In today’s world of complex interconnectedness and highly specialized operations, the processes of gathering raw materials, producing the goods, storing and delivering them to the end users are often carried out by different parties. As the result, Supply Chain Management (SCM) has become a legitimate stand-alone field in itself, responsible for the flow of materials and products between these business functions. “The increased money companies will make or save through optimized logistics and supply chains is estimated at $3 trillion through 2022” . As businesses focus more on their core competencies, distribution is one function which is increasingly being outsourced and SCM has thus received a lot more attention and investment.
While many things are expected to either be improved upon or change completely in 2017, there are a few major trends which we believe will significantly affect the SCM sector:
1. E-commerce boosts the importance of logistics
The Global E-commerce Report for 2015 has produced striking results about this industry’s potentials, especially in the Asia-Pacific region.
In addition, the estimated share of online goods in the total retail revenue has gone up to 7 percent globally, and 8.6 percent in Asia-Pacific only. All the above figures clearly show that e-commerce is a major global trend which will greatly affect other related sectors, especially SCM. As the multi-stage production of a good is no longer confined to one single country, or even continent, logistics managers nowadays must familiarize themselves with complex cross-border distribution networks. For a single item manufactured in one country, raw materials might be supplied by another, while physical stores and delivery to end-users are in yet another.
2. Everything goes digital
Digital is a trend which is affecting most businesses nowadays. However, While the design and production of goods have become highly digitized, companies will never be able to reap all the benefits of this technological advancement without digitizing their supply chains as well. For example, a logistics manager, with the assistance of a last-mile delivery system, will no longer have to look at maps and struggle to find the shortest path for his/her delivery man to take goods to a customer. The software will take into account all characteristics of the local transportation system and produce an optimized plan for all delivery trips to be carried out. Real-time tracking and report generation are also valuable tools for both managers and customers alike.
Moreover, the digital economy will also provide all players with greater transparency and communication both within and outside the organization. The concept of a Supply Chain Control Tower is not new, but it is still being enhanced with the introduction of cloud computing. Data from supply chain operations all over the world will be collected and analyzed in order to improve current processes.
The year 2016 has brought technological advancement to a new level. Virtual Reality (VR) is now available to the public not only for entertainment but also for business purposes. This technology is being rapidly applied to many business functions, including SCM. Logistics managers can now plan and visualize warehouses in full-scale even before beginning construction. In terms of delivery, in addition to a digitally optimized last-mile delivery system, VR can also add value to this process with heads-up and windshield displays which will distract drivers much less than traditional GPS devices .
“Globalization” has been the hot buzzword for decades, so much so that some people think it’s already fully achieved. However, starting with Brexit – Britain’s public decision to leave the European Union – and the very recent result of the U.S. election, many experts have started talking about “de-globalization.” “[In September], the World Trade Organization forecast that global trade will expand at its slowest pace since the financial crisis this year, also downgrading its projections for 2017” .
Until now, international businesses have been enjoying (almost) free trade and movement of labor across national and continental borders. Whilst this will not abruptly end, it will be negatively affected to a certain extent by the coming Brexit and Donald Trump’s protectionist policy. “Large multinationals will be paying very close attention to the design of their supply chain networks – to where their factories and warehouses are located and how they flow products to customers” . SCM professionals, as the result, will have to adjust their business strategies accordingly.
4. Automation reduces the need for human workers
These days, we can easily see robotic arms picking at intricate parts on an assembly line in a modern factory, a job used to be done by human hands. One estimate is that for every 20 jobs lost to trade, 80 manufacturing jobs are lost to automation . Big e-commerce corporations such as Amazon are experimenting with drone technology to use as an alternative non-human distribution system, as well as to reduce road vehicles and thus contribute to the global eco-friendly trend. While we are not yet sure when self-driving cars will actually happen on a scale large enough to take jobs away from truck drivers, we can already certainly see automation in the planning and management stages of a supply chain’s operation. Today, the best route optimization software can analyze maps and traffic and automatically allocate the best routes to all delivery people, saving days of a logistics manager’s planning and management time. The best software will generate the optimal routes so that less vehicles and drivers are needed to deliver the same amount of orders as dispatching manually.
5. Rethinking the supply chain entirely
While a lot of technology that exists today can help enhance a supply chain digitally, there is a big difference between an improved traditional supply chain and a re-invented digital one. There are many aspects of traditional SCM which are not ready for technological integration. Digitizing a few certain elements of a supply chain will only increase efficiency proportionally, while an entirely redesigned supply chain will allow technology to embed itself naturally and seamlessly into the whole system and multiply productivity manifold. “[We should] reimagine supply chain as a Digital Supply Network (DSN) that unites not just physical flows but also talent, information and finance. This new breed of supply chain is more connected, intelligent, scalable and rapid than traditional supply chain management” .