TRANSFORMATIONS IN SUPPLY CHAIN MANAGEMENT

What could be the most relevant trends that contribute to successful Supply Chain management?

Until COVID-19 disruptions, organisations were unresponsive to the changes that happen around them. They were more focused on internal operations and the internal factors that contribute to operational efficiency.

However, during the Pandemic, Organizations realized that they need to adapt to the VUCA world (Volatility, Uncertainty, Complexity, and Ambiguity). They are now receptive to the regular changes in the environment, build resilience, and become agile. Today, the organizations’ outlook is more towards optimizing their supply chain.

The global supply chain is continuously evolving, keeping up with the current era's rapid technological breakthroughs. Although it can be challenging for supply chain managers to keep up with these developments, doing so is essential to maintaining the resilience of your supply chain and boosting the success of your company. Staying ahead of the supply chain management (SCM) trends that are influencing SCM's future is preferable.

Here are some areas that require better focus.

DIGITIZATION

Organizations are using older techniques in estimating demand. It is so a threat since the application might get outdated and the provider might even stop supporting it as technologies develop. Organizations have to focus on executing techniques that include AI, big data, and machine learning, to enhance their forecasting. In other words, digitization & technology is necessary to streamline the supply chain.

In a survey conducted by McKinsey & Company, it seems that the majority percentage are still using spreadsheet methods for supply chain planning and forecasting. They have to adapt to the fast-moving environment and consider moving towards electronic supply chain management (e-SCM). This is where digitization, the Internet of Things (IoT), or any other technology plays an important role in developing the SCM.

To fulfill the needs of the organization, appropriate technology must be chosen, then deploy properly, and resolve any internal issues that may arise. Digitization cannot be ignored. It already exists and will only continue to play a bigger role in the supply chain in the future.

One challenge would be the time. A company on average will take at least 3 years to revamp its operation and planning methods since this involves global implementation and will have an impact in their initial stages. This means that companies need to rethink and accelerate their techniques over planning very quickly and capitalize on the opportunity to be resilient.

?SUPPLIER RELATIONSHIP

Earlier Organizations used to have a limited number of suppliers with whom they have had long-term relationships. However, the trend is that they look to diversify their choices of suppliers, by having some more suppliers onboard. This helps them to meet critical deadlines, risk of being out of stock, better sourcing, and rapport with the local market. Including more suppliers on their list will broaden their market reach (tapping new markets abroad) and build relationships with different types of suppliers. Organizations have better chances to control small suppliers and keep them as a backup force. They can even shorten the supply chain by keeping them close. Further, companies can focus on strategies to support their goals and those of the suppliers, that will benefit both parties. Share knowledge, deal with unforeseen concerns as they arise, and fix issues before they become bigger ones. Bringing efficient communication techniques will benefit the business. One challenge here would be making the right choice of supplier, who could add business value to the organization and remain a long-term partner.

AUTOMATION IN WAREHOUSE

Organizations are facing heavy attrition and therefore there is a huge reduction in the labor force. Automation could be used to fulfilling orders in such difficult times. Bringing technology inside the warehouse can reduce costs and manage stocks efficiently. This is vital inside a warehouse because it involves picking orders, sorting, packing, loading or unloading, stacking, and shipping. A robotic solution could be an ideal method, that helps in such processes and therefore optimize warehouse management. Further, IoT can be utilized to enhance fleet management, inventory control, warehouse management, and even mechanical and technical maintenance. Even smart fleets and warehouses that improve data accuracy and efficiency across several facets of your supply chain can be built with IoT technology. According to Gartner’s survey, by 2026, 75% of large enterprises will have adopted some form of intralogistics smart robots in their warehouse operations. These robots will not replace human, but would be treated as supplements. Robots navigate through the warehouse, identify the products and place them according to the requirements. Further, some organizations use smart glasses or deep learning methods to scan products on shelves, which might be difficult for humans to identify. Similarly,

SUSTAINABILITY

Organizations are moving towards sustainable options. As items are manufactured and transported throughout the world, supply chains frequently involve energy-intensive production and transportation. In addition, the end users are also concerned about sustainable product sourcing. In a sustainable journey, the organization’s role would also include solving universal problems including fair labour standards, deforestation, water security, and climate change. A robust supply chain to become greener will eventually reduce its operational costs and maintain overall efficiency. A circular economy is recommended were recycling the discarded raw materials or finished goods, are sent back into the production units after necessary processing. This indicates a commitment to environmental and societal values. For example, Subaru’s Indiana car-making plant is the first zero-waste factory in USA.

Sustainability comes along with three elements in a supply chain.

• Environmental responsibility: Protecting the environment from potential harm brought on by supply chain activities such as production, storage, packing, shipping, and other minor processes.
• Financial responsibility: It takes care of the business's financial requirements. Shareholders, employers/employees, clients, customers, business partners, domestic institutions, and financial institutions are some of the participants in the financial markets.
• Social responsibility: Principles, ethics, morals, and altruistic expectations of society from a corporation are all part of social responsibility. This implies that each individual in a sustainable supply chain is treated justly, equally, and in accordance with the obligations of human rights.

For a sustainable supply chain, some ways could be keeping an eye on numerous factors such as carbon reduction, use of renewable energy, recycle goods and materials, among suppliers. Sustainability metrics in intelligent supply chain management (SCM) systems could improve so that it monitors all these factors. For example, the system could predict the closest distribution centers.

Key advantages of a sustainable supply chain:

• Reduction in costs
• Build healthy relationships & reputation
• Reduce environmental impact
• Minimising risk

One factor that hinders any organization from moving towards sustainability could be the cost and complexity of the supply chain. However, they could overcome this since the investment towards sustainability would lower cost savings over time.

It is impossible to predict with accuracy what would be the supply chain concerns over the years ahead. However, a robust supply chain would be ready to deal with any unprecedented changes that arise. The planning of supply chain strategies will be strengthened and improved by supply chain sustainability. Efforts to sustain the supply chain will increase, and more businesses will embrace a circular supply chain approach.

Organizations need to prepare a risk assessment for the entire logistics network and be prepared to respond to alternative scenarios whenever needed. Extending lead times for transportation planning and reevaluating network agility and resilience is ideal. Enable alternative supply sources, transportation methods, ports, and routes. To meet the additional costs of rising fees from fuel surcharges and other forms of transportation, establish a contingency plan for the cost. The best strategy is to prepare for the worst, as proposed by Gartner, making the supply chain robust and adapting to even minor changes.?

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Sources:

https://www.mckinsey.com/business-functions/operations/our-insights/to-improve-your-supply-chain-modernize-your-supply-chain-it

https://www.gartner.com/smarterwithgartner/gartner-predicts-the-future-of-supply-chain-technology

https://www.netsuite.com/portal/resource/articles/erp/supply-chain-sustainability.shtml

https://www.gartner.com/en/articles/preparing-for-the-worst-is-the-best-logistics-strategy-now-more-than-ever-1