The landscape of supply chain management has seen a rapid transition in the last three years as the global pandemic exposed the fragility of traditional supply chain models. Supply chains worldwide were tested under the pressure of sudden supply-side shocks and disruptions caused by travel bans. Fluctuating demand sent traditional models into a tailspin as companies scrambled to stay afloat amid the volatility. Few were prepared for the scale of disruption with many suffering heavy losses as a result of the bullwhip effect.
According to EY, only 2% of companies who responded to a recent survey were ready for the disruption. For the few that were, a key differentiator was their use of technology. Through the use of predictive analytics and improved supply chain visibility, companies like Nike and HP were able to identify and respond to challenges that threatened the continuity of their business.
This industry-wide disruption has fueled a paradigm shift in the way supply chains are managed, with executives rethinking the way their organizations use technology. Now, as companies look to build more resilient supply chains for the future, digital technology is at the forefront of this transformation.
Supply Chain Management’s Digital Transformation
The shift towards digital and automated supply chains began long before the pandemic but was accelerated by the sudden changes in consumer behavior. With customers expecting faster, more personalized services, businesses have been forced to adopt digital solutions that can offer real-time visibility or risk losing out to their competitors.
EY’s research found that increased visibility and efficiency were among survey respondents’ top priorities in 2023. Across all surveyed companies, 61% reported increased visibility as a top 3 focus while 65% reported greater efficiency as a top 3 focus. These goals are being achieved through the use of technologies like cloud computing and supply chain orchestration systems, which allow companies to connect and integrate all parts of the supply chain.
Digital solutions have become essential to improve visibility and agility across networks, enabling companies to track shipments and analyze demand in real time. Autonomous systems help to continuously monitor operations and detect deviations from normal performance, alerting teams when there is an unexpected issue or bottleneck. This kind of proactive monitoring allows businesses to identify and resolve any potential disruptions before they lead to a complete shutdown.
With the pandemic highlighting the need for improved supply chain resilience and agility, a growing number of companies have been investing in digital transformation initiatives to build smarter, more responsive networks. According to EY, by 2035 45% of supply chains are now expected to become automated, with investments in AI and robotic process automation projected to double in the next few years.
For businesses looking to stay ahead of the curve, digital transformation is no longer a nice to have; it’s now an essential part of the supply chain equation. However, it’s not enough to just invest in technology; the key is to integrate these solutions with existing systems. This means developing a strategy that takes into account all aspects of the supply chain, from warehousing and transport to customer service and order fulfillment.
By understanding the evolving landscape of supply chain management and capitalizing on the opportunities presented by digital transformation, companies can equip themselves to handle future disruptions. Here are five trends that are driving this shift toward a smarter, more connected supply chain:
1. Automation & AI-Enabled Decision Making
Autonomous systems have become the cornerstone of modern SCM practices, providing businesses with increased transparency across their networks and allowing for faster decision-making. As the demand for heightened visibility and agility increases, a growing number of companies are turning to autonomous supply chain models to remain competitive.
Within the warehouse environment, automated systems like robotic process automation (RPA) and warehouse management systems (WMS) are helping to reduce human labor costs and allow for faster decision-making.
The addition of AI and machine learning has further enhanced the capabilities of these systems, providing businesses with real-time insights into inventory levels and customer demand. Through the use of AI, WMSs can identify and re-route shipments that are delayed due to weather or other disruptions. They can also suggest alternate routes to delivery locations, helping businesses avoid costly delays and minimize the impact on customer service. Advanced WMS solutions can even be used to predict customer demand and order the right amount of inventory based on trend forecasting.
On the transportation side, AI-based solutions have enabled companies to optimize their fleets and reduce delivery times. By using predictive algorithms, transport providers can assess current and expected traffic conditions to determine the best route for each delivery. This helps them avoid delays due to congestion or accidents, resulting in faster, more accurate deliveries.
As AI-enabled automation systems continue to evolve, more companies are turning to them to improve the accuracy and agility of their supply chains. According to recent research, 35% of companies are already using AI-based systems to inform decision-making with 42% exploring the use of AI in their operations in the future. For businesses looking to remain competitive, AI-enabled automation has become an indispensable tool for modern supply chain management.
2. Cloud Computing & Data Management
Cloud computing has been a major enabler of digital transformation within the supply chain industry, allowing companies to connect disparate systems and access data from anywhere in the world. By migrating their supply chain operations to the cloud, companies are able to gain real-time insights into their networks and ensure data accuracy across all systems. Cloud computing also allows for seamless collaboration between teams, enabling them to work together and proactively respond to changes in customer demand.
The rise of cloud computing has been accompanied by an increased demand for better data management solutions. Data is the lifeblood of any successful supply chain and with so much data to process, companies need a reliable system to analyze and interpret this information to drive better decision-making. Modern SCM solutions now offer access to real-time data from all points in the supply chain, allowing for comprehensive analyses that can be used to improve operations.
And with advanced analytics tools like machine learning and natural language processing (NLP) automating data capture and analysis, companies can extract valuable insights from their data sets. These technologies can be used to identify emerging patterns, predict customer behavior, and discover new opportunities for growth.
Cloud computing and data management solutions have become vital components of modern supply chain strategies. The use of these technologies is expected to continue growing at an impressive rate in the coming years as more companies look to harness the power of data. According to a report from Mordor Intelligence, the Cloud Supply Chain Management market is projected to grow at a Compound Annual Growth Rate (CAGR) of 11.09% by 2028.
3. Visibility & Connectivity
One of the most important aspects of a successful supply chain is end-to-end visibility; having access to real-time information about shipments and orders can be invaluable in responding to customer requests or avoiding potential issues. To achieve this level of transparency, businesses must connect all parts of their operations, from suppliers to customers. This is where the Internet of Things (IoT) and connected networks come in; these technologies allow for the creation of a “digital thread” that connects all stakeholders within the supply chain ecosystem.
Through IoT-enabled sensors and smart devices, companies can capture data at each step of the journey – from production to delivery – providing them with greater visibility into their supply chain operations. Connected networks can also be used to enable collaboration; customers, suppliers, and other stakeholders can all access the same information in real-time and work together to resolve issues or find opportunities for improvement.
The use of visibility and connectivity solutions within supply chains is on the rise as companies look for ways to improve the efficiency of their operations. McKinsey & Co. reported that 93% of procurement and supply leaders are examining their supply chains and seeking ways to increase their visibility. As more businesses adopt connected networks and sensors, there is an increasing need for advanced analytics technologies to analyze the data collected from these systems. This will be essential in driving better decision-making and improving overall supply chain performance.
4. Supply Chain Network Design
Following the shift toward digital, modern supply chains have grown in complexity. The traditional “linear” supply chain model of the past has been replaced by a more interconnected and dynamic approach: supply chain network design. Companies must now create a more dynamic network of suppliers and customers that can scale and adapt to changing market conditions. This requires supply chain network design (SCND) tools that allow companies to visualize their current networks and identify areas for improvement.
Supply Chain Network Design (SCND) is the process of understanding customer demand and optimizing existing resources in order to create an efficient distribution system. SCND tools allow companies to model their supply chains and analyze them for potential risks, bottlenecks, and opportunities. With integrated supply chains, businesses can pivot to respond to customer needs and adjust their operations to optimize resources.
The use of SCND tools is becoming popular with supply chain executives, as it allows them to understand customer demand and optimize their resources in order to create a more efficient distribution system. A Deloitte report found that only 13% of businesses can map their entire supply chain network, while up to 22% have no visibility beyond their immediate suppliers. Despite this, better order, inventory, and shipment visibility tops the priority list for 60% to 80% of companies. With a heavy focus on customer experience, executives are turning to SCND tools to gain visibility into their operations.
5. On-Demand Delivery & Logistics
During the first year of the pandemic in 2020, e-commerce sales increased by $244.2 billion, or 43%. While e-commerce growth has slowed since then, online shopping is still the preferred method for many customers. The pandemic led to an unprecedented level of channel switching and brand loyalty disruption, with 75% of consumers trying new shopping behaviors. Many cited convenience and value as the reasons behind this change.
The rise of e-commerce and the need for faster delivery have put tremendous pressure on businesses to offer flexible delivery options. Customers now expect to receive their orders within 24 hours or even same-day delivery. To meet these expectations, last-mile delivery logistics must be optimized. This requires businesses to incorporate on-demand delivery and fulfillment solutions, such as crowdsourced delivery networks or micro-fleets, into their operations.
Crowdsourced delivery networks, like those offered by Amazon Flex and Uber Eats, are an increasingly popular solution for on-demand delivery. These networks enable businesses to outsource part of their last-mile logistics operations, reducing costs and improving customer satisfaction. For businesses with capital constraints, outsourcing last-mile delivery operations can be a cost-effective way to meet customer demands.
Micro-fleets, another emerging trend in logistics, offer an on-demand delivery solution for businesses in dense urban areas. These fleets are composed of smaller, more agile vehicles that are designed to deliver orders to customers at a lower cost and in less time.
According to Allied Market Research, the on-demand logistics market is projected to reach $80.63 billion by 2031 with value-added services type predicted to rise at 24.7% CAGR. As customer demand for faster delivery continues to grow, on-demand logistics solutions offer businesses an effective way to meet their customers’ needs.
Staying Ahead of the Curve in the Supply Chain Industry
The journey to digital has already transformed the world of supply chain management and these five trends are just the beginning. As customer demands continue to evolve, supply chain teams must be agile enough to pivot quickly and leverage the right technologies to meet their needs. By leveraging visibility, connectivity, analytics, SCND tools, on-demand delivery solutions, and other emerging technologies, businesses can create a connected ecosystem that allows them to respond faster than ever before.
Interested in learning more about how Optchain’s team of supply chain professionals can help your organization optimize its operations? Contact us today to learn more. Our experts can help you leverage the right technologies, increase visibility into your operations, and stay ahead of the curve in an ever-evolving world.
