Trends and thoughts about supply chains in 2019

Roger OakdenGlobal Logistics, Supply Chains & Supply Networks

Markets and trends

Trends viewed in categories

In business, a trend can refer to a business model, a process or a technology. However, a trend will only be of more than passing interest if it could directly impact your business and people.

Based on articles written by various commentators, trends in supply chains for 2019 can be grouped into four categories:

  1. Channels of distribution
  2. Supply chain visibility
  3. Logistics operations technologies and employee capability
  4. Operations planning process

Given that a trend can take more than 15 years to go from initial concept to general acceptance and use, it is notable that no article mentioned climate change or circular economy as trends that are likely to affect supply chains by 2030.

1. Channels of distribution

International Trade (or cross-border) trade is experiencing:

  • increased tariffs and non-tariff barriers between trading parties
  • implementation of bilateral trade agreements
  • countries improving their logistics services infrastructure and processes
  • increases in the cost of moving goods across borders e.g. surcharges to cover the cleaning of ship funnel emissions or the higher cost of using low sulphur fuel

For logisticians engaged in international trade, geopolitical events, regulatory changes and associated cost increases will require an increased understanding of your current trade lanes and alternatives.

eCommerce continues to gain a lot of attention, but typically from a US or UK viewpoint, where eCommerce sales have forecasts up to 40 percent of all retail sales by 2023. The main challenges of eCommerce for these countries are:

  • Cost and complexity of ‘last mile’ (and ‘final metres’) delivery; adapting operations to address consumers’ changing demands
  • Control the cost of ‘free’ deliveries. The consulting firm CapGemini has identified this business model as ‘not sustainable for full scale implementation across all locations’
  • Move distribution nodes closer to consumers. The need for fast, low-cost delivery is influencing the placement of inventories to more, but smaller fulfilment centres e.g. delivery or collection points in small warehouses, distributed lockers and sites within shopping centres

eCommerce trends are country based rather than generic; therefore, what are the trends in developed countries where eCommerce is currently less than 10 percent of total retail sales? And what of eCommerce trends, buying patterns and challenges in developing countries?

2. Visibility in Supply Chains

‘Digital Supply Chains’ is a term (or buzzword) that is gaining some attention. From articles, the objective appears to incorporate continuous automation (e.g. Industrial Internet of Things or IIoT) data that is communicated, normalised and structured for online analysis. The expected outcome is to enable closer collaboration between parties and within organisations; from end user demand markets to extended supply markets (an organisation’s supply network).

While called a trend, Digital Supply Chains is likely to be a 15 – 20 year transformation journey. Not only is this a technology journey, but an intra-enterprise and inter-enterprise challenge concerning agreement and coordination in supply chains:

  • Clarity between parties in extended supply chains concerning the Aim and Objectives
  • Communication channels and processes available between parties
  • Communication and integration capability of each party’s IT system and applications (including legacy systems)

The basis of co-operation between parties in a supply chain is trust. Before any substantial progress can be made in a business relationship that requires an agreed sharing of data and information, the parties must be comfortable (at the minimum) with:

  • Delivery In Full, On Time, with Accuracy (DIFOTA) from each supplier
  • Payment In Full, on Time, with Accuracy (PIFOTA) from the buyer.

But, how many organisations measure and recognise achievement against these metrics?

To provide an increased level of trust in supply chains, Blockchain is being promoted as a critical technology. However, only a few businesses are currently using the technology in a meaningful way. Amongst the hype, two factors limit its usability:

  • Interoperability: the capability of applications supplied by different software suppliers to accept, reformat and use data supplied from other applications
  • Scalability: as more users interact, an application’s response times are reduced

The blog Know the promise of new technologies for supply chains discussed how the limitations may be overcome through using Blockchain where it is best suited. Even if this occurs, the advisory firm Gartner considers that it could take up to ten years for Blockchain to become a generally accepted business tool.

3. Operational technologies

Analysis and artificial intelligence (AI) in supply chains are receiving a lot of attention, but limited implementation. One of the reasons is lack of qualified and experienced people, which is not new. While course/units in quantitative analysis are generally available, only a few universities provide learning in supply chain analysis.

Also, supply chain analysts are not backroom people, but must interact with colleagues in operational areas and so require interpersonal skills. For these reasons, supply chain analysis and AI is likely to be a service sold by larger 3PLs and specialist consultancies.

As for physical technologies used in logistics operations, the usual suspects get a mention. But typically, it is only large businesses which have a fund for testing and evaluating new technologies. For most potential users, the CAPEX proposal identifies the suitability and financial viability of a technology for each business. Implementations will occur where there is a justified business case, as in 3PL warehouses and transport fleets.

4. Operations Planning process

Sales and Operations Planning (S&OP) is a planning approach with a thirty year history of being the next ‘big thing’, but without success. An initiative to rename the process as Integrated Business Planning has not changed the situation.

No matter the type of business, the basis of S&OP is the balancing of demand (identified through Demand Planning) for the goods and services and the capability to supply. The structured process can also enable groups within an organisation to liaise and understand the challenges of other groups and reach agreements.

While the logic and potential positive outcomes are evident, fear of change to current practices is a difficult hurdle to overcome, especially when finance executives see S&OP as a threat to their budgetary control process.

Through 2019, Learn About Logistics will continue to inform readers concerning the principles, influences and trends surrounding supply chains, so you are better informed to influence senior management, customers and suppliers.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...