Supply chain is an integral part of all businesses, and plays a crucial role in the current and future growth of the business. However, in recent times the emerging new business trends and rapid pace of globalization made it difficult for traditional supply chain systems to balance profitability with sustainability. It is not feasible to plug traditional supply chain management systems into modern businesses.
Business owners that still view the traditional supply chain as an asset can bear a huge loss in terms of money, time, and, most importantly, customer trust. Modern businesses are centralized around customer satisfaction, higher visibility, cost reduction, and operational efficiency, and without fine-tuning the supply chain with the latest technologies like supply chain management software solutions, it is an impossible feat.
Why Is Supply Chain Management Transforming?
- Digitization of supply chain: The evolving supply chain technologies and need for automating business processes have led to the digitization of the supply chain. Digitizing the supply chain involves replacing manual processes with digital products and services. It enables business owners to address key challenges of the supply chain and makes the entire process faster. It makes the supply chain process transparent for every person involved in it – from suppliers of raw materials to the transporters of finished goods, and finally, customers demanding faster delivery. The digitizing of the supply chain can improve the organization’s bottom line and operational efficiency. So there is no reason for organizations to pull back from digitizing the supply chain process. Business organizations are in a better position than they used to be in serving customers and delivering products to them.
- Emergence of a wide range of technologies: The machine learning algorithm, supply chain analytics, blockchain, automation, robotics, big data, IoT, cloud computing, and numerous other innovative technologies have changed the definition of modern supply chain management. These technologies make the traditional supply chain leaner while keeping the overhead costs low. For instance, businesses can use big data analytics to process a large amount of data and analyze them in real-time to forecast future product demand. It helps the company to save money on unnecessary product stocking and makes the team more productive in handling goods.
Blockchain is another incredible technology and asset for the supply chain. The decentralized ledger allows businesses to record and protect transaction data shared across multiple parties. It gives a minute-to-minute update about the product status without intervening third-party. Other applications of blockchain in the supply chain processes are signing smart contracts with suppliers, fast and secure payment, enhanced supply chain logistics, etc. Together, these technologies are completely transforming the supply chain process from autonomous logistics, smart warehousing, predictive maintenance, product demand forecasting, last-mile delivery, etc.
- Rise of 3PL, 4PL and Dropshipping: The demand for third-party logistics and dropshipping has significantly risen in the last couple of years. It is redefining the supply chain and helping business enterprises mitigate challenges related to distributing stocks and last-mile delivery. It allows organizations to focus on the core business activities and minimize the costs associated with logistic services. The rapid growth of e-commerce business and demand for low-cost logistic services is one of the main reasons for boosting the 3PL market. The 3PL and 4PL service providers are pushing the transformation of supply chain management.
As per one of the reports, the global third-party logistics market was valued at $1032 billion in 2021, and it is forecasted to reach $1656.7 billion by the year 2027. In another report, businesses agreed that they are seeking to outsource logistics to 4PL, with 42% of respondents looking for providers that can design, build, run, and measure logistics functions completely. These reports clearly indicate the demand for 3PL and 4PL and their impact on modern supply chain management. Third-party logistics providers are further making their foothold stronger by making mergers and acquisitions.
- Customer-centricity: Due to the digitization of businesses, customers are increasingly connected to the products and truly drive the business. To increase business value and keep pace with the current market trends, enterprises are shifting from product-centric to customer-centric business models. It has transformed every process in the business, including supply chain management. A customer-centric supply chain is no more optional but imperative for companies to survive. It means the supply chain should efficiently serve the customers and elevate customer experience throughout the supply chain.
Organizations are today investing in technologies such as big data analytics to understand customers’ sentiment, behavior, and experience so that they can react quickly to their needs or expectations. In an age where companies put a lot of effort into designing products that resonate with their target audience, it becomes equally important to have an effective supply chain that delivers products at low costs and as quickly as possible. It helps customers to place orders, track deliveries, and coordinate returns from any place and at any time. A customer-centric supply chain fosters customer loyalty and greater profitability, which are keys to business success.
- Environment-friendly supply chain model: Recently, there has been a lot of discussion on the impact of supply chain operations on the environment. As the general awareness of the green revolution is increasing, companies face heavy pressure from stakeholders, government, and customers to build an environmentally sustainable model. As per HBR, many multinational corporations have pledged to work with suppliers that adhere to social and environmental standards. It implies that suppliers have to focus on being eco-friendly along with improving operational efficiency.
There are many options that suppliers are exploring to make the entire supply chain greener from packaging, design, procurement, manufacturing and assembly, logistics, and distribution. Suppliers are adopting electric vehicles for transportation to reduce carbon footprint; likewise, they are looking toward hydro, solar, and wind power as the energy source. For packaging, they are exploring biodegradable materials. Many companies have paid less attention to making the supply chain eco-friendly, but ignoring it could impact business growth and profitability. Now companies have realized that consumers appreciate and prefer brands that support the green revolution.
Business owners continuously improvise their business strategies to respond to the market needs. As the world is stepping into industry 4.0, there is an urge for new production methods and supply chain systems. Besides that, customers’ demand for more individualized products and fast delivery are putting huge pressure on the supply chain process to become resilient and fast.
To address customers’ new requirements, the supply chain is harnessing the power of advanced technologies and latest trends. The new approach is completely transforming the supply chain and provides more transparency. It requires companies to rethink their business processes and adopt strategies that make them relevant to the current market.