Digital Supply Chain:
The Success to your Future
1. Supply Chain Evolution Over the Years
Historically, the supply chain in all industries depended on manual processes, Excel spreadsheets, and to some extent even pen and paper records. Recent innovations have empowered businesses all over the world to transform the traditional supply chain into a digitally-driven one.
Simplified, the digital supply chain refers to the implementation of technology within the structure of a traditional supply chain in order to enhance the delivery of products. Its evolution originated from a boom in tech and E-commerce in the 80s and 90s – continuing to this day.
Typically, supply chain evolution is a result of shifts in consumer behavior, coupled with key developments and events that impact the retail and logistics landscape in a global marketplace. Below are a few key examples of how changing consumer trends and global events drastically shaped the evolution of the supply chain thus far:
The Rise of E-Commerce and Shorter Lead Times on Fulfillment:
Shorter lead times from retailers has led to the need for faster turnarounds in the manufacturing and delivery of goods. CPG brands in particular face shorter and shorter lead times from stores who order in smaller batches, but more frequently. The volatility resulting from this shift has led to the need for more proactive supply chain management and an investment in digital transformation. By turning to technology brands found they could streamline processes to adapt to faster turnaround times. We see this in the rise of E-commerce.
E-commerce is expected to be a $5 trillion industry by 2021. As consumers shifted to online channels over the years, the supply chain that was once built for brick-and-mortar factories, warehouses, and distribution centers has been transformed into a complex system based on digital infrastructure. Online consumer demand increased, and the supply chain had to evolve in order to keep up.
Global E-commerce giants like Amazon sped up fulfilment by investing heavily in a digital transformation throughout their entire supply chain. By utilizing automation to streamline transport through fulfilment centers, software to scan products and track the progress of each delivery, and dedicated Amazon planes to expedite shipping, Amazon managed to shorten the all-important lead time and revolutionize delivery and fulfillment. With an offer of accelerated two-day shipping, it suddenly became possible for consumers to purchase whatever they needed, wherever they were and to receive it almost instantly.
The Growth of Off-price as a Channel for Excess Inventory:
The Great Recession triggered a dramatic shift in consumer spending. Consumers began to expect high discounts on brand-name goods, which they would find in abundance in off-price stores. Brands, too, benefited from the off-price market and leveraged it as a lucrative channel for selling excess inventory.
However, when grappling with outdated, manual processes, selling excess inventory is easier said than done. Brands found themselves at a significant disadvantage when it came to selling into off-price due to outdated systems that provided no real-time visibility and no substantial way to manage ever-growing inventory levels. As a result, they had no way to identify off-price opportunities and even when they did, they were held back by inefficient and error-prone inventory management processes.
So, to successfully move inventory through off-price channels, brands began to leverage digital solutions to analyze inventory, to identify opportunities and to effectively plan ahead to ensure they can sell-through most effectively.
The Influence of Sustainability on Brand Strategy and Production:
90% of a company’s environmental impact comes from their supply chain. As sustainability became increasingly important to consumers and brands alike, the supply chain experienced several technological changes intended to help the planet. Excess inventory is one of the biggest pain points for brands in terms of sustainability. With an increased focus on brands for disposing of stock through burning or throwing product into a landfill, it has become crucial for brands to move excess inventory in a more sustainable way.
We have seen the emergence of organizations like Delivering Good whose focus is on helping brands to repurpose excess inventory to help those in need while minimizing waste. We have also seen companies like Flexport develop technology to help enterprises make smarter decisions when it comes to their freight carriers. Flexport calculates companies’ carbon emissions to highlight where action needs to be taken, and how much of an effect these actions have on reducing brands’ overall carbon footprint.
From a supply chain perspective, INTURN and other software solutions have evolved to help retailers sell excess inventory to minimize waste and expenses throughout the supply chain. When faced with excess inventory, digital technology can be used by retail brands to track inventory in real-time, analyse market trends and access performance history to pin-point lucrative opportunities and sell through off-price channels with minimal environmental waste and maximum benefit to their bottom line.
The Impact of Globalization on Supply Chain Disruption:
Oftentimes, innovations in the supply chain are prompted by moments where supply and demand do not match – and these moments are often caused by, or exacerbated during, times of global uncertainty. Over the years, global disruptions like economic turmoil and public health crises have impacted supply chains at both the demand and supply end.
A recent example is COVID-19, the current pandemic which caused unprecedented disruptions to the global supply chain. Due to measures put in place to control the virus’ spread, factories were shut down and shipments were halted. As a result, brands found it difficult to source products from their regular supply bases. Meanwhile, as the pandemic grew more severe, consumers began to panic-buy essential goods, culminating in serious inventory shortages – particularly for CPG brands.
However, ramping up manufacturing to cater for this sudden spike in demand came with even more risks as, when the panic-buying stopped, brands were faced with the possibility of additional excess inventory. On the other side, fashion and home brands also found themselves with inventory in excess as consumers shifted their attention to more essential items.
What all of this indicated was the danger and ineffectiveness of rigid supply chains. Brands ultimately found they were not equipped to cope with sudden fluctuations in demand brought on by the COVID-19 pandemic. To be better prepared for disruptive events, manufacturers, suppliers and retailers are now heavily investing in digital solutions to gain visibility into their inventory and leverage insights at every stage of the supply chain. By implementing new technology, brands will be able to plan ahead to adjust supply to meet demand and proactively make decisions that help to minimize the risks that comes with major disruptions.
3. How a Digital Supply Chain Can Position Brands for Success (Especially During Times of Disruption)
If the supply chain evolution has taught us anything, it’s this: digital readiness is the key to building an even stronger, more responsive and integrated supply chain.
Here are the three biggest benefits an organization can gain by implementing digital solutions to optimize their supply chain:
Full Transparency and Control
Leveraging the right technology gives brands the power of increased visibility, and we’re already seeing examples of this across the supply chain. Cloud-based logistics and warehouse management softwares are providing real-time tracking and reporting through a single platform, eliminating inefficiencies and providing brands with complete control and visibility over their operations. With the added insight, teams can react in real time to problems by rerouting shipments or even changing carriers in order to lessen the risks within their business.
At the retail end of the supply chain, inventory management and optimization software are allowing brands to gain complete oversight of inventory levels. This allows them to proactively manage, plan and strategize in order to cope with unexpected changes in demand – all through a single, centralized platform.
Inventory management platforms in particular are giving retail brands unrivalled control by providing all real-time and historic inventory information in one place, allowing them to easily access data to inform better decision making.
These platforms also help automate long and manual processes such as inventory allocation, thus increasing speed to market.
Centralized and Accurate Information
The stages within a supply chain are often siloed, with important information stored in separate locations. This causes a rigid and disconnected supply chain that is extremely vulnerable during volatile periods. Brands can leverage a digital solution to centralize information into a single source of truth that can be accessed anywhere and anytime. Digitally consolidating information empowers users to view, manage, and update inventory remotely and trust that the information they are working with is accurate and up-to-date.
This means that brands can benefit from greater visibility and streamlined workflows. With a centralized system of record, users can immediately access historical information such as transactions or product information without the error-prone manual processes of spreadsheets and emails, thereby preventing small errors from escalating into substantial problems further up the supply chain.
Preparing the supply chain for the unexpected starts with effective decision-making: a strong defense is a good offense. The right technology will harvest and provide brands with real-time data for things such as inventory performance, allowing them to implement strategic adjustments and make proactive decisions that will benefit them down the line.
The most effective software solutions can also capture historical data which can then be leveraged strategically to determine how much inventory needs to be moved (and the best approach to do so) based on prior performance. Not only this, but accessing and analyzing both past and present data gives brands the edge over competitors by helping in the development of strategic pricing plans and timing offers to reap the maximum benefits. Accessible data ultimately gives brands the opportunity to pinpoint potential weaknesses along the supply chain and make better decisions even faster, all of which will help to position them for success during disruptive periods.
4. What’s in Store for the Future?
In 2018, only a reported 1 in 5 companies were in an advanced stage of digital transformation. However, faced with volatility from an increasingly unstable global market, brands are now realizing that digitization is vital. The threat posed by the bullwhip effect on the supply chain has forced brands to re-evaluate their supply chains and think more seriously about investing in more advanced tools.
By 2030, it’s expected that the digital supply chain market will reach around $100 Billion, with spending on transformation technologies (i.e. new hardware, software, and cloud-based management services) all increasing. The digital supply chain will continue to grow and evolve, and new technology will continue to provide greater opportunities for improvements in efficiency and accuracy. Brands ahead of the curve will leverage this technology to cut costs, boost margins, and best position themselves for times of disruption, setting the future of a successful business strategy.
In this way, the evolution of the digital supply chain is far from over. It’s just beginning.
How to Choose the Right Solution
Need a digital solution for optimizing your excess or slow-moving inventory, but not sure where to start? Read our blog post on How to Choose the Right Solution.