How to Reshape Your Supply Chain Strategy in 2020
In the modern business environment, the rise of customer expectations impacts every part of the supply chain. Meanwhile, next-generation transportation and logistics strategy solutions are making global supply chains more intelligent, faster, user-centric, and sustainable.
In the last decade, the logistics industry has made a huge leap forward and is expected to reach $12,256 billion by 2022. Since proficient logistics is crucial in reshaping the supply chain, let us see what tendencies might help you improve your supply chain strategy and therefore grow your business.
How Intelligent Strategy Improves Supply Chain Efficiency
It is not only enterprises with global recognition that have to implement thorough strategies. No matter the size of the company, a supply chain strategy is a must component of the overall business success. The key goal is to ensure high product and service quality to the customers at a reasonable profit margin. Let’s find out some benefits of a good strategy and why your company needs it:
It helps keep costs and service quality in balance
Building a robust strategy entails performing trade-offs between the costs and quality of services provided. For instance, keeping customers satisfied means having all goods available in stock all the time. This may lead to excessive manufacturing and inventory which will result in extra expenses. So, with an effective strategy in place, such things must not happen, helping the company save money and keep customers happy at the same time.
It helps adapt to customer demand fluctuations
Customer demands grow, so does the competition in the logistics and supply chain market. Companies must monitor what is changing, adjust their prices, delivery methods, and overall customer service. Previously, it was a common thing to wait until a monthly report is generated to analyze production and inventory. Today, there is no time to wait. So companies must turn to weekly or even daily reports and integrate changes to operations. This is all must be documented and foreseen by a strategy.
It encourages business development
A good strategy helps understand where your company is moving. In order to see your future, it is essential to analyze the past. Thus, collect data about vendors you collaborated with, let’s say, last year. Compare prices, quality of services, quality of raw materials, and other factors. Determine what you want to improve. Document all this and achieve business goals more effectively.
Choosing the Strategy Based on the Supply Chain Model Your Company Follows
The supply chain model of your company and the strategy are two interconnected notions. Overall, there are six supply chain models, but they all are divided into those with a focus on efficiency and those with a focus on responsiveness. Let’s dive deeper.
The one oriented toward efficiency entails thorough metrics measurement with the purpose of relevant materials utilization, cost reduction, and performance improvement. This category includes fast, efficient, and continuous-flow models.
- The fast model is about organizations that manufacture and distribute trendy goods with short lifecycles. The aim is to cut the time to market.
- The efficient model works for highly competitive companies on the market. The aim is to maximize the overall efficiency by keeping an eye on prices in the relevant industry.
- The continuous-flow model suits companies where the customer demand remains stably at the same level. It works for mature companies with little customer demand variations.
The category focused on responsiveness includes organizations that create goods and products based on specific customer requirements and demands. Here we can distinguish such models:
- The custom-configured model suits companies that create products with an unlimited amount of specifications.
- The agile model entails the development of products based on unique customer requirements.
- The flexible model works for companies that face high peaks of customer demand. This is where a flexible approach is needed.
So, while there are many supply chain models, the strategy creation will differ for each. However, there are components that must be present no matter the model. They are high visibility, green SC, automation, 3PL, and partnerships. In this article, we describe all these components and outline the types of strategies that can be implemented.
Benefit from a Real-Time Visibility in Supply Chain Management
A lack of visibility and transparency negatively affects end-to-end supply chains. Professionals are now looking for new methods of reducing risk and streamlining the entire process. Thus, early investment in blockchain and IoT (Internet of Things) technologies can provide innovative companies with a competitive advantage.
To yield these results, organizations must learn blockchain capabilities, choose a suitable starting point for their industry, and demonstrate the value with an appropriate and functional use case. Here are five core use cases designed by Deloitte and Oracle for chief managers to consider where to apply blockchain.
You can also try out the brand-new software powered by Blockchain (TradeLens), a platform to track the end-to-end shipping route, making the entire process more transparent. Carriers, freighters, ports, 3PLs, and other shipping and logistics participants would all share and use this one single portal to keep their customers up-to-date.
IoT is not new in delivery chains, as real-time WMS (warehouse management system) and fleet management solutions have been in use for a few decades. However, today’s WMSs seem to be more innovative.
The use of smart glasses and augmented or mixed reality head-mounted displays (HMDs) increases the level of automated collection and data processing. Plus, smart sensors broaden management visibility across the supply chain to help companies reduce operating costs, improve asset efficiency, and generate incremental revenue. You can see how to digitize your supply chain management (SCM) from an IoT perspective.
AR, Blockchain, and IoT technologies will definitely change the look of next-generation supply chains. As a result, we all hope to get transparent, speedy, safe, and efficient SCM.
Make Your Wallet ‘’Green’’ with Green Logistics in Your Supply Chain
Organizations across the world integrate sustainability practices into their supply chains to become environment-friendly, cut costs, and win customers. The trend, called “green logistics,” can not only help the environment but also enhance corporate reputations, lower supply chain costs, and, most importantly, win more customers.
Whatever the motivation of the business is, switching to a green supply chain is catching on rapidly. By the way, check the annual rankings of the top green companies released by the CDP group.
Benefits from Going Green
Of course, the global purpose of going green is to contribute to saving the planet by reducing GHG (greenhouse gas) emissions. But we’d like to look at the green supply chain management (GSCM) from a business perspective.
Create a better image of your company
Firstly, the number of corporations that would not get an endorsement on the market from moving to environmentally-friendly logistics is incredibly low. We all care about our safety, beginning with things like clean air, water, and soil. This reflects in our daily habits, and we make safe choices by opting for nature. Famous examples include the usage of plastic-free goods, drinking organic coffee, and driving electric cars. Thus, the more sustainable your supply chain goes, the better is the position of your business on the market.
In the modern age, green efforts mean far more than recycling water and minimizing waste. As Corporate Knights’ list of the 2019 Global 100 Most Sustainable Corporations states, going green means a drop in CO2 and waste production, gender equality in leadership, and even the income derived from sanitary products.
Top 10 companies leading the eco-friendly charge
Get revenue from implementing green logistics
Imagine, for a second, how many pathways for creating extra revenue you often overlook. GSCM alone offers dozens of them. Let’s mention a few:
- Become green and sell your tools for GSCM since these ready-to-use tools are always in demand and save companies both time and money. Be the first to create value for your rivals and benefit from it while handling your primary business at the same time.
- Sell waste that your business produces. The enormous popularity of sustainability and environmental responsibility forces more companies to utilize recycled waste. So, you can kill two birds with one stone by helping those companies to get raw materials while also financially benefiting from it.
Minimize energy costs
The planet’s resources are limited, and it’s not hard to understand that the more we consume irresponsibly, the more expensive the global supply chains get. The integration of green solutions instead of using traditional power sources is way more cost-effective (if not free). Consider recycling your waste or using solar/wind energy.
Thus, turning your business into a green and sustainable one saves you money and vice versa—saving money makes your business more sustainable.
World’s biggest economies ramp up their emissions
In the modern economy, organizations typically stop caring about things that keep people alive unless they contribute to their earnings. The last couple of years has shown that this pattern has drastically changed. One of the benefits of GSCM strategies is the power to appeal to both environment-oriented and business-oriented executives. So, the new perspective doesn’t seem to be so frightening and, in fact, reveals endless opportunities.
Automate Processes with Artificial Intelligence
Numerous organizations have begun using AI applications in their supply chain development to improve speed, supply chain efficiency, and control working expenses.
AI applications within SCM activities:
- Chatbots for daily operational procurement, e.g., speaking to suppliers during little talks, setting and sending actions to suppliers concerning governance and compliance materials, placing purchasing requests, and more.
- Machine learning (ML) for supply chain planning (SCP) can assist in forecasting within the inventory, demand, and supply. If used accurately through work tools, ML can revolutionize the agility and optimization of supply chain decision-making.
- Machine learning for warehouse management. The success of supply chain planning heavily relies upon proper warehouse and inventory-based management. Regardless of demand forecasting, supply drawbacks (overstocking or understocking) can be disastrous for just about any consumer-based company.
- Implementation of AI into logistics and shipping has become a core objective for SCM. Automated shipping minimizes lead times and transportation costs, adds environmentally friendly operations, reduces labor expenses, and, most importantly, outranks the competitors.
Types of AI applications in companies in the United States as of 2018
Drive Cost Savings with Third-Party Logistics (3PL)
Third-party logistics (3PL) is a widespread practice used for supply chain strategy where a company outsources logistics functions to another company.
Because 3PL firms are experts in logistics, they usually have a more expanded network than your company’s supply chain function. They are more likely to have exclusive relationships within the logistics industry, more significant influence during negotiations, and are able to offer more discounts to clients. All of this can minimize overhead costs.
By partnering with a 3PL company in SCM, you can also save on making enormous infrastructure investments as it can provide transportation, warehouse space, and staff and tracking technology, among other things.
The functions of 3PL companies:
- Inbound freight
- Customs and freight consolidation
- Order fulfillment
- Management of cargo to customers
Reduce Logistics Costs with the Increase of Partnerships
The aim of any company’s logistics strategy is to minimize freight costs and provide a highly efficient service. Partnerships will often not only help to reduce the costs, but also reduce the risks associated with shipping cargo. In some cases, productive cooperation can also decrease delays in delivery and enhance customer value and satisfaction.
Within international markets, businesses are trying to find partners that use innovative digital alternatives, which can help them to seek new opportunities. Increasing forecast accuracy, reducing inventories by using JIT (just in time) system, gaining new and more accurate delivery and decreasing the amount of required administrative work are the crucial goals businesses aim to address through partnerships.
3 Types of Supply Chain Strategies You Should Focus On
With the significant impact of innovative technologies and disruptive approaches on the industry, companies have to keep up with the changes and adjust their business strategies, taking into account all market fluctuations. We have outlined three types of strategies you can consider to integrate into your business:
- Demand-driven business strategy. This approach entails using special tools for predicting demand for goods manufacturing. Usually, it comes along with technologies such as machine learning and big data. They are used to collect market and customer data, analyze it, and propose ideas on which products must be created and in which order.
- Agile or flexible supply chains. While the market is always changing, consider enriching your business strategy with technology and approach alternatives that can be used in different situations to minimize possible risks and revenue loss.
- Sustainability at the core of the supply chain. Organizations aiming to preserve environmental and social sustainability possess great competitive advantage among others. This is why supply chain companies need to integrate such sustainability into their strategies.
Summing up the Benefits of SCM Trends for 2020
SCM can be improved through a variety of aspects. The accurate integration of the abovementioned practices, including “going green,” will enable organizations to create a better image of themselves, reduce costs and even get revenue. In addition, the data accumulated from IoT and artificial intelligence allows industries to streamline and accelerate the supply chain to yield better outcomes.
If you are looking to make big changes, the Innovecs team has got you covered. Our professional can help you imagine, deliver, and run your supply networks to address tomorrow’s challenges and opportunities. Whether you need a platform for generating critical insights, optimizing business processes, or automating supply chain activities across your value chain, you are in the right place.