If there’s one thing you can count on in supply chain, it’s that things will change. Often. It could be as relatively small as a last minute order or engineering change, or as big as an industry-wide shift that sends your end-to-end supply chain spinning in an entirely new direction. At the recent Gartner Supply Chain Executive Conference, there was a lot of talk about the latter. As it turns out, that future state we’ve all been speaking about for years isn’t as far off as you might think. It’s already here and the impacts on your supply chain are happening right now—whether you’re aware of them or not.
Gartner Research Director Tom Enright gave an enlightening presentation on Future Supply Chains for the Digital Era and Beyond, and shared some unstoppable forces in motion right now that will change the very notion of supply chain. If you haven’t already started to embrace and prepare for this new digital future, you may already be too late.
1. The customer
Customers have always been at the heart of supply chain. That much isn’t new. What’s changing is how they want to engage and interact with it. As I mentioned in an earlier blog about the Gartner conference, customers are demanding you deliver an experience, not just a product. They want a continuous, seamless experience that blurs the lines across companies, retailers and partners.
The notion of online or offline doesn’t exist for them anymore. It’s all about how, when and where they want it—and the answers to those questions may not reflect how your end-to-end supply chain is setup. Order fulfillment channels are becoming more complex as the possible combinations for purchase and returns explode. Buy online, pickup in store, return via postal service. Buy online, ship direct to consumer, return to brick and mortar store. Buy via mobile, ship to a third party location (like work or a hotel). Buy via IoT buttons (like Amazon dash), deliver via drone, return via courier. Can you see where I’m going with this?
You have to start thinking of your supply chain as providing a service, and you must develop a digital strategy, not just an ecommerce one, to deliver it.
2. Global purchasing power
Twenty years from now, who will you consider an economic superpower? The current categorization of G7 (Canada, France, Germany, Italy, Japan, UK, USA) won’t be applicable. Realistically, it already isn’t. Emerging economies, those classed as part of the E7 (Brazil, China, India, Indonesia, Mexico, Russia, Turkey), are hitting the leaderboard of the top 10 countries with the most purchasing power. China already tops that list. Since 2015, E7 countries have already been marginally ahead of the G7 nations, and Gartner predicts that gap is only going to grow. It expects by 2045, E7 countries will hold a combined $143 billion in purchasing power to the G8’s $58 billion.
This shift in purchasing power means you already need to be thinking about where and to whom you’re distributing your products. Your segmentation and network design have to adapt. Now is the time to reach out into the E7 and determine how you can operate there in the future. Does that mean relocating your distribution hubs? Or changing your logistics channels? What happens to the role of your current mid-tier suppliers, who could become superpowers? These represent just a fraction of the questions you need to be asking today—not tomorrow—if you want to get ahead of the shift.
How ready are you for digital business? Gartner’s research suggests many of you are still a long ways off. Its statistics show that while 70% of companies recognize the importance of things like mitigating cyber risk, building knowledge and roadmaps for emerging technologies, and using digital to execute on a more reliable and profitable supply chain, a mere average of only 15% are actually ready to act on them. What’s even more frightening is the fact the research also shows 65% of the millions of smart devices already available on the market will be hackable by 2019. That’s less than two years away.
IoT is here, and with connected devices moving into the billions, you can’t afford to ignore it. The big data it’s providing means more insight into consumer demand, but only if you have the analytics and data structure to support it.
With the emergence of rideshare giant Uber comes a new form of gig economy, and it’s expanding well beyond the confines of individual transportation. The so-called uberization of talent will continue to change the way in which we work. Networks of companies, instead of individual corporations, will be the primary hirers, employing more of us as on-demand experts, jumping from project to project. The notion of staying with a company long-term is already fading, and in the very near future could disappear altogether.
The explosion of this sharing economy is also creating the uberization of logistics networks. Last mile delivery will be farmed out to local entities, many of whom will use their own cars, trucks and bikes to do it. It’s already happening, but it’s on the verge of breaking out on a much larger scale. It will extend beyond last mile delivery to companies looking to share resources to eliminate capacity constraints and cut costs on a global scale.
While these four forces are already in motion and affecting your supply chains, the good news is Enright has some ideas on ways you can adapt now to prevent that impact from becoming a negative one. He suggests looking at your capabilities in the following areas:
With a staggering number of baby boomers retiring every day, the total global workforce is shrinking—particularly in some of those G8 countries. Not only will you have fewer workers to choose from, but many will come into your employment less educated and less technically skilled since they won’t have decades of experience under their belt. They’ll need strong leadership and guidance, so you need to start identifying your future management now, then nurture and develop them. It could also be time to re-examine where you’re hiring to avoid falling further down the hole of today’s already existing talent gap.
The bright side is that while human employees are decreasing, robotic ones are on the rise. That means looking for future talent who can teach and train these robots, and ones who are willing to work alongside them, or perhaps even under them.
Corporate social responsibility
Social transparency is already driving purchasing decisions by your customers. If you don’t have a corporate social responsibility (CSR) strategy, you’re already behind and potentially losing revenue. Gartner says an estimated 30% of consumers weigh CSR as highly as price when determining which company to buy from.
Pretty soon that’s going to extend to how socially responsible your company is, if you’re working with suppliers and partners who also have that same level of commitment to bettering the lives of their works, protecting the environment and being good global citizens.
More ‘things’ are getting connected every day. From smart refrigerators to toothbrushes to engines. As mentioned earlier, humans and smart machines are already starting to co-exist. With the rise of artificial intelligence (AI) and machine learning (ML), a blended population isn’t far off. You need to start shifting your thinking from big data to big answers.
How are you going to incorporate the rapidly growing number of digitally disruptive technologies into your end-to-end supply chain? What kind of impact will it have on your business from a profitability standpoint? A talent standpoint? A resource standpoint? Don’t put off finding out the answers. Start investigating them today.
Economies of connections
Looking ahead, one of the key ways to adapt to these forces putting pressure on your supply chain is to increase value through network relationships. We’ve already seen evidence of how successful this type of mindset can be when companies, oftentimes competitors, find ways of working together to find cost savings on both sides. Like when they use the same local delivery truck to re-stock retailers who sell products from both companies. The result is lower transportation costs since trucks aren’t going out partially filled. As an added bonus, it also helps the environment by reducing the carbon footprint of those items.
Setting up these mutually beneficial networks or ecosystems will drive efficiency and profitability within your supply chain. Just be aware that for them to succeed, so must all the partners involved.
Trying to stop unmovable forces like customers that are more demanding, a shift in global purchasing power, digitation and uberization is an exercise in futility, but by planning ahead and recognizing the future is now, you can adapt, thrive and profit in this emerging new digital world.