How The Evolving Supply Chain Affects Worldwide Business Models And Economies
By Oyku Ilgar, SAP
Supply chains are everywhere. Everywhere you look, everything you see around got you through a supply chain. The laptop you are looking at, your morning coffee, or your favorite mug your friend got you as a present. Your car on the driveway, or the loaf of bread on your kitchen counter is the end result of a vast interconnected process of designing, sourcing, production, and transportation; in other words supply chains.
But have you ever thought about what the beginning looked like and how everything evolved into today’s supply chains? On this National Supply Chain Day today, let’s delve into the transformation within the supply chains and spread awareness about the way they affect all of us.
A little bit of history
Even though the term supply chain management was first used by Keith Oliver in 1982, the origins of supply chains can be traced back thousands of years to the ancient world. One of the earliest was when the Roman Empire established a system of roads and waterways to transport goods throughout the empire.
Then during the exploration and colonization era, European countries established trade routes with Africa, the Americas, and Asia to bring spices, gold, and silver to Europe. With the development of steam-powered transport in the late 18th, goods were traveling farther and faster than before. And with industrialization, mass production in factories, storing the goods, and transporting them by rail or trucks, supply chains became more complex and started taking the first steps of today’s supply chains.
You cannot blame Zeus for the permacrisis
Imagine living in the year 47 A.D., in the heart of the Roman Empire and you are a merchant trading goods. Over the past few months, you have been experiencing an olive oil delay due to bad weather and you won’t be able to fulfil the needs of your customers. The situation worsened when you found out the wheat from North Africa, which you have ordered will not going be arrived on time. And the raw material prices skyrocketed due to the war in a neighbor country.
Sound familiar? Lockdowns, travel restrictions, and factory closures led to a decrease in production and an increase in demand for essential goods. The war in Ukraine, climate change challenges, politics, and inflation have also been hard on supply chains. The difference between back then and now is today’s supply chain managers cannot blame the ancient gods for the disruptions.
Supply chains as differentiators
Global supply chains form the backbone of most economies today; and as today’s supply chains got more complex, they became differentiators for businesses.
For multiple decades the focus of supply chain management was cost reduction by using various concepts like inventory minimization, JIT, offshoring, and automation, according to Pushpinder Singh, Global Leader, Supply Chain Transformation at IBM Consulting.
“Now supply chains are treated as a competitive advantage and as new business models are evolving, Supply Chains are becoming more complex and require professions to learn new skills like data science, advanced analytics and embrace working with Open AI-driven algorithms,” said Singh.
Amazon has disrupted books, toys, clothing, fast-moving consumer goods industry in last 20 years. Uber has disrupted the transportation industry. Airbnb has changed the hotel and logging Industry. Self-driving cars have potential to disrupt 10+ industries and most recently Open AI-based chatbots can disrupt all industries and change the way how we interact with machines.
“Now the focus and priorities of most Industries are to make their supply chains sustainable and resilient,” said Singh.
According to a new Oxford Economics study, sustainable actions are having a positive impact on how a company is perceived with both market share (31% vs. 14%) and brand perception (60% vs. 49%). Sustainable and resilient supply chains enable businesses to adapt quickly to changes in the market, manage risks efficiently and deliver better customer service running with cleaner, sustainable operations.
Ensuring the balancing act for healthy equilibrium
A healthy supply chain is all about balance. Businesses weigh all the decisions to balance variables such as cost, efficiency, resiliency, sustainability, customer satisfaction and profitability. And every new day, there are new dimensions that make it even more complex.
“A healthy equilibrium in the supply chain is a state where products flowing through all the nodes of the supply chain are optimal based on demand and supply at these nodes, leading to zero waste and minimal cost,” said Singh.
To ensure that the balancing act maintains a healthy equilibrium, supply chains need to have effective communication and collaboration channels that promote transparency, accountability and trust among all parties. How to achieve this? Using smart technologies, such as AI, ML, or predictive analytics, and creating a collaborative ecosystem of shared real-time data consistently with each stakeholder.
“Every organization is trying to unlock value by automating mundane tasks using , building cross-functional intelligent workflows for faster decision making and Open AI based Chatbots to make consumer experience uniform,” said Singh. “These concepts will gain momentum in the next few years and many companies will move toward self-healing supply chains to define new supply chain models and disrupt or make existing supply chain models obsolete.”
In every aspect of the supply chain, from the design of new products, through the manufacturing and logistics processes, and ultimately through the operations and end of life of a product, it is essential to bring awareness to resilient and sustainable supply chains. On this 29th of April National Supply Chain Day, let’s recognize the hard work of supply chain professionals whose great work keeps us linked with the world.
To learn more about how to get on the path to a Risk Resilient and Sustainable supply chain, download the Oxford Economics Research.