Technology, sustainability, globalism, shifting customer expectations and even volcanoes have had a significant impact on how businesses think about their supply chains over the past decade. Company leaders should consider these and other key factors as they assess their supply chain strategies for 2017 and beyond. Tweet This
The “Amazon effect”
Even if online sales aren’t a major part of your business, the explosion in online retailing has altered expectations about the time and cost of shipping across all channels. Logistics – in particular, speedy, nimble logistics – have become a greater factor in many companies’ success. What’s more, the sheer scope of Amazon’s shipping practices and its growing in-house distribution operations are disrupting not just retail shipping, but the entire freight and logistics industries. That means if you haven’t seen big changes in the logistical factors affecting your supply chain, you probably will.
Sustainability and social responsibility
Corporate social responsibility isn’t just a business buzzword, it’s become an expectation from customers and regulators. It’s now assumed companies will track the sustainability and ethical practices of their own operations and those up and down the supply chain.
Many manufacturers and suppliers now issue sustainability reports that can be used to monitor the other players in your supply chain. But the growing importance of knowing more about your partners and their practices is one of several factors driving the next trend in our list.
Even when goods and services were freely flowing, traditional supply chain relationships often were lacking in two key areas: information and trust. Today, successful companies collaborate throughout the supply chain to ensure that each link in the chain has the information it needs to be responsive to market changes and each other’s changing needs. One study found that collaboration across supply chains, when rated on a 10-point scale, increased from around 2.5 to 7.1 between 2000 and 2012. And supply chains are continuing to move in the direction of creating closer connections.
Trends such as connected supply chains and distributed manufacturing, which spread responsibility up and down the supply chain in new ways, require visibility into each other’s operations and integration of key systems including purchasing, inventory management and manufacturing across companies.
As collaboration increases, supply chains are going digital, automating and sharing with partners functions including procurement, orders, invoicing and payment. One study shows companies that digitized key operations have increased profitability by more than 25%. But that’s just the beginning of how technology is transforming the supply chain.
Big Data and the Internet of Things
The growing universe of connected devices in all areas of manufacturing and logistics (known as the Internet of Things, or IoT) is rapidly converging with large repositories of data and sophisticated, often predictive, number-crunching methodologies (known as “big data” and advanced analytics). This powerful combination provides opportunities to further streamline and network the entire supply chain from suppliers and manufacturers to retailers and end customers.
Remember when RFID chips were supposed to transform the logistics sector? Now the tracking of tagged materials can be completely automated and tracked in real time at all levels of the supply chain. In addition, the collection of massive amounts of data will ultimately open the door for automated systems, driven by machines learning and artificial intelligence, to make time-sensitive decisions with little or no human intervention.
As supply chains have grown more global and more nimble, natural disasters anywhere in the world can have a greater impact on your business. This can happen in surprising ways, such as when ash from a volcano in Iceland disrupted air travel cargo for nearly a month in 2010, causing global supply-chain disruptions in industries ranging from auto manufacturing and agriculture to clothing and diamonds. If your business hasn’t developed a risk management strategy to address potential disruptions, it’s time to do so.
Borrowing a term used in software development, agile supply chains are ones that can weather unpredictability and respond to market changes. Because they incorporate many of the other trends including digitization and networking, they’re rapidly supplanting the lean supply chains that came into vogue with “just-in-time” logistics. Research shows that companies with agile supply chains have more responsive service levels while managing to maintain the lower inventories favored by the lean approach, in large part because the approach focuses on being responsive to shifts in sales as well as sourcing.
With volatility and uncertainty in the forecast for 2017 and beyond, taking steps to make your supply chain more flexible, better connected and more collaborative should be at the cornerstone of a future-looking strategy for your business. The good news is that technology and changing practices make doing so an attainable goal that translates into time and cost savings and a better bottom line.
Photo Credit: Cheggy, Twenty20