Our top 5 supply chain trends to watch

Articles

Over the past few years the supply chain has been undergoing a profound change, engendered by global economic instability, increasing competitiveness and a transformation in consumption habits. These new challenges have added more complexity to the supply chain and given rise to new priorities. As companies ramp up their competitivity, they have expressed the concurrent needs of increased visibility of and collaboration with other links in the supply chain. The race to provide the best service, through specialization and lower costs, pushes enterprises to review and reconfigure their internal criteria for measuring logistics performance. Traditional models of the supply chain no longer permit companies to remain competitive in today’s multifaceted environment.

Top 3 supply chain challenges

According to a survey of 400 enterprises by the consultancy Deloitte, the 3 biggest supply chain challenges facing organizations are price pressures, increased client expectations, and demands for quicker response times.

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1. Digitalization of the supply chain

This year will mark a turning point in the digitalization of logistics, warehousing and production processes. Digital technology has revolutionized traditional business practices and has had a tremendous impact on supply chain management. The incorporation of new digitized logistics systems that emphasize responsiveness, agility, efficiency and intelligence have been superimposed upon the more typical performance indicators, like time, cost and quality of service. Studies have shown that companies adopting digital strategies saw their revenues increase by 9%, their market valuation rise by over 12% and their turnover jump by 26%.

2. Interconnected supply chain networks (values webs)

The increasing number of players in the global economy has contributed to the complexity of the traditional supply chain. According to a global survey published by Deloitte, supply chains are moving towards an ecosystem characterized by complex, hyper-connected and interdependent relationships, further stimulated by technological advances in information and communication. This new model, called the “Value Web,” is characterized by strong collaboration and co-creation, which have become factors of equal importance to those of product flow, control standards and coordination. This means that the value generated by the supply chain rests on the exchange of information between various connected entities and is no longer generated exclusively by the accumulation of skills within a single enterprise. This trend has been transforming the supply chain from a linear to a networked model, which imposes requirements of flexibility and adaptivity to the new and changing needs of customers.

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3. Increased interest in Big-Data for better visibility and continuous improvement of the supply chain

Big Data refers to the massive growth in and collection of volumes of data by new technologies, which lends itself to being stored on giant, accessible databases. Harvesting and analyzing big data–a practice that has become universally accepted in the corporate world–allows for the utilization of optimization tools, which has been shown to lead to significant positive impacts on a company’s revenue and profitability. When applied to logistics, Big Data can meet the many and diverse challenges in supply and distribution chains: it facilitates the management of supply and distribution systems, optimizes and limits the costs of operations, transport and inventory. For example, using this data prevents trucks from departing half-empty by identifying the possibility of picking up additional deliveries while en route. By allowing better planning and the reduction of errors in forecasting, it also contributes to greater agility in meeting and anticipating the ever-changing demands of the market. Big Data also plays an important role in terms of user experience, providing multiple opportunities to better serve customers through offering customized services to each client.

4. Internet of Things (IOT)

Logistics has not been immune to the explosion of “connected objects,” which has transformed practices in and the structure of the sector’s value chain. Connected objects are “the network of physical objects—devices, vehicles, buildings, etc.—embedded with electronics, software, sensors, and network connectivity that enables these objects to collect and exchange data” (source: Wikipedia). These objects also contribute largely to the increase Big Data. It is predicted that by 2020, between 26 and 80 billion electronic devices will be connected, and 40% of all data will come from machines connected to one another (source: Gartner Institute). With its ability to connect the physical world to the world of information, the Internet of Things creates data that can be collected, analyzed and shared. Whether through tracking systems, data analytics or sensors, the use of connected objects in the supply chain will bring improvements in terms of efficiency, innovation and user differentiation, through data analysis, leading to an improved customer experience. The responsiveness and agility of the supply chain will be improved: it is now possible for companies to manage their chain at the point closest to their physical operations, trace product history from conception to consumption, reduce losses and costs thanks to systems for temperature stability and inventory management, and develop new ways of interacting with customers.

5. Opting for a circular supply chain

The circular supply chain originates in the advent of the “circular economy,” which itself was created due to an awareness of the insurmountable difficulties caused by an unlimited exploitation of resources. While a traditional supply chain operates on the basis of a linear process (from raw material to intermediate good to finished product), the circular chain (or reverse supply chain) represents the mastery of return flows, focusing on job and wealth creation through the choice of recycling products. Although the management and the success of such a system require a new way of thinking, the profits that the company can draw are high:

  • Reduced administrative, transportation and aftermarket support costs,
  • Increased velocity,
  • Increased service market share,
  • Improved achievement of sustainability goals, and
  • Better customer service and higher consumer retention levels.

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(source: Cesaris)