Connected Business: The Post-COVID Supply Chain
With supply chains being massively disrupted as the pandemic took hold, what does a post-pandemic supply chain look like? How can businesses transform their partnerships to create new supply chain relationships that use technology to keep global trade moving?
For many businesses, COVID-19 has meant re-designing their supply chain. Panic buying and delivery delays on a global scale pushed many enterprises to totally overhaul how they approach their supply chain. Some companies even buy their own containers and lease their own ships to stabilise supply to meet their growing customer demand.
The pandemic effectively rewrote the rules of the supply chain. Another critical consequence of the pandemic has been to lay bare how the supply chains of many businesses are not resilient enough and don’t have the technical foundation to cope with massive swings in demand that have been witnessed over the last two years.
“We found that COVID has had a massive impact on consumer demand patterns and supply chains, with 85% of consumer product companies and 88% of retailers facing disruptions and dramatically shifting the trend towards ecommerce,” explained Chris Long, Director (Retail Operations Consulting Lead) and Luke Large, Senior Consultant at Capgemini Invent. “This has forced many CPR companies to rethink their supply chains. In fact, 66% of organisations foresee significant changes to their supply chain strategy in the next three years.”
Says KPMG in their report, the Supply Chain of the Future, “Supply chain management is no longer about reducing cost: it’s about service differentiation, increasing market share, even driving revenues as a growing number of customers buy into value-added, premium fulfillment options.”
According to Gartner, 72% of supply chain organizations view technology as a source of competitive advantage, only 47% manage SCM (Supply Chain Management) technology horizontally and holistically across functional domains. And by 2024, 50% of supply chain organizations will invest in applications that support artificial intelligence and advanced analytics capabilities.
Customer expectations have massively shifted over the last decade. Next-day delivery, wide choice, and the ability to buy on a global scale have meant businesses have had to make their supply chains multifaceted tools that consistently meet these demands.
Speaking to Silicon UK, Henrik Smedberg, Head of Intelligent Spend Management UKI, SAP, says: “Brexit has created another layer of complexity for managing supply chains. Near-shoring and on-shoring in the UK is now a necessity for some supplies and that drives up costs. In the building industry, for example, the cost of plywood and other wood and building materials have more than doubled in some cases recently. This cost and scarcity of supply threatens to move the focus off sustainability unfortunately. However, we are seeing more chief procurement officers add sustainability to their remit and more CSPOs are prioritising sustainability.”
New tech connections
Automation, of course, has a key role to play in improving how supply chains operate. The advances in IoT sensors deliver intelligence to warehouse service providers with the data they generate, feeding into supply chain management systems businesses can connect to. This ecosystem of data can ensure supply chains remain dynamic, reliable, secure, and resilient.
What’s more, as machine learning is applied to the supply chain, human decision-making will become automated in some aspects of the supply chain. Here, predictive analytics hold the key to understanding potential customer demand, with the supply chain automatically adjusting as demand ebbs and flows.
Decades of supply chain evolution has driven down the unit price of goods and created a complex web of supply chain components from manufacturing to transport. The heavy integration of these systems has been cost-effective, but as the pandemic has revealed, these networks are slow or unable to react to spikes or troughs in customer demand.
This must change if post-pandemic trading is to continue. Here, small, more specialised supply chains will emerge that are autonomous and able to react to customer demand. The micro supply chain in the future, with advanced digital systems able to easily manage multiple supply chains.
“Gartner research shows that supply chain leaders perceive technology primarily as a competitive advantage — they focus on long-term value,” says Christian Titze, Vice President Analyst, Gartner. “Yet, 80% of organizations favour a cautious approach when it comes to adopting new supply chain applications and technologies.”
Whether global or micro supply chains are considered, many businesses are using the digital twin concept and applying this to their supply chains. This speaks volumes about the importance that continued digitisation will have on every business’s ability to trade economically in the future. Developing these systems will give enterprises the digital foundation to build efficient and cost-effective post-pandemic supply chains.
The emerging technologies Industry 4.0 defines that includes 5G, IoT, Edge Computing and Machine Learning, all support how businesses will manage their supply chains. However, leveraging these technologies in an integrated service will be a challenge.
Kit Kyte, CEO, Checkit, tells Silicon UK: “In the post-pandemic world, ‘dark operations’ will be recognized as a source of risk and an obstacle to adaptability. Digital adoption is set to rise. By 2025, 23% of supply chain leaders expect to have a digital ecosystem in place, up from 1% today, according to research from Gartner. Supply chain leaders will be looking to augment their workforces with digital capabilities, ensuring they can adapt more quickly to global economic forces and other forms of disruption. In practice, you’ll see frontline people equipped with mobile apps that serve as digital assistants – guiding and capturing their activity in real-time, enabling collaboration and generating much-needed management insight.”
Supply and demand
For businesses to thrive post-pandemic, it’s clear they must have efficient supply chains. “The pandemic taught us disruption is inevitable and unpredictable. While organisations can’t control every aspect of their supply chain, they can take control of how they allocate capital to investments in digitizing their business for the future,” Chris Huff, Chief Strategy Officer, Kofax, explained.
“Time-consuming, manual processes can hurt the vendor relationship and put the company at risk of making poor decisions based on inaccurate data. Creating digital solutions, such as AP automation addresses this blind spot by providing full visibility and transparency into how work gets done and enables organisations to start working like tomorrow—today.”
A complete overhaul of some aspects of the supply chain is clearly urgent for many enterprises. As they re-draw their digital transformation roadmaps, resilient supply chains are a critical component.
Matt Bye, Chief Technology Officer, Sedex, concludes: “As the world economy starts to recover post-pandemic, it is absolutely critical that organisations are able to use technology to gain full understanding and visibility of their supply chain. This will both protect them from further risks in getting products from source to customer, and more importantly, help organisations create a fairer, safer, and better supply chain.”
The future of all post-COVID businesses is coming into focus. The pandemic has revealed what can be fundamental problems with an enterprise’s supply chain. Now, these issues can be seen, companies can act. Domestic and global trade has changed perhaps forever. With this new trading environment, a new approach to supply chains is needed. Technology will play a critical role to shape these new trading relationships.
Silicon In Focus
Anthony Thrasher, Director of Product Management at SPS Commerce.
As an expert in retail fulfilment, Anthony offers a unique viewpoint on using the latest retail technologies to drive innovation and growth. At SPS Commerce, Anthony leads the Dev Centre (developer portal), product-focused on making partner and customer developers wildly successful when connecting to the world’s leading retail network. He also leads on SPS Commerce’s logistics product strategy, helping third-party logistics providers and carriers to communicate with their retail trading partners.
What does a post-pandemic supply chain look like? How does a post-pandemic supply chain differ from a pre-pandemic supply chain?
“COVID-19 has forced companies to revaluate their supply chains. In addition, the pandemic has exposed the vulnerabilities of many organisations, leaving them searching for ways to reduce risk within their retail ecosystem.
“Due to the unavailability of products and reduced capabilities to receive raw materials, some retailers were forced to diversify their suppliers. Quick implementation and onboarding programs for multiple fulfilment styles (dropship, BOPIS, cross-dock, etc.) was necessary to deliver products to consumers.
“Consumers now expect these new services, and retailers need to figure out how to maintain them both successfully and cost-effectively going forward. This requires them to find the tools and technology that make the strategy long term.
“As ports and shipping channels were impacted, businesses were unable to obtain materials. As a result, suppliers signed up for new fulfilment offerings to meet retailer demand, which broadened their footprint. Many added additional fulfilment partners to service these new areas for customer dropship.
“The combination of the two created a more co-dependent relationship between suppliers and retailers. In addition, the post-pandemic supply chain enforced the realization to create efficiencies both relied on real-time order visibility.”
What are the core challenges businesses now face creating a sustainable supply chain?
“The importance of sustainability has grown drastically within almost every industry, and retail is no exception. Consumers are getting pickier about the brands they choose based on how sustainably products are produced and packaged. Companies that are responsive and start preparing now can build themselves an early competitive edge. However, they must first tackle the four main challenges:
- Difficulty in monitoring complex supply chains
Companies offering multiple products likely operate within complex supply chains. For example, a single product may have a myriad of different material suppliers and manufacturers along its supply chain. In addition, if companies employ several suppliers per component to ensure continued delivery in case of disruption, the process becomes even more complex and error-prone. - Costs
From a short-term perspective, reassessing supply chains, setting new standards and taking measures to change supply chains can use more resources and increase costs. However, once in place, sustainability can strengthen the supply chain by reducing costs and enhancing a brand and its reputation. - Lack of alignment
Sustainability can be of varying importance to many different players in supply chain networks. For example, as products and materials are substituted to ensure availability, some levels of compliance may be sacrificed. Similarly, while relationships are already formed, many go back and address the alignment needed for a long-term relationship.”
How will robotics and automation technologies change how supply chains operate?
“Robotics and manufacturing automation help to reduce operating costs and increase revenue potential. During pandemic shutdowns, these companies had a higher likelihood to keep plants open with fewer workers and the ability to keep workers distanced across assembly lines. This prior investment paid dividends in return for work.
“Automation across paper processes also found ways for people to collaborate while not being in the same physical location. Companies that still have paper-intensive processes found execution difficult as the handoff and transfer of information was no longer functional. Those that had a cloud-based system were able to easily access and share information on one platform.”
Is data analytics and how this information is applied to the tangible supply chain how businesses can enable greater efficiency and cost savings?
“Information and the ability to access it have become the core of any effective supply chain. The speed at which new information can be seen has also become a critical component. These items are achieved when retailers can leverage a single process with few exceptions across their supply chain. For example, it allows for visibility into orders in any status through the fulfilment process and information that is accessible across the organization.
“This saves time and money that is spent managing separate processes. There is no manual receipt, entry or response required, and constant follow-up for information is no longer necessary.
“During the pandemic closures, this revealed opportunities for even more points of information. As the logistics networks were maxed out, retailers realized that issuing a routing number was not guaranteed to ship the product. As a result, they demanded even more tracking during transportation to ensure products were en route.
Accurate sales forecasting is critical for solid supply relationships in retail. Retailers can share this data with suppliers through third-party analytical tools. This allows them to analyse data across their retail outlets from various systems, combined with pre-determined performance indicators such as purchase history, geographical data, seasonal, pricing and time periods. Overall, it helps businesses uncover up-to-date, actionable insights to significantly enhance their ability to forecast demand.”
Do we see a radical re-thinking of how resilience is built into the supply chain in the wake of COVID-19?
“Many stop gaps that were quickly implemented are becoming part of the day-to-day business, and companies are now working through these to make them long-term. Technology and tool buying decisions were fast and not well-vetted and are currently being evaluated to ensure they are the right solutions going forward.
“Flexibility will be a necessary form of resilience in supply chains post-COVID-19. It will allow a company to both withstand significant disruptions and better respond to demand fluctuations.
“For a company to increase its supply chain flexibility, they will need to master the ability to reallocate resources where the need is greatest, include plans to postpone and improve and maintain deep relationships with their suppliers. These capabilities will help companies to respond quickly to a disruption.”
How are technologies like AI, edge computing and IoT transforming the supply chain?
“Technology is used to keep the business connected when people are not housed in the exact location. The network connections are critical to add new vendors and maintain visibility of orders and processes. All of the information requires reliable infrastructure. Many people realized they didn’t have the right partners or capabilities to support the high data demands.
“From predictive to prescriptive to decision support and decision automation, artificial intelligence is transforming supply chain activities in many ways. For example, AI can provide the foundation for autonomous planning, predicted on internal or external data from suppliers, customers, demographics and broader economic indicators. It can also analyse the historical performance data of machines to forecast when one is likely to fail, minimising time out of service and identifying the root of the problem.”
