The future of supply chain in an age of instant gratification

A good company can fundamentally change consumer attitudes and expectations. In the 90s Starbucks fundamentally reshaped the market for hot drinks, along with consumer perceptions of the value of coffee. In the last few years, attitudes to fulfilment have also shifted with the rise of giant e-tailers like Amazon. 

Not only has longtail retail meant that a vast selection of goods is on offer but a combination of innovation in the sector and the huge logistical resources available to the biggest players means that shoppers expect more.

Amazon’s trialling of one-hour delivery and drones and its expansion into fresh, chilled and frozen food, raises the bar for all retailers. Once customers get used to expecting to have their order delivered in full in 60 minutes then they become increasingly reluctant to settle for less from other suppliers.

The need to compete in this new market is driving many companies to look again at their own supply chain operations. Even if they don’t have the resources of an Amazon, tightening up their supply chains allows them to leverage such advantages as they do have.

So what form is this talking and in what direction is supply chain heading?

Some trends are already clearly visible.

Professionals to the fore

It’s not that SC’s current veterans aren’t professional – quite the contrary. But twenty years ago there was only one course in Europe that offered a PhD in logistics. Now graduate and postgraduate courses in supply chain and logistics are springing up across this continent, America and Asia. What’s more attitudes to supply chain are changing. Boards are starting to recognise that there needs to be a much more profound understanding of supply chain not just in the supply chain team but right across businesses – store handling, warehouse operations, home delivery and returns, manufacturing, transport, the lot. But rather than wait for sales, marketing, finance, HR and the rest to catch up, senior SC executives really need to understand how the rest of the businesses they are engaged in work too.

Collaboration will be key

The bedrock of the future will be built on the improved collaboration between departments that this move ushers in. There needs to be more holistic control of retail and wholesale businesses end to end and side to side.

And we need a new phalanx of educated trained professionals because holistic management of an increasingly complex environment, demands people of the highest calibre. As computational power increases, the best systems will give you higher and higher degrees of visibility over larger supply networks. At present, many companies’ planning is done monthly. In the near future, you can expect the picture to be updated at least once a day and this will move towards a real time overview of the entire supply operation across all transport units, stores, DCs and SKUs.

Being able to look before you leap

Scenario testing will become standard practice in supply chain management. How does this work? It’s about identifying those ‘known unknowns’ (to borrow from Donald Rumsfeld) – the potential inaccuracies, the things that need contingency planning, the hard-to-predict factors. Shared scenario ‘playtesting’ prior to the most important events and seasons helps align the approach and responses of different teams within the business when the contingencies happen. Simply add in any set of parameters, use your system data and monitor the KPIs to see the impact of different possible situations. Then, armed with these forecasts, decide on responses to any given event that’s been played out in the ‘sand-pit’. These responses can then be automated so that if the system detects that the criteria have been met it will swing into action. Any uncertain situation can be played out in advance and as many likely permutations gamed and planned for. That way, in the thick of the season, your system will be primed to deal with issues so you don’t have to.

Your future will be flexible

… or rather you can expect to need to be more flexible in the future. For instance you may need a flexible in-house workforce that can work around the peaks and troughs in picking and delivery and warehouse positioning requirements. Then again you might outsource some capacity needs to partner, or even share resources. In the longer term resource sharing could be one of the most interesting areas of potential development in supply chain. Some have suggested that blockchain, the tech that underpins Bitcoin, could be a great enabler. Others wonder if we’ll see the sharing economy extend to supply chain via an Uber- or an Airbnb-type app to provide easy access to logistics and warehousing, for instance, for those without enough, and the chance for those with excess to monetise it. Could sharing be the way for all the Davids to join together and scale up to take on Goliaths like Amazon? Who knows! But we can be confident of this much – all those who think supply chain is a worthy but dull field will find that a far harder position to take in five years time than they could possibly suspect. The importance of supply chain within the business world is only set to grow.

Mikko Kärkkäinen, Group CEO, RELEX Solutions 

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