Supply Chain Management Challenges All Businesses Need to Understand
Sustained marketplace success and effective supply chain management go hand-in-hand. Why? Organizations that cultivate and maintain reliable yet malleable logistics channels can source the material needed to produce impactful products with minimal overhead and deliver these items swiftly to anticipative consumers. In fact, 62% of logistics, supply chain, and transportation executives say their companies are undergoing profound supply chain transformation, according to a 2019 report from Forbes Insights. However, the stakeholders managing these ever-growing caches should familiarize themselves with some of the most recent SCM challenges and trends to ensure that the supply chains they are constructing are truly built to last.
Here are three of those developments and potential roadblocks, and how they might affect organizations attempting to establish logistics conduits that catalyze success:
1. Advanced technology
Sophisticated enterprise information technology now propels numerous operational functions, including supply chains. In fact, businesses worldwide spent around $14 billion on SCM solutions in 2018 alone, per Gartner. However, this rudimentary software is quickly becoming a remnant of the past due to the emergence of several new SCM technologies. Gartner recently highlighted some of these innovations, which include artificial intelligence software, robotic process automation, digital supply chain twinning, and blockchain.
AI is particularly consequential within the SCM context, having the ability to render assistance across various essential supply chain functions, including maintenance and production planning. And despite the experimental aura associated with the technology, AI sees significant use today — one study from Adobe estimated that 15% of all organizations have deployed this highly advanced software. Robotics is also rising in popularity among organizations looking to automate select SCM processes. Today, there are an estimated 4,000 robotic warehouses in existence worldwide, according to analysts from ABI Research, who estimated that number will increase to 50,000 by 2025 due to an influx of more than 4 million RPA units. Digital supply chain twinning, which involves developing online logistics models that match physical counterparts and therefore can be used for forecasting and simulation purposes, is gaining comparable traction among SCM stakeholders. Blockchain is too, as many supply chain leaders consider the technology, which rose out of the cryptocurrency revolution, an ideal solution for ensuring logistics security. This is partially why an estimated 80% of businesses are pursuing blockchain, per PricewaterhouseCoopers.
2. Decentralized distribution
Back in August 2018, Amazon earned a patent for a fantastical ecommerce innovation: the floating drone warehouse. The patent, which drew considerable media attention, detailed specifications for a hovering distribution hub that would work in concert with hundreds of drones to deliver customer orders. Many dismissed the idea out of hand, despite the ecommerce giant’s penchant for technological innovation. And while it may be a long time before the first Amazon distribution blimp takes flight, the overarching operational objective behind it, supply chain efficiency through logistics decentralization, is evolving into industry best practice.
A good number of businesses are breaking down and redistributing their supply chain nodes in an effort to reduce last-mile delivery times, which are essential to customer satisfaction. Same-day shipping and similarly accelerated logistics options are in higher demand than ever before, making rapid SCM operations critical to organizational success, particularly for B2C companies serving online shoppers. With more than 60% of digital patrons expecting their same-day deliveries to arrive before noon, per UPS, SCM stakeholders at these businesses and others have no choice but to follow in Amazon’s footsteps and embrace logistical decentralization in an effort to bring products closer to customers.
3. Widespread deglobalization
Numerous worldwide trade conflicts have materialized in recent years, collectively damaging international business partnerships forged in the decades following the implementation of the North American Free Trade Agreement and other key pieces of globalist economic policy. Now, nations such as the U.S. and the U.K. are pursuing protectionist trade strategies made to prop up struggling domestic industries. These methodologies, while somewhat effective, are hurting companies that depend on logistics channels that span multiple continents and countries, Supply Chain Quarterly reported. Tariff issuance is the driving force behind this SCM disruption, as organizations everywhere are forced to offset the increased cost of raw material or end product exportation, or seek new partnerships. Intel, for instance, recently revealed that it was taking a second look at its supply chain operations in an effort to find more cost-effective sourcing and shipping strategies, per Bloomberg.
Unfortunately, this general trend of deglobalization is not likely to end soon. While the U.S. government has been meeting with officials from China, its biggest and most powerful economic opponent, in an effort to de-escalate trade tensions, both countries look poised to continue their protectionist ways for the foreseeable future, The New York Times reported. Additionally, the U.S. Department of Commerce is close to imposing new tariffs on $4 billion in products produced in the European Union, according to the newspaper. This move could further imperil businesses that maintain ties with EU logistics partners or are looking to move their supply chains there due to the deglobalization unfolding in Asia.
Businesses grappling with these and other SCM trends and challenges could encounter difficulties when pursuing the necessary operational adjustments. In these moments, external expertise can make an immense difference, lending organizational leaders the actionable insight they need to marshal transformation within their supply chains and capture associated bottom-line gains. Here at USC Consulting Group, we help companies across virtually all industries navigate internal and external upheaval, leveraging tried-and-true techniques and tools that simplify change management, facilitate operational improvement, and lay the foundation for sustained growth.