The rolling supply chain disruptions of recent years have presented an imperative for organizations to identify and reduce their supply chain risks and costly disruptions when unforeseen events occur. Companies are looking to introduce resilience into their supply chains by increasing domestic production where feasible and increasing visibility over every supply chain link. Exciting emerging technologies are driving the industry toward greater efficiency, transparency, and sustainability. Understanding these emerging technologies and their potential is helpful when building resilience into your supply chain.
Reshoring & Near-shoring: Building Local Resilience
The Covid-19 pandemic and geopolitical conflicts have shown the fragility of global supply chains. To enhance resilience, companies are considering reshoring and near-shoring manufacturing operations. Reshoring involves bringing part or all of the supply chain back to the home country, while near-shoring involves relocating to a nearby location. These strategies can reduce dependence on distant suppliers and offer greater control over the supply chain, thereby mitigating risks and disruptions.
N-Tier Visibility: Illuminating the Supply Chain
Visibility is crucial to supply chain resilience. Companies need to have a clear view of every link in their supply chain to identify potential disruptions and take proactive measures. It is recommended that an enterprise has between 70% to 90% visibility of their supply chain. Still, a 2020 study estimated that most enterprises only have visibility over c.20% of their supply chains, meaning they generally only have visibility over the first tier of suppliers – see the supplier visibility barrier in Figure 7 below.
Figure 7: The supply chain network and the visibility barrier
Similarly, a 2021 McKinsey survey shows that less 50% of senior supply chain executives have visibility of their operations and supply chains beyond their tier 1 suppliers, and only 2% have visibility in the third tier of suppliers and beyond (termed N-tier suppliers). These findings matter because lower levels of a supply chain are still a significant part of the production and demand fulfillment, and some of the most problematic supply chain shortages and disruptions tend to originate in these deeper supply chain tiers, which are often considered to be too far removed from core operations to necessitate active monitoring. Looking ahead, it is clear that supplier monitoring is becoming a bigger focus for companies looking to build more flexibility and resilience into their operations.
To a large extent, the solution to supply chain visibility issues has been control tower technology. The control tower technology already in use provides supply chain monitoring by giving early warnings of when an external shock is about to disrupt operations. Some control towers use existing systems that are based on legacy enterprise software systems (like enterprise resource software (ERP)) with their supply chain visibility capabilities. One such technology is the Wincanton Transport Management Control Tower which applies new models to existing supply chain visibility software and tracks goods from order placement to arrival through its control tower capability but with limited actionability. ERP solutions are a good tool for handling complex data, but they don’t work as supply chain monitoring tools because they are a system of record that does not provide actionable insight for real-time problem-solving across the supply chain network. While these existing supply chain monitoring technologies improve supply chain efficiency and reduce costs, there are some challenges, including inefficiencies created by manual processes and inconsistencies in data capture and quality. Additionally, the security risks that arise when transferring data between companies are an added barrier that creates data silos along the global supply chain. Together, these challenges continue to stand in the way of fully automating the supply chain monitoring process.
The next generation of this technology needs to enhance the existing control tower technologies to further improve the resilience of the sourcing function by;
- Leveraging technologies like artificial intelligence (AI), machine learning (ML), natural language processing, big data, and other cloud-based technologies to create a full picture of end-to-end supply chain conditions in real-time.
- Creating supply chain networks sharing information across the entire supply chain. It is estimated that companies that use integrated supply chains report 20% more efficiency.
- Developing actionable insights for all supply chain participants that automatically execute solutions to problems that arise across the supply chain network, along with predicting and solving for various types of dynamic trading partner risks that may arise in transit.
Thus, the intelligent control towers of the future should leverage various other technologies and supply chain networks to drive differentiated value through network-level use cases that cut across multiple parties and different supply chain tiers, to include some combination of demand, supply, and logistics – this is the new frontier for most supply chain visibility companies going forward.
In our experience working with startups in the industry, we have found that most supply chain visibility businesses are primarily focused on first-generation, track-and-trace, control tower capabilities, which are expected to be commoditized in the next few years. The supply chain visibility space is increasingly becoming crowded with new market entrants who, at most, provide visibility up to the second tier of suppliers. This leads to visibility blind spots in ‘black hole’ data areas like ports, drayage, and N-tier supplier levels.
Startups such as Portcast have realized that the true value of control tower technology lies in leveraging various technologies – like AI/ ML modeling – to capture and generate actionable insights from proprietary data sets. In response to these market dynamics, the startup is enhancing its control tower visibility capabilities by integrating into multiple networks of data nodes (like ports, operators haulage) to get proprietary data sets which it has termed ‘inferential data’ from which it infers supply chain conditions in real-time in relatively underserved trade lanes such as the Asia-Europe and the Asia-US lanes.
Technologies Driving Supply Chain Resilience
- Blockchain-Based Supply Chain Management Systems can provide enhanced transparency and traceability, enabling businesses to track goods and optimize supply chain efficiency. By reducing costs and increasing accountability, blockchain fosters trust among stakeholders.
- Autonomous Vehicles and Drones have the potential to automate logistics and delivery processes through autonomous vehicles and drones. These technologies streamline operations, reduce costs, and improve customer satisfaction.
- Predictive Analytics and Machine Learning can help businesses predict consumer demand and optimize their supply chain accordingly. This enables better decision-making and improved demand forecasting.
- Embracing 3D printing can enable on-demand manufacturing, reducing reliance on traditional supply chains and enabling businesses to respond quickly to changing market demands. It reduces lead times, increases opportunities for customization, and improves supply chain agility.
- Collaborative Logistics Platforms can connect shippers, carriers, and logistics providers, enabling them to share data and resources and improve overall supply chain efficiency. They enable improved collaboration, increased efficiency, and improved supply chain visibility.
- Circular Economy Models focus on reducing waste and maximizing resource utilization by designing products for reuse, refurbishment, and recycling, thereby reducing the need for traditional supply chains. This approach minimizes environmental impact and boosts supply chain efficiency.
- Internet of Things (IoT) can monitor goods in transit and track inventory levels enhancing visibility and real-time decision-making. IoT-driven insights increase supply chain efficiency and reduce operational costs.
- Robotic process automation and warehouse automation increase efficiency and reduce labor costs in supply chain operations, driving optimization.
- Edge Computing can enable real-time data processing, allowing businesses to make faster decisions and respond quickly to disruptions. It increases efficiency and speed, improves response times, and reduces downtime and delays.
Corporate organizations must recognize the transformative potential of emerging technologies in building resilient supply chains. Working with technology startups driving these disruptive technologies will help organizations be better prepared to tackle any challenges that come their way, ensuring long-term growth and success in a volatile global market.