impact on how retailers align themselves is the plant-based diet. Shoppers are moving further and further away from animal products, and are looking for plant-based alternatives for ethical, health & sustainability reasons. Successful and competitive wholesalers acknowledged this trend, and change product lines and stocks accordingly to meet adapting retailer demands.
It is now easy to see how changes trickly up the supply chain & those links that predict and address these changes early are the most successful.
Predicting trends undoubtedly requires advanced technologies to do so. Systems that can search through existing data, understand customer or market trends, and support managerial decision making are essential for those businesses at the forefront of their sectors. Looking towards the next decade, “the use of advanced techniques for demand sensing and dynamic forecasting, aided by machine learning technologies, is set to become an essential part of day-to-day supply chain operations.”
The third priority that research has pointed out is sustainability. During the pandemic, research conducted during the time showed that this eco-friendly approach to supply chain management had fallen down the ladder of business priorities (1), but in the coming years, it is said to be making a quick resurgence.
Larger supply chain operators have no got sustainable practices in their cross-hairs, and they are seeing real operational improvements;
“Henkel have shown, strong environmental actions are also delivering real operational results: a digital twin connects and benchmarks 30 factories and prescribes real-time sustainability actions, which over ten years have reduced energy consumption by almost 40 percent and waste by 20 percent.”
Supply chains have taken Environmental, social, and governance (ESG) focus’ into greater consideration following the worst of the pandemic. A key driver for these changes come from within & outside of supply chains - Both companies & consumers are driving for more transparency behind operational standards, and these social influences will have a huge impact on the success and growth of businesses within the chains, and “Companies looking to avoid the increasing reputational, regulatory, and financial risks of poor ESG performance are being pressed to act.“
When moving towards sustainable practices, businesses are being encouraged to first understand the resources it consumes and the emissions generated, then use these as a baseline to introduce structural changes that target and mitigate them. They must also set realistic timescales and goals for where they would like to be.
First, understand resources consumed & emissions generated, then use these as a baseline to implement structural changes that target & mitigate these factors (setting timescales & realistic goals).
Prioritising these goals of resilience, agility, and sustainability all begin with investment into the performance of the business, with clear goals of what the future should look like for a company. To reduce the impact of unpredictable forces, improve effiiciency and adaptability, and reduce emissions, companies must have a clear view of their operations. From here, they can evaluate which areas are working well and which are inefficient, then invest in ways to improve the overall performance to maximise competitiveness while future-proofing both the company and its supply chain.
https://www.mckinsey.com/business-functions/operations/our-insights/future-proofing-the-supply-chain
