Global supply chain challenges have been around for years. Long gone is the time when a country sourced, manufactured, and distributed their products independently of other countries and regions.
And as a result of this global aspect, in recent years companies have invested millions of dollars in their global supply chains. This is good. They have their customers in mind. But crucially, this investment has omitted the important issue of securing visibility. Lack of visibility leads to missing problems that could have been guarded against earlier.
The Covid-19 pandemic has served to shine a harsh light on this glaring lack of tracking and visibility.
And that’s important, because adequate real-time visibility is essential to being able to effectively manage your global supply chain challenges in 2021.
If you haven’t kept an eye on every part of the chain, you may have opened up your business to disruption and a falling return on investment (ROI).
So, in this article, we’ll talk about how and why you should now use technology to provide this visibility as an answer to most of the global supply chain challenges we face.
But First, Let’s Look at the Challenges
The reason for the current disruption follows years when there’s been a serious lack of development (although not investment, as we said) in the business of supplying and moving goods from start to finish in the chain.
This lack of development is surprising. The supply chain has been growing in complexity for a long time. And whether your supply chain is long or short, it’s still more complex than it was. And you now also have to rethink everything around disruption and risk.
Some businesses have taken a few initial steps towards acknowledging this complexity and the associated risk factors, and have made moves to turn the tide. But many have failed to view the overall picture and have not, therefore, become agile businesses who can quickly change with the times.
It’s taken the 2020-21 pandemic to make everyone take note of the challenges we now face
- political instability
- shortages of components
- scarcity of rare earth materials e.g. for batteries, chips, and jet fighters
- shortages of plastics derived from the petrochemical industry
- inadequate national manufacturing facilities
- fall in production resulting from Covid issues
- risks from counterfeit components
- inadequate availability of ground, sea, and air transport
- extra costs when containers are not returned on time (demurrage and detention)
- delays in delivery ultimately affecting inventory and supply
- increased compliance requirements and regulation of standards
- enhanced customer expectations of ethical sourcing and labor
These challenges are clearly not all of them.
We could add a more obvious challenge. And that’s the increase in online ordering stemming from global lockdowns during Covid-19. This very public-facing issue has challenged availability of stock, cartons, delivery drivers, and the balancing of supply and demand.
And in the current economic climate, balancing supply and demand has become crucial. The reason this is now a challenge is because there are longer lead times for inventory in the market, yet ever-increasing customer demand and expectations for immediate access to goods.
These two issues – of balancing supply and demand and increasing customer expectations – require a technological solution. And this tech solution will bring benefits to the whole global supply chain and address the main challenges we face in 2021.
Automation and Technology: an Answer to the Global Supply Chain Challenge
The value of technology and automation in the chain becomes obvious in a time of higher demand and tight capacity. Technology adds value in two ways:
- Firstly, it enables efficient and cost-conscious decision-making.
- Secondly, it helps create scalability and resilience.
The bottom line here is data. Whereas people used to say oil was the most valuable commodity, the value of real-time, high-fidelity data has toppled oil from its pedestal. Increased access to these data provides added value to businesses in tandem with the increased complexity of decision-making.
It’s obvious why. You can use data to streamline all processes if you invest in good data analysis aided by AI and Machine Learning.
- AI can process vast amounts of information far quicker than a human can. It can also indicate ways to improve processes that will, in turn, reduce costs.
- Machine Learning acts on patterns, correlations, and anomalies seen in the data and enables predictions to be made.
- Together, AI and Machine Learning can reduce complex decisions to something more manageable.
Two examples of added value are: You can optimize logistics costs by consolidating your shipments. And you can find a solution to diversifying and leveraging multiple carriers – so long as your technology choice is carrier independent.
These examples show how careful use of technology and digitalization can help solve global supply chain challenges if ramped up to all areas of your business.
Are you falling behind?
Christian Piller, VP of Value Engineering project44, said in a recent webinar: “If you haven’t started your digitalization journey with your supply chain, you’re behind.”
He cited a few of examples of falling behind:
- On-time delivery is 50% down on Transatlantic and Pacific lines (compared to only 5% in 2020).
- If your teams are still hunting for shipment data and updating spreadsheets, they can’t stay on top of today’s disruption – which increases your risk exposure.
- Even autonomous trucks and drones won’t be effective if the underlying data process is still mainly manual.
There’s lots of tech out there to drive supply chain efficiency in future: not only Machine Learning and AI capabilities, but also IoT, mobile, advanced analytics, and cloud.
As a result of this tech capability, you should start integrating as much of it as possible into your supply chain. This will ensure you can move forward quickly as an agile business and reach a new level of efficiency despite the challenges.
So how can this be achieved?
How Can We Use Technology and Data to Solve Global Supply Chain Problems?
Let’s first deep-dive into the overall aims of seeking solutions.
We need to:
- Make our supply chain agile. This means being able to quickly respond to changing circumstances globally as indicated by the real-time data.
- Build up inventory as a shock absorber – but not indiscriminately. Your data analysis will indicate which lines are profitable and which need altering or dropping. The aim is to have the right stock available and reduce any need to sell off unwanted stock at a loss.
- Prevent late shipments, material shortages, and damaged goods. The way to do this is with a cloud-based, all-in-one transport management system (TMS) – as we mentioned in a previous post on logistics. There are many TMSs – so be sure to suit your own specific needs, or the cost will outstrip the savings.
- Eliminate single-source supplies or transport. Single sources increase your exposure to risk in the global supply chain. However, it’s not necessary to stay domestic. It’s better to diversify the supply base and have a wider range of options in today’s politically and economically challenging climate.
- Plan for uncertainty in the future. Assume there will be some!
- Above all, take full advantage of the huge growth of e-commerce. It seems unlikely to abate any time soon. So use every aspect of technology to your competitive advantage online.
No one can advise on the best software, the best co-partners, or the best logistics experts to help you on your digitalization journey with your global supply chain.
Your journey will depend on many factors, such as whether you run a small domestic business, a multinational large business, the number of channels you have (single or omnichannel or anything in between), and the resources at your disposal.
However, the value to your global supply chain of going fully digital will become obvious in three areas of your business.
Which Areas of Your Supply Chain Benefit From the Fully Digital Solution?
By using the data you’ve mined, these areas will show an improvement:
You’ll be able to improve network design decisions and also your manufacturing facilities. In addition, you’ll probably find you can get the balance of your inventory right and refine your offerings and channels.
On top of this is the bonus of integrating into your processes and workflow the right strategic decisions to mitigate your supply chain risks.
If you can form strategic partnerships with others, this will bring rewards for all of you. Just make sure you’re in agreement about what you want to achieve.
On-time delivery will improve as you become able to collaborate with partner carriers and suppliers. Your technological partner will also be able to more easily manage the increasing number of customs and compliance issues your business will face going forwards.
In addition, you’ll be able to review data to manage all risks better. As a result of this improved performance, the customer experience will also improve.
An extra, pressing issue in today’s world, which challenges the supply chain in a new way, is that of avoiding forced labor in another country earlier in the chain. You can improve performance in this area using the data you now have access to within your fully transparent supply chain. In turn, this makes today’s ethical customer more willing to buy.
3 Financial Management
By bringing in a transparent view of your supply chain in all modes and regions, manual tracking and tracing reduces to virtually nil. So the personnel who would have pored over spreadsheets can work on other aspects of your business that will increase productivity and income.
You will also be able to manage and reduce the incidence of detention and demurrage fees. And alongside that, avoid or minimize the financial effects of any non-compliance.
Keeping an eye on both low-cost and high-cost supplies becomes easier when you have granular data to hand. Obviously, reducing even low-cost expenditure increases ROI.
Becoming an Agile Business in the Global Supply Chain
To gain benefits in the three areas mentioned above, you need business agility. Without business agility no one today can compete against “disruptive” start-ups – never mind also overcome global supply chain challenges.
Becoming agile is therefore an additional challenge your supply chain faces – and the solution is to root agility in your business ethos. This entails a willingness to change on the part of those with old mindsets!
How must mindsets change?
Business agility means being able to change things fast when need calls. Therefore, end-to-end digitalization – in the way we’ve described in this article – needs to be adopted across the whole organization. You can’t have silos in your business. Manual processes must stop holding sway! Everyone needs to be on board with the same digital-first agenda.
On the other hand, when the mindset in your head office changes in this way, it spreads vertically and horizontally. Digitalization of your whole global supply chain then becomes easier. And the business suddenly has the chance to become agile and compete in a world where challenges have disrupted “business as usual.”
The bottom line is your customers at the end of the supply chain. They want a customer-centric experience when buying from you, with sustainability at its heart. Both large and small companies recognize that the biggest portion of their costs is what they’ve invested into the total supply chain. They’ve done this with the ultimate aim of pleasing the customer and making money.
It follows, therefore, that visibility gained from efficient digitalized shipping management – with transparency from one end of the supply chain to the other – will not only answer most of this year’s challenges in respect of your global supply chain. It will also position you as a reliable company in the eyes of your customers and ensure your ROI.
At Waterways, we take pride in every aspect of our business and would love to help you with yours too. Contact us to find out how we can help you with your global supply chain challenges.
Image attribution: EPatrick