Successful Global Supply Chain Management
The value of effective global supply chain management is increasing each year, as nearly 10-12% of global GDP comprises logistics activities. This percentage shows that people tend to consume more and more. And along with the need to get the deliveries on time, customers seek a seamless and superfast shopping experience.
Thus, 30% of businesses worldwide stated that their primary objective is to satisfy the rapidly changing customer requirements, which can result in the company’s success. Indeed, companies with high-performing supply chains get more revenues, than the average logistics performers.
With this in mind, leaders have to find out the ways to transform their global supply chain management and to adapt to growing customer mandates. According to a recent report Future State of Digital Supply Chain Transformation, over 75% of companies consider the integration of digital tools as a very important component in achieving effective supply chain management (SCM).
What Is Global Supply Chain Management?
Global supply chain management generally refers to all processes regarding a product’s lifecycle, from the concept of its creation to distribution to endpoints. Global SCM is aimed to enhance the productivity of each stage of this lifecycle, get rid of inefficiencies, and deliver the products timely and seamlessly.
The traditional global supply chain comprises four critical stages: supplier, manufacturer, retailer, and end-user.
What is the global supply chain in real life? A real-life example of the global supply chain may be the following. In 2019 Nike took a win as Company of the Year for its revolutionary approach to supply chain management. The key factor of success was incorporating AI, predictive analytics techniques, and inventory tracking using RFID and QR codes.
This tech-driven decision helped them to better forecast fluctuations in customer demands, and therefore increase the quantity of placed orders. Besides, Nike achieved the desired levels of visibility throughout the entire supply network. In such a way, Nike became an industry-leader and brilliant representative of global supply chain performers.
Market Overview: Global Supply Chain Management Software
The current pandemic has dramatically affected the global supply chain management. The Tradeshift uncovered the colossal COVID-19 impact on commerce and demand. In China, for example, 56% of all transactions dropped beginning from the middle of February. The US, UK, and EU followed with a combined initial decrease of 26% at the start of April, and a continuing drop of 17% at the end of April.
Another study by the Institute for Supply Chain Management states that nearly 75% of companies reported they somehow suffered from the novel virus. Plus, over 50% of respondents underwent sudden delays in receiving packages from China suppliers.
Therefore, the need for more transparent, autonomous, and predictable supply chain management has become urgent for international businesses.
The software market of global supply chain management is projected to reach US$ 9.56 billion during the next four years, according to Technavio.
Software aimed to enhance supply chain visibility and event management (referred to as SCVEM software) will provoke even faster market extension between 2020-2024. Being a part of SCM software, the new SCVEM solutions aid companies in event maintenance and accurate decision-making in different aspects of the whole supply chain.
With the development and integration of the SCM software, companies can take advantage of higher employee performance, improved warehouse management, fewer operational costs, increased efficiency of their transportation, inventory management, and overall logistics.
Benefits Of Global Supply Chain
Why is effective global supply chain management so important? Companies who have debugged SCM can reap their benefits, from lower supply chain costs to faster transactions lifecycle and thus faster revenues. Here are the key advantages of streamlined SCM.
Improved Overall Effectiveness
With real-time tracking the availability of goods in stock, companies can better conduct a demand-planning and source raw materials from a reserve supplier if needed. This reduces the number of delays and customer dissatisfaction.
Thus, supply chain management software underpinned by smart solutions results in improved overall efficiency.
Better Management of Demand Fluctuations
Supply chain management is a critical milestone in operating a product company, but demand forecasting can be very tricky. Every business leader has probably dealt with the so-called bullwhip effect. Put simply, this effect refers to spikes and drops in customer demand which literally causes waves hitting the supplier of raw materials.
With robust SCM software in place, supply chain managers have access to a constant stream of real-time data. This data can be leveraged to better forecast demand and promptly respond to ever-changing consumers’ needs. This way, leaders overcome challenges like the bullwhip effect.
Optimized Transportation Management
The global supply chain management grows aggressively along with the spending on deliveries. Thus, in 2018 the US companies spent US$1.64 trillion on transportation services, an increase of 11% compared to the previous year. Another survey states that almost 25% of supply chain professionals consider shipping costs are the biggest issue for B2C e-commerce companies.
Supply chain managers often adopt transportation management software (TMS) to have the utmost control over transport and reduce associated costs. The figures below demonstrate the beneficial effect of TMS:
- According to Forbes, TMS can reduce freight costs by up to 8%.
- TMS solution can help shippers to reduce their bills by 90-95%.
- Adopters of TMS solutions usually experience 5-10% in cargo cost savings.
The TMS market across the globe was US$1.8 billion in 2018, and it is projected to hit US $4.8 billion in the next five years, meaning it’s high time for businesses to invest in the right technologies.
With TMS, you can track your shipping operations anytime and in real time. You gain better control over fleet maintenance, fuel spending, route planning, communication between suppliers, and more.
Better Risk and Threat Management
Access to real-time supply chain data, on-time analytics, and backup planning can help managers to run impeccable supply chain risk management, meaning they will be able to foresee unprecedented situations and disruptions that may cause adverse effects on the entire business.
By implementing the Internet of Things (IoT) solutions, you get improved transparency and gain more control of your operational activities. Telematics devices can help companies mitigate such risks as delays, product losses, events that compromise the quality of goods, and other concerns that arise during transportation or inventory management.
In addition, IoT is used to identify vulnerabilities in the supply chain management system by applying machine learning, cryptographic hardware monitoring, and other techniques to alleviate the results of unexpected malicious events.
Reduced Overhead Costs
The precise demand forecasting allows companies to cut the overhead expenses associated with overstocking. When there is an excessive amount of inventory in your warehouse, you pay extra for their storage. Thus, knowing the demand, you keep the right number of products with higher velocity and generate more revenues.
Adopt automation solutions to reduce these costs. For example, a warehouse management system (WMS) can improve your order shipments’ speed and increase the efficiency of business operations. The integrated WMS solution elevates warehouse productivity by 25%, saves space utilization by 10-20%, and leverages stock more effectively by 15-30%.
The automated tools like sorter and conveyor systems can also contribute to inventory optimization, by increasing the pick rate by five times, compared to manual picking 60-80 units per hour. Therefore, the value of WMS software is that it aids business executives in controlling inventory, handling day-to-day activities regarding inventory shipping, storing, and sorting.
Sooner Achieving of Positive Cash Flow
All advantages described above drive companies’ leaders to make decisions faster and more accurately as disruptions occur, easier manage warehousing, inventory, and transportation issues, better forecast demand. Moreover, they also contribute to achieving positive cash flow (CF).
For example, partnerships with trusted suppliers mean fewer disturbances and more satisfied consumers. This also allows you to issue invoices and get paid faster. Digital solutions foster budget savings, reduce wasteful spending, minimize overhead expenses, and contribute to a faster return on investment (ROI).
Challenges in global supply chain management can turn into benefits if having the right instruments at hand. Consider integrating dedicated SCM software with warehouse and transportation management functions to have a flawless supply network.
Reshaping Future Via Modern Global Supply Chain Solutions
Global supply chains have become highly complicated and crucial for many businesses to stay competitive. Such interconnected and sophisticated nature of cross-border supply chains makes them vulnerable to multiple risks, including cybersecurity threats, delays, unforeseen events like COVID-19, and many other adverse impacts.
Luckily, emerging global supply chain techs can drastically increase visibility across the entire chain, making it agile and resilient. According to Forbes Insights, almost two-thirds of surveyed companies see the benefits of leveraging new technologies, like IoT, AI, ML, robotics, and Blockchain. These disruptive technologies can give businesses great visibility and control across all logistics processes. Let’s discuss each in more detail.
Internet of Things
IoT is a buzzword of the recent decade or even more. Technology is rapidly developing along with the expansion of its use cases. Currently, the telematics market consists of 95% hardware. This trend will change, accompanying a decrease in the physical devices and the concurrent growth of software. By 2026 the IoT market will reach nearly US$11 billion, with software representing 80%.
Essentially, IoT collects tons of data that has to be analyzed. That’s why supply chain managers have to find ways to exploit it in the most effective way. For example, not so long ago the IoT data was crucial for route optimization, risks mitigation, better demand planning. Today’s IoT devices are used to gather information on individual drivers, their health state, the conditions of tires on a vehicle.
More than 4 out of 5 industry experts see the most significant value from IoT transformation in fleet management, namely in route planning.
AI and ML
The applications of breaking through techs like Artificial Intelligence and Machine Learning are vast, some of them we are going to explore in this section.
Accurate and Fast Decision Making
Big trucking carriers usually have to handle thousands of repetitive and complicated tasks requiring a lot of input data to make the right selection. For example, to pick a reliable carrier, a company needs to seek through numerous possible providers and routes, which can take nearly 5 minutes. With AI & ML instruments, managers can narrow the choices to several seconds making the most appropriate choice.
Vendor of autonomous carriers TuSimple revealed their plans to bring driverless trucks to market by 2024. Driverless cars aren’t aimed to replace the truck driver but rather solve the problem of driver shortage by increasing the efficiency of the existing driver fleet and improving overall driver safety. With self-driving trucks, human engagement, as well as the associated expenses, can be substantially minimized.
Drones for Last-Mile Deliveries
The pandemic has added value to contactless activities. That’s why drones operated by AI can become more in use. In warehouses, drones can be used to pick up inventory because they do this faster, replacing possibly forklift trucks or conveyors.
Drone delivery can dramatically improve and ease the last-mile deliveries, which often happen to be the most expensive for customers. Besides, companies like DHL, Amazon, and Google are testing drones for lightweight consumer goods deliveries.
The smart contracts available with Blockchain streamline the complicated logistics processes that generally involve several third-parties because of distrust among stakeholders in the transaction. Therefore, people across the globe can instantly start collaborating and do commerce.
Although implementing Blockchain into the supply chain is a challenging task, when realized, it will be a powerful instrument for effective SCM. Moreover, the Blockchain integration into the SCM system positively affects the market and drives even faster growth through the period 2019-2023.
Benefits Of Transformational Technologies
According to the Penske survey regarding the state of the supply chain through 2023, the business leaders say the following are the most important reasons to adopt the technologies as mentioned earlier.
Elevated Performance and Speed
More than half of respondents report better productivity rates in their supply chain teams with the use of Blockchain, AI, ML, and telematics devices. These techs enable greater visibility, better route planning, and improved forecasting of future customer demands.
Transparency and Accuracy
Blockchain and IoT can offer real-time tracking of any parcel, up to its identification number. It is also easy to monitor the goods conditions as well as possible handoffs (when a task is delegated to another person and becomes most vulnerable). Also, 57% of executives reported that accuracy was a vital driver of value, which can be achieved via better transparency.
Almost 50% of surveyed said they lack staff, namely fleet drivers and warehouse operators. At the same time, employees are reported to feel happier with their jobs as they receive the right resources to optimize their work. That means companies that embrace new technologies not only add value to the business but are able to better retain their employees.
Another crucial benefit is customer satisfaction. 53% of the company’s leaders harness technology to improve customer experience. Using drones, for example, makes deliveries cheaper and leads to higher customer loyalty. Also, the real-time parcel tracing contributes to a trusted relationship between seller and buyer.
Reliability and Flexibility
More than half of the interviewed executives see the improved uptime (the time the system works without interruptions) and flexibility. This is mainly possible thanks to IoT devices, supported by AI and human involvement. With a more precise understanding of vehicle functioning, fleet managers will be able to mitigate or prevent the transport’s potential failures.
Primary Global Supply Chain Strategy for a Better Management
All changes that have already happened and continue to disrupt the global supply chain management have forced businesses to adapt and respond quickly.
1. Perform accurate demand forecasting to know the market better and react to the changes immediately.
Precise forecasting and emergency planning can provide a full picture of your business processes and immediate response to disruptions like natural disasters, political movements, communication problems with suppliers, and other factors that may affect production and logistics activities.
Leaders can also revise their pricing and advertising strategies to adapt to demand, promote new products faster, accelerate revenue streams, or even increase margins for a popular product with insufficient market supply.
The most important here is to be ready to use unprecedented events in your favor and mitigate the possible adverse effects so that your company stays on top and succeeds.
With the rise of ambitious technologies such as Blockchain, IoT, robots, the supply chains become more resilient, flexible, visible, and easy to manage.
2. Develop a responsive and flexible supply chain with accurate planning and integrated solutions at hand.
Once company leaders have a better vision and can instantaneously reshape the demand and risk, the next step is to build supply chains that match to ever-changing industry events. Organizations must deploy robust planning tools and constantly regulate operations to ensure the adaptiveness of SCM.
The new model of global supply chain management addresses new changes and rapidly responds to them, which allows you to minimize or even reduce breakdowns across the whole network.
The integration of edge tools, like autonomous cars, interconnected devices for warehousing and inventory management, Blockchain smart contracts, AI-based drones, give businesses:
- Outstanding visibility.
- Better collaboration across the entire chain.
- Easier prediction of sourcing and supply events.
- Just-in-time production.
- Real-time transportation tracking.
- Effective warehousing.
- Accurate decision-making.
3. Align product development with supply and manufacturing operations to speed up successful innovation.
Embracing innovations helps corporations to be competitive. But to succeed, the goods must be designed cost-effectively, in the proper place, and at the right time. Product management should be optimized with suppliers, manufacturers, and transportation procedures. The actual budget has to be properly analyzed to keep balance across the full-cycle business.
Besides, innovative products and competitiveness are closely connected to the choosing and maintenance of suppliers and techs. If a company can control the information, people, operations, and decisions associated with the product lifecycle, it can become an industry leader.
4. Foster green initiatives within global supply chain management to enhance the company’s reputation and overall business.
Organizations that strive to be socially and environmentally friendly have a better reputation, achieve significant competitive benefits, fine-tune production and communication with suppliers, and achieve higher employee engagement. Sustainable efforts in SCM may bring many new opportunities:
- Executives need to integrate a green approach into their SCM as a core element of logistics. Adopting green initiatives can bring supply chain processes to the next level, from cost-effective alternative sources of power to better company image.
- Then, executives should address the problem with excessive energy consumption and setting real-time visibility. This enables the decrease of carbon emissions, conscious use of power sources, less waste with recycling materials, and route optimization.
- Businesses can stay afloat and outrank rivals by continually improving via regular assessments, audits, and new skills. Through regular compliance audits and defining best practices, a company can easily keep supply chain operations eco-friendly.
5. Ensure a regular supply of products that can be easily predicted.
Without a stable supply of goods, companies won’t be able to reach the appropriate service levels. This might lead to dramatic losses and, which is more serious, supply shortages.
That’s why responsible managers must improve operational performance to ensure flawless supply chain activities. With reliable SCM software, a company has all production processes synchronized and integrated with the demand-planning procedures.
Hopefully, the article has given a profound understanding of the global supply chain and the way it works. Today, the supply chain software development is a key to fighting off the logistics challenges. Here we mean adopting technologies that have proved to be efficient in enhancing the global supply chain management, such as:
- Autonomous vehicles and drones to reduce costs and fill in driver shortage gap.
- IoT devices for 24/7 live tracking of warehousing, transportation or inventory management.
- AI-driven tools to replace manual and repetitive tasks that decline human involvement.
- Blockchain smart contracts for instant and secure collaboration between international stakeholders.
To step up the transformation within supply chain management, one needs a reliable IT partner. Innovecs specializes in providing custom supply chain and logistics software to clients from all over the world.
Our tech team is highly skilled in developing software for projects of varying complexity. Innovecs is ready to collaborate with growing startups that require custom SCM solutions, based on disruptive techs like Blockchain or AI. Or if you are a large organization requiring integrated supply chain solutions, Innovecs is here to help.