The continuing pandemic and reemergence of new strains and variants has thrown much of the global supply chain mechanism and ecosystem into disruption and disarray. The search is now to revert, change and transform.
The year 2021, like the preceding 2020, was another unprec
edented year for global supply chains and logistics. A lesson derived from the ensuing situation was the unpredictability of predictions for supply chains, logistics, transportation, ports, retail, manufacturing, and distributors. Consequently, it created an impact.
The result here is a list of ideas and uncertainties for 2022. They are some of talking points and takeaways that have taken life during all this and what they may mean as things to watch for.
Overview
The business story of the pandemic has been its direct and indirect impact on the logistics and supply chain management. The result—logistics bottlenecks and chaos, port jams, ocean shipping rates, inventory shortages, lockdowns, shipper workarounds both reshore and onshore.
There is need for trade and supply chain synchronization. All of these are indicative of disruption and the potential for change, even transformation.
Status
The pandemic validated that Supply Chain Management (SCM) is critical and strategic. This is now globally understood. It also made companies look at the end-to-end supply chain, not just downstream with customer orders and stores.
Implicit and explicit is integrating the end-to-end supply chain. This may mean a new SCM structure than using logistics as the organization breakdown. That said there is still the challenge for firms to see the size, complexity, and nonlinearity of supply chains. What will all of it mean going forward?
Normal
This interrogative has two parts. One, when will logistics and supply chains achieve normalcy? After the upcoming Chinese New Year? Perhaps in the second half of the Year?
Two, what will normal be and look like? Will it basically the same as pre-pandemic except for a few changes? Or will there be transformations across supply chains, logistics, and transportation?
Supply chains
Stories about what happened and is happening treat supply chains as a monolith, one-size fits all—a cookie cutter approach. There is no differentiation by company, industry, market, or regions of the world. That is wrong and creates misdirection for change and what is, can be and should be.
Technology
This is a high on the list issue. Covid has and will accelerate its use. The term, the single word, actually has multiple, different meanings. Start with the premise that there is no universal technology for logistic and for supply chain management.
However, firstly there is the need for a disclaimer. Technology is not a silver bullet that fixes everything. It is a process enabler. Its success is directly proportional to how well your process works or does not.
Here are some sure technologies you should have:
Data Analytics
Start with data analytics. There is an incredible amount of data in end-to-end supply chains. No other part of the organization can rival its mass. Tapping into it can provide insights and solutions for what is happening to your supply chain or logistics and possible ideas to improve it.
That can reap incredible benefits as to performance and cost. A trick is to understand what you are seeing—metrics, trends, or outliers. Or are they outliers?
Digitization
Then go to digitization. Moving away from paper and other media is important as we have learned as a step for operational continuity and control. It also aids in data ‘creation’ for analytics.
The length of supply chains and all the participants means this is not a quick-fix programme. Clearly this is mandatory and needed.
Visibility
Visibility was a topic before
Covid. There are technologies that recognize it. However, this is more than
track-and-trace from transportation-related firms. It is the same with
inventory in warehouses. These constitute only a portion of activity.
What must be recognized are the internal and external gaps such approaches have as to players and process that are hidden each from buyers and sellers. These holes are signs of loss of control of the process.
The starting point should be the process related to two key documents—your purchase order and the customer purchase order. Start with creating and issuing your PO and upstream processes where supply chains of supply chain management begin.
This is coupled with the visibility is the need to integrate it. Then you can use metrics to focus on events and not on all your activities.
Blockchain
Blockchain offers the potential for supply chain visibility. Regrettably, so far, much of it remains hype. There are issues. First, as with visibility and with its linear, transactional view, it misses participants in the supply chain. Those gaps can mean control lapses. Second, for the climate change, green supply chain supporters, there is the high energy used to make bitcoins.
Robotics
This is escalating in warehouses as companies deal with labour shortages and rising labour costs. It is especially for high-volume operations. Using this technology may be a deep-pocket question for firms.
That can mean using outside distribution centers that are technology centric. It may also, for some, mean process improvement to compensate for the inability to use robotics.
Transportation
Depending upon the transport mode, there have been varying degrees of sticker shock with rates. Then there are issues from contract to spot market. How much of the higher prices will remain as things settle? How will you balance contract and spot rates in your shipping?
Second to the cost concern is the service quality and reliability provided by carriers. This may be the most important issue with its impact on production, sales, and customers.
Is all this just a matter of changing carriers? Or is there a need to reanalyze what you do and how to achieve reductions?
E-commerce
It is well known that online sales surged during the
pandemic. The question retailers with stores have is how much of that
e-commerce volume will come back to them. Amazon has defined the customer experience
with its order delivery velocity.
They have done it with a supply chain management by redefining the process. Its supply chain includes logistics infrastructure—now the second largest delivery service in the US, warehouses, planes, freight forwarding, and trailers. They attacked the import logistics chaos by chartering ships to move products. Then there is also the rapid rise of cloud technology.
Last Mile
All this positions them with operations performance and lower costs, including the Last Mile. How many e-commerce retailers can match it as they pay outside service delivery carriers?
These capabilities have placed many retailers in a competitive quandary. Does Buy Online Pickup In-Store (BOPIS) match the customer convenience of home delivery—for free? Will Buy Now Pay Later (BNPL) offer a way to compete?
But the threat of Amazon also includes transportation, logistics, and 3PLs. The concern is that they would offer/sell their services to other shippers. Besides their logistics capabilities and technology, Amazon also has a competitive advantage with its real-world supply chain management experience and expertise. That opens up 3PSCM and SCMaaS opportunities.
Resilience and Risk Mitigation
These two go together and hand-in-hand. Creating resilience requires reducing supply chain risk, both external and internal. Technology is one tool to becoming resilient. But, as the pandemic showed, it is about more than technology. Achieving it is also about operations.
A key action is to assess risk spots. How else can you build resilience and reduce risks without understanding your end-to-end supply chain?
These can be infrastructure, technology, participants, and process. And for end-to-end supply chains, that can mean extensive analysis to identify all activities, especially upstream. These include going deep into tiers for suppliers' suppliers and mapping it.
Other Reflections
There are more contingencies to consider:
The shortage of warehouse space: This demand reflects e-commerce sales and an inventory buffer arising from the logistics chaos of the pandemic.
The future of lean: Lean has been blamed for inventory shortages. Given the length of the pandemic and its end-to-end supply chain impact, this blame is a bit odd. Lean may gain more importance, especially for international, to remove excess time and smooth it. Value stream mapping is a viable tool for this.
Inventory: Will companies carry more inventories to limit exposure with a future challenge? Is this being resilient? With the need for more warehouse space, where will this additional inventory be stored? Or, instead of storage, will it mean using lean to move inventory more quickly instead of placing products in storage?
Reshore / onshore: The inventory and supply chain disruptions have raised questions about reshoring away from certain countries and moving to others. Furthermore, there is the onshore to move production back to destination countries. The latter has potential for products and their materials that the pandemic deemed critical.
The analysis is the cost of reshore / stay the course, even with price increases, versus moving production onshore. Transportation, labor, understanding and defining the scope of products and materials are subjects at stake. Think also of Bills of Material, suppliers' suppliers and the network diagram that it would resemble.
Net Carbon: Greenhouse
gas / carbon reduction will gain more urgency. This will impact transportation,
service providers, packaging, and more.
Capital investment: The
question of ports increasing capacity leads to the need to invest in
improvements. A challenge to this is that much of the volume surge is historic
and may not be sustainable. As such, what would be the return on investment if
volumes calm? This question applies to other areas of logistics. Invest or wait
for the drop.
Next global challenge
First, it looks like CoViD and
its variants are not going away. That can mean ongoing lockdowns, logistics,
and supply chain issues. Stay alert.
Climate change is a current and escalating global problem. It will have definite impact on supply chains and their underlying logistics, ports, warehouse networks and transportation. All as the world deals with rising sea levels and high temperatures and the effect. This challenge will require fresh thinking and may demand a redo of supply chains and logistics beyond Covid.
Conclusion
All this is a lot to digest, let alone act on. Disruption will be continuous. That means supply chain management and logistics transformation will not be an option. It will be required.
The question for everything that has happened and may be happening is what are you doing? Are you preparing or sitting and waiting?
