Breaking Supply Chains Only to Make Them Stronger

Behind every change we’ve experienced over the last year is a chain. And those changes tested each link thoroughly. The challenges faced, decisions taken, and solutions found helped to reforge an even stronger chain. We’ve now reached a moment when we can zoom out, reflect on accomplishments, and predict, with a degree of certainty, what lies ahead.

Traditional supply chains tend to be a linear process connecting goods and services to consumers. In the past, I’ve written about how to make this key area customer-centric while gaining a competitive advantage. But the COVID-19 pandemic was a catalyst for us to take that concept a step further.

Lessons from Chaos

Global trade froze. Stories emerged of companies caught so off-guard they even resorted to flying engineers to China to bring back critical components in their suitcases. Meanwhile, e-commerce surged as the home front became the store front. The stress on supply chains seemed to be at the limit, only to be pushed beyond when a cargo ship blocked the Suez Canal, leaving US$9.6 billion worth of daily trade – for lack of a better word – stuck.

The gap between customer expectations and organizations’ ability to meet them widened. Half of the executives we surveyed agreed that deficiencies in cost, local sourcing, and sustainability all need to be addressed. Combine that with customers expecting similar experiences whether they purchase online or in-store, the pandemic exposed the comprehensive work that needs to be done to strengthen supply chains. But do we need to wait for the next crisis to test resilience? The technology exists to future-proof supply chains by creating a digital twin, simulating even unprecedented scenarios, and analyzing the outcomes to ensure your real customers will be barely affected.

The winds of change have already spurred some players into action. 84% of companies we surveyed are investing in drones, autonomous vehicles, and other technologies to cover that crucial and costly last mile. I believe all roads lead to our shared future – breaking the physical limits of supply chains to build resilience. The ability to be proactive and to absorb and recover from the next shock will be the competitive advantage of customer-centric organizations.

Rethinking Distance Sustainably

With customer expectations on the rise, one efficient and cost-effective solution is to sever the ties between fulfillment and distance. Technology has offered the prospect of minimizing the cost of higher demand and increased border crossings of goods. A concrete example of this lies in the construction industry. Winsun, a Chinese tech firm, is already using on-site 3D printing technology for a 60% reduction in materials and 80% reduction in labor hours. And if we can’t achieve similar feats as companies like Winsun who have brought the distance down to zero, we can at least make distance as efficient as possible with quantum routing. This tech uses cloud-based, quantum computing to calculate fastest routes using millions of real-time data points including traffic congestions.

It is time that holistic approaches which address all aspects of the supply chain take center stage. When we shrink centers down to micro-fulfillment level, for example, organizations can serve more customers without 1 million square feet warehouses. Walmart is using automation to do just this, while providing customers with automated pickup points to save on the last-mile costs.

To address the growing sustainability trends, the use of machine learning, virtual try-on apps, and body scanning tech are helping reduce the more than US$1 trillion of unsustainable global return costs every year. Amazon’s “Made for You” service is a glimpse into the future. It only produces what will be sold. They reduce waste by using your photos to create form-fitting clothing on demand. Circular business models are rewarding refilling instead of discarding. At Algramo in Chile, overhead is down, and detergent is sold for 30% less than in other stores, thanks to incentivizing the re-use of packaging.

Start Here

That first step is always the most challenging one – but many of us have overcome our fears and accelerated our transformations due to the COVID-19 pandemic. Here’s a starter pack:

1. Re-define the purpose of physical infrastructure

Flexibility should be the priority and supply chains should live on demand. Your physical networks should be adaptable and multipurpose. Stores in town centers act as pick-up centers as well as event centers for fashion shows. Then they could pivot to cafes to meet customer expectations.

2. Re-think collectivization

Breaking the limits of supply chains means more than just internal organizational restructuring. Examine how collaboration can benefit both your supply chain and the partners you take on all along the chain. Agility and resilience go hand-in-hand. A network of adaptable, flexible organizations can make crossing borders and dealing with supply problems less costly.

3. Re-design products and services

If you break the physical barriers of your supply chain, new business models and products will follow. Rural communities have for too long waited for fiber-optic and broadband companies to lay cable and offer them service. Aerospace manufacturer SpaceX is testing an internet service that uses over 1500 satellites to deliver a cheaper and more effective service. For customers, high speed internet access will soon be as simple as installing a small receiver on their rooftops. New mindsets and business models go hand in hand.

And Emerging Economies?

Closer to home, the benefits of breaking the physical limits on supply chains will have a drastic effect on workers’ jobs, skills, and locations. In Bangladesh alone, a steep fall in demand saw only 3.9% of suppliers in the garment sector able to retain their entire workforce. Organizations will have to work together to identify and mitigate the risks to the livelihoods of people when we break supply chains. That will mean supporting long-term skills development with the use of technology.

Supply chains are in a continuous state of reforging, and the COVID-19 pandemic is a catalyst for the changes ahead. Now, we must continue to look beyond what has become apparent and create flexible, on-demand networks that fulfill customer expectations.