Supply chain agility

Traditionally, companies have focused primarily on improving operational efficiency and reducing internal cost in their supply chains. However, as supply chains have become more complex – with higher expectations from a variety of stakeholders and more diverse sources of risk – this approach is no longer effective and firms are having to rethink how they enhance their supply chain performance. According to a recent survey and industry report by MHI – the leading logistics trade association in the US – and business consultants, Deloitte, the two main strategic priorities for logistics executives today are supply chain analytics and multichannel fulfilment. 

Supply chain analytics

A vast array of analytical tools and techniques can be used to harness the power of data to give powerful insights that help management to reduce supply chain costs and risks, while increasing operational agility and service quality. A number of factors have come together to boost the potential of analytics including the availability of ‘big data’, ever-faster data processing speeds, the falling cost of data storage, higher connectivity levels and the availability of sophisticated analytical software tools. Of course, pure play e-tailers have had a clear advantage in having access to valuable data from the beginning, while retailers moving into online sales have had to play catch-up. Visualisation, predictive modelling and advanced forecasting techniques are helping supply chain analytics to be less backward-looking (drilling down into past data) and more forward-looking.

The multichannel world

The report identifies the second main strategic priority for supply chain managers today as multichannel fulfilment. The new retail environment is one in which consumers can shop for what they want, when they want and where they want. In addition, they demand rapid and consistent delivery of their orders – often the next day and even the same day. Online fulfilment is the fastest growing segment in retail but many retailers are struggling to service direct-to-customer orders through existing distribution facilities that were designed specifically for store replenishment. For many of these companies, the true objective is not multichannel fulfillment but omnichannel fulfilment, with all channels being fully integrated. For this, companies need real-time inventory visibility at every site across the supply chain, allowing a single pool of stock rather than having separate inventory for different channels. A significant barrier here can be the incompatibility of legacy systems, which can prevent the implementation of a common inventory pool. 

New technologies

Areas of emerging innovation highlighted in the MHI/Deloitte report include sustainability, mobile/machine-to-machine technologies and 3D printing, all of which have the potential to have a dramatic impact on future supply chains. 

In terms of sustainability, companies are keen to reduce waste in the supply chain through greater reliance on renewable energy, more fuel-efficient vehicles and optimised packaging. Material handling suppliers – including automated system providers – are responding to these needs with many innovations and more widespread use of existing technologies, such as regenerative braking systems. Companies are realising that a sustainable approach not only improves the bottom line but also the top line, as increased consumer loyalty can boost the overall value of the brand.

When it comes to mobility and machine-to-machine (M2M) technology, firms are realising that this can improve supply chain agility and customer service levels by providing employees with the information they need, on the go. Use of technologies such as bar coding, image scanning, voice data and RFID is not new but is becoming more common, even in smaller companies.

As for 3D printing – or, to give it its proper term, additive manufacturing – some pundits believe that it could revolutionise supply chains by localising production and enabling just-in-time manufacturing. However, although it is already being implemented in some sectors, there are significant hurdles yet to be overcome in other industries.

Barriers to innovation

The MHI/Deloitte survey points to two major barriers to the adoption of supply chain innovations today – a shortage of talent and a reluctance to shift focus away from cost reduction.

Obviously, in order to maximise the potential of the latest supply chain innovations, companies need talented personnel with the right skills and experience. With 1.4 million new jobs expected in the supply chain sector by 2018, this is a problem that is set to get worse. Typically, older employees have the required experience but tend to be less comfortable with new tools and techniques; younger personnel, on the other hand, are au fait with the technologies but may lack the required experience to implement them effectively. Solutions here include training of older workers in the latest tools and mentoring of younger workers to help them build their experience.

The continued focus on cost reduction in the supply chain is arguably an even greater problem than the talent shortage, as it requires changing entrenched mindsets. Over 70% of respondents in the MHI/Deloitte survey admitted that controlling costs was a top priority. With return on investment for new technologies – such as state-of-the-art warehouse automation systems – strengthening year by year, companies willing and able to tackle this issue and shift focus away from cost control have the potential to achieve huge competitive advantage.

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