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The top five supply chain trends companies must address now

Your company's supply chain is essential to making your customer happy -- and to making sure your company doesn't get left behind. Here's what you should know to ensure both.

The bleary-eyed Starbucks customer ordering his triple, venti, no foam latte before work, the Lululemon patron believing her local store should carry whichever color and size she wants, and the online shopper who expects Amazon-level convenience all want their product of choice to just appear. They likely give no thought to the complex and interdependent chain of processes needed to make that happen. On the other hand, if you're a company leader or a supply chain executive, you should be obsessed with just that.

Indeed, at arguably no other time in history has supply chain management been so confusing and, simultaneously, so critical to a company's competitive edge. To help you navigate this tricky balance, here's a look at which supply chain trends are most pressing, as well as advice on how to address them.

Volatile business landscapes

The stress is higher than ever in the broader marketplace, said Greg Gerstenhaber, a partner at Bain & Company. He points to the commodities market, trade policies, regulations, changing business models -- the list goes on.

"There's more volatility now than ever," he said.

Because of these issues, having a responsive supply chain is critical.

Bill McBeath, chief research officer at ChainLink Research, has a similar take. The ability to change direction and respond to events quickly is an increasingly important competitive advantage, he said. McBeath points to the ever-shortening product lifecycle, and the demand it places on supply chains.

"You have to compress your time to market or you will be left in the dust," he said.

So whether you're talking about ERP, supply chain management or any other system -- the pace of technological change is increasing.

"You need an Agile infrastructure, and one that can continually evolve," McBeath said.

Companies that are slow to adopt new technologies will end up with rigid infrastructures, and may find it hard to change.

Gerstenhaber said excellent supply chains are marked by tight alignment between the supply chain and the overall business strategy. This means that supply chain leadership has a seat at the table, active involvement in setting strategic direction and clarity on what their role is in helping the company deliver against the strategy. Companies with standout supply chains take an end-to-end view of the supply chain's function in the company, rather than viewing functions in silos.

"They're making the right calls and setting the right priorities for the business as a whole," Gerstenhaber said.

Taxes and trade agreement shifts

It only takes a scan of news headlines to realize that taxes and trade agreements are going through some turbulent times, and could have major consequences for many companies' supply chains.

Michelle M. Meyer, director of advisory services at consulting firm PwC, points out that, beyond U.S. borders, there's plenty to scrutinize.

"With Great Britain's pending exit from the EU [European Union], and some of the other projected changes here in the U.S., we will see some pretty immediate impacts on companies and their supply chains," she said.

Meyer recommends that companies watch these political shifts closely, and that they be proactive about analyzing the repercussions and potential responses to various scenarios -- especially in terms of taxes, which will require close communication between tax executives and supply chain leaders. She advises asking critical questions, such as how import taxes would affect the company and ways the company can handle them.

"It immediately becomes a network design and supply chain design question for the supply chain leadership," said Meyer. "There are some things that could start happening very quickly, depending on trade agreements and tax changes -- globally -- and other countries' response to those. Supply chain designers will tell you the number one driver of supply chain design is taxes."

Digital transformation and IoT

The process of converting information into a digital format sounds innocuous, but digitization has produced sweeping changes across the business landscape. Indeed, digital transformation is affecting every area of the business, and the supply chain is no exception.

"If, before you [could] manufacture a certain widget, you needed capital-intensive manufacturing capabilities, that's one kind of supply chain," Meyer said. "If, now, all I have to do to deliver those same capabilities is put a chip inside some inexpensive components, I've moved into a digital electronic assembly world -- and that's a completely different supply chain."

Top five supply chain priorities

An example of this effect can be found in the deployment of additive manufacturing, or what's commonly known as 3D printing. Bain's Gerstenhaber said using 3D printing in manufacturing can be far more complex than it might seem. Product design, the tools you use and manufacturing layouts for 3D printing can be quite different than in traditional manufacturing.

Printing a product or component can radically change a supply chain and the way a product is marketed. For example, 3D printing can enable printing just one of a component, a major production shift that can have a profound effect in the parts and resupply business.

"3D printing is powerful," Gerstenhaber said. "But to really get the most out of it takes that total company strategy."

Avoiding the hype of the internet of things (IoT) is virtually impossible, but IoT technology is just getting started. One estimate says that, by 2020, more than 20 billion connected things will be used across a range of industries and enterprise functions. Some estimates are even higher. In the near-term, however, there are some specific IoT uses that supply chain leaders should be investigating.

"Having IoT capabilities is going to give you better visibility, better predictive capabilities, just better transparency of your supply chain," said Meyer.

Keep your core value propositions top of mind and figure out what tools can help you deliver them.
Greg GerstenhaberBain & Co.

As for the digital transformation, trying to figure out where to start can feel overwhelming.

"Keep your core value propositions top of mind and figure out what tools can help you deliver them," Gerstenhaber said. "Lock onto a digital vision for the company."

C-suite and supply chain leaders should be in tight alignment to set goals and success markers, whether that's greater efficiency or new products. This sort of alignment may require changing the operating model if the supply chain doesn't currently have a seat at the table. In that case, Gerstenhaber said that supply chain leaders should find better ways to service the core value proposition. He also advised finding a repeatable model that can help managers continue to scan the horizon for new opportunities.

Going paperless

One of the supply chain trends that will be both tricky and key for companies is figuring out how to go digital.

"A pure digital supply chain is where there are no paper documents and all transactions and visibility information is transmitted electronically, and it's transmitted in near real-time as events happen," said ChainLink's McBeath.

Of course, since people will likely always be part of the process, pure digital is a Platonic ideal. Even the ideal digital supply chain will need a rules engine for deciding when human involvement is required.

Global trade processes could benefit greatly from automation, McBeath said, noting that if you add up all of the paperwork for even a simple international shipment, the result is often a four-inch-thick pile of documents.

A digital supply chain also reduces the friction and effort to connect and communicate between trading partners. For example, just establishing the relationship and integration for a supplier involves a largely manual sharing of essential information, such as tax IDs, addresses, long forms to be filled out and, depending on the type of supplier, many different types of certifications and other documents. That information could be collected digitally.

Better yet, McBeath said, is storing that information on a shared network platform (with strong security), where supplier information can be accessible to any of their customers on the platform. With a networked platform, the supplier need only enter (or change) the information once for all of their trading partners on the platform, rather than having to do it separately for each partner.

One challenge is connecting with the long tail of smaller suppliers, many of whom are less technically sophisticated. To tackle this challenge and get closer to 100% digital connections, companies can look at optical character recognition scanning technologies (which increasingly use machine learning to improve accuracy), supplier portals, no coding visual workflow technology and various integration tools, according to McBeath.

Omnichannel

One definition of omni is "in all ways or places," and that's exactly how customers want their shopping experiences. Not surprisingly, in our convenience-worshiping culture, this is causing a shift toward online and home delivery.

For example, a survey by KPMG found that 68% of shoppers purchase online versus 32% in-store, with 74% saying they purchase online for the trying and testing stage.

What some are referring to as omnichannel primarily means direct to the consumer, said PwC's Meyer. The consumer wants home delivery, and that is causing often painful shifts in how companies manage their supply chains.

The KPMG survey found that returns can actually help drive in-store traffic, however, and 35% of KPMG respondents reported impulse purchases in store as compared with 21% online. Forecasting the specifics of such behavior is no easy task.

"The challenges and transformation retail is going through right now is as dramatic as anything the sector's undergone in at least 50 years, maybe 100," said ChainLink's McBeath.

The omnichannel shift puts the core tenets of supply chain management to the test -- getting better at forecasting demand and moving products to the right place at the right time. More sophisticated supply chain practices, such as more granular and nearer real-time visibility, are leading to more accurate tracking of shipments throughout an order's lifecycle.

Technologies such as machine learning, analytics, forecasting, demand sensing and even barcode and RFID can enable better omnichannel capabilities, according to McBeath. Moreover, ongoing investments and work to continually clean and improve the quality, completeness and accuracy of the data companies use from all sources are critical and cannot be overlooked.

Whichever supply chain trends and improvements you're talking about -- and this is especially true of omnichannel capabilities -- it all comes down to a combination of your supply structure and how well the underlying systems and processes support that structure and work together, Meyer said.

"It's really a supply chain design issue," she said. "I think some companies have been better at it over the last couple of decades, and some are coming to the realization that it's not a one size fits all." 

Next Steps

How to create a sustainable supply chain

Blockchain can help supply chain traceability, but can't solve all the issues

Ways supply chain partners can work together on IoT efforts

This was last published in March 2017

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