Your supply chain impacts every aspect of your organisation, as you move myriad goods, often across global borders. Supply chains are also typically fragmented and vulnerable to geopolitical crises. When things go wrong, as they did for many companies during the COVID-19 pandemic, it seriously impacts the bottom line.
In this piece, which highlights key parts of the second podcast in our “Technology in an Uncertain World” series, we explore how digital platforms can transform information-heavy supply chains, delivering end-to-end insights to drive better decision-making, improve agility and streamline processes.
And we ask whether companies are ready to take advantage of the opportunity to use platforms to transform their global operations.
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Needed: Improved visibility for supply chains
It is difficult to manage supply chains effectively because they are hugely fragmented.
“Traditionally the supply-chain market comprises vendors focused on specific functional areas such as warehousing, transportation, manufacturing or planning. These are not integrated and don’t address end-to-end supply chain scenarios that we see in the real world,” says Richard Howells, VP, solution management for ERP, Finance & Digital Supply Chain, SAP.
He argues that the best supply chain solutions “improve visibility, giving access to the information and data in a format to do your job better.”
If a shipment is delayed or comes in on time but with only 80% of the goods needed, companies can’t inform customers or adjust processes unless there is visibility early in the process. Digital tools and tracking systems create the visibility needed, showing where supplies are in-the-moment and predicting where they are going to be.
But given this kind of technology has existed for some time, why hasn’t there already been a revolution in how supply chains are managed?
Old digital solutions, new uptake
Lars Jensen, CEO at Vespucci Maritime, and an expert in the container shipping industry, says the supply chain industry is undergoing an evolution rather than an evolution.
“What we are seeing is the uptake of digital solutions that were already here 20 years ago but failed to get take-up then. It is down to the ability to seamlessly place bookings against contracts, to submit relevant shipping instructions and material for other industries, and the ability to buy something online.”
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Consumers have already been doing this for 25 years, but shipping lines and customers were used to haggling over price in person; they were not ready for online transactions.
“This is potentially one of the largest changes we’ve seen over the past three or four years,” adds Jensen. “It was spearheaded first by Hapag-Lloyd and Maersk, and then the other container lines picked up on it. That’s why I call it an evolution because most people wouldn’t think buying online is new. But in container shipping supply chains, it is.”
How technology is addressing supply chain challenges
COVID-19 was a further block to adopting platform technology, as it caused global disruptions that absorbed the attention of supply chain managers. A 10-fold cost increase in freight rates and widespread delays in moving cargo between Asia, North America and Europe left scant time to consider the benefits of digital platforms.
The market, however, has since calmed down and focus has shifted from crisis management to generating long-lasting efficiencies in supply chains. Platforms are back on the table with technologists busy building a suite of services, and businesses using them significantly more.
“It’s like the perfect storm of technology coming together, to help address business challenges and drive new business models,” says Howells. “Every product seems to be a smart product now, because the cost of sensors has come down, which means it’s more affordable to put IoT sensors into products and capture real-time information.”
Listen to Richard Howells
Companies can see how a product is performing or if any parts are causing a problem and may need maintenance, its throughput or usage or what emissions it is generating. In this way, IoT data can capture vast amounts of structured and unstructured data across supply chains, whether equipment in manufacturing facilities, vehicles on the roads, or from products themselves.
“We’re also getting sentiment data from social media about demand signals and buying preferences, so we get a better visibility of the supply chain from end to end. This IoT and sentiment analysis generates huge amounts of data that can be accessed across the supply chain,” adds Howells.
Platforms that will grow rapidly in the next 12 to 24 months are those that provide this kind of real time data and can answer key questions: where is my cargo stuck and, more importantly, why is my cargo stuck and who do I need to contact to get it unstuck? And it will be information delivered across multiple platform solutions, which are all dedicated to meeting the many different and specific problems presented by today’s supply chain infrastructure.
Regulatory impetus for digital platforms
Risk resilience and sustainability are two key areas that are likely to further propel the use of digital platforms – especially when backed up by legislation.
In Germany, for instance, the Supply Chain Due Diligence Act, which came into effect in January 2023, will push companies to use digital platforms to conduct the due diligence necessary to prevent human rights abuses and environmental violations across their supply chains.
Similarly, the UK’s Plastic Packaging Tax 2022, requires companies to provide specific data to prove they are using a certain percentage of recyclable rather than single-use plastic in packaging. As slight variations of this law now move to other countries, platform solutions will be needed to see beyond individual functions, ultimately delivering a more unified, visible world.
For a sense of how far this could all go, Simon Wardley, Senior Researcher at DXC Leading Edge, describes a piece of work undertaken in Hungary earlier this year. “They took transaction-level VAT records and they were able to use them to graph out the entire Hungarian economy. And they discovered that about 25% of its GDP had 36 companies critical to that, which is a frightening figure,” he says. “And 75% of the systemic risk of the entire nation was actually in 100 companies, which was also terrifying.”
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Logistics revolution in the making?
There is no easy answer for managing supply chains that are fragmented and exist in a world full of different companies operating in a wide variety of economies all at once.
Digital platforms will grow for the obvious reason that they can deliver the clarity required to meet company, consumer and regulatory needs. But there is no need to try to solve everything at once. As we saw in the first part of this series, platforms allow you to build in an iterative fashion: solve a particular problem, solidify your solution, turn your solution into a component for the next solution. Companies can keep on going until they’ve created something they could not have imagined at the start.
It is an evolutionary process – but with potentially revolutionary outcomes for the logistics that underpin our global economy.
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