Four notable trends shaping the supply chain management trajectory

Wind mills
Source: Pexel

Companies across industries today are experiencing unprecedented transformations in their supply chain in response to digital disruptions and shifting consumer expectations. There is no time in history has the pace of disruption been quicker than now. As technology gives rise to competition, businesses have been reinventing their supply chain to retain and increase business value while minimizing costs and impact on the environment.

DIGITIZATION

Technology plays a critical role in the global supply chain that enables international trade flows. For instance, firms can easily track the movement of goods from foreign ports to local distribution networks down to consumers with the use of certain software. The software produces data analytics so firms can better leverage the information to make a better, informed decision.

Supply chain digitization helps companies navigate to the increasing complexity of world trade characterized by a highly competitive, super connected, and evolving marketplace environment.

One notable disruptive event that stretches the supply chain capability is the recent coronavirus pandemic. Research published by the McKinsey & Company suggests that consumers are shifting to online and digital solutions as well as reduced-contact channels to get goods and services. And as a result, companies are innovating their supply chains by incorporating digitization to business models to serve the evolving consumer sentiment.

OMNICHANNEL LOGISTICS

Retail used to be plain and simple. Retailer builds a central distribution center, delivers the goods to the store, and customers come and buy. But the technology disrupts the industry and created to what is now called digital commerce. Customers today regardless of where they are can buy virtually anything online and get it delivered right to their doorstep.

As online shopping continues to rise, inventory management is critical and distribution networks need to be redesigned to serve different buying channels. This created complexity in managing the supply chain. Retailers should ensure an optimized level of inventory and flexible logistics capability to meet customer’s demand at every buying touchpoint – physical store, online orders, and other channels.

Walmart and Amazon are two of the major retailers that relentlessly innovating their supply chain for competitive advantage in omnichannel logistics. Their supply chain networks ensure efficiency in material flow and a reduction in distribution costs.

SUSTAINABLE, CIRCULAR SUPPLY CHAIN

Innovative companies today have transitioned from linear to circular supply chain (similar to the circular economy) for a sustainable future. The linear view of the supply chain cannot contain today’s complexity because of so many global configurations, suppliers, regulations, and other factors all collaborating to move things around with greater efficiency and effectiveness.

The circular supply chain considers inputs or raw materials to evolve in the circular supply network with minimal impact on the environment. Recyclability and traceability are essential components of a circular supply chain – the product does not end with the consumer rather it is being re-used to conserve environmental resources.

Courtesy: Gartner

Because resources are limited and subject to exhaustion, the need to use them efficiently to produce more outputs makes sustainability a key ingredient in supply chain management. Companies have been ramping efforts to ensure their sourcing strategy does not harm the environment.

Governments and organizations have expressed their concern on environmental and labor malpractices across many supply chain activities. For instance, the International Maritime Organization has introduced IMO 2020 regulation requiring ships to cut emissions to 0.5% to reduce Sulphur oxides in the atmosphere and protect human health. Although complying with this rule would mean a significant investment from carriers, the IMO 2020 will ensure not just carriers but also people and the environment become sustainable.

INTEGRATED SUPPLY CHAIN

Close coordination between stakeholders is pivotal to operate an integrated supply chain. Imagine a company working to achieve its goal with a conflicting departmental objective or one functional team trying to improve its own process and realized it does not contribute to the improvement of the entire organization. That is the problem of fragmented or siloed systems. People, systems, and processes are in place but have not seamlessly integrated to work together for a common purpose.

While some organizations are still operating their supply chains in a fragmented manner, successful companies have been investing resources in integrating their supply chains to reduce cost, improve visibility, and respond quickly to changing customer demand.

The technology enabling real-time visibility across the supply chain along with innovative company culture is what enables effective coordination. Technology solutions improve data capture and information exchange between stakeholders to improve supply chain collaboration.

To drive a market edge in the competitive environment, supply chains must become agile, efficient, resilient, and sustainable. The supply chain responsiveness and flexibility in responding to disruptions are crucial for the company’s success. Embedding technology in the supply chain not only improves collaboration but also drives innovation resulting in competitive advantage.

Marvin Bunyag provides analysis and insights into the most trending news in the supply chain management space in the Philippines and across Asia. He is an APICS-CPIM professional and brings 7 years of international experience in the supply chain. He holds MS in Operations and Supply Management from the University of Wisconsin in USA and a BS in Commerce at the University of the Immaculate Conception in the Philippines. 

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