2017 is the year for supply chain management (SCM) investments.
More and more companies are beginning to recognize that SCM must be on the C-level agenda, as it plays a strategic role in operations and helps to achieve a competitive advantage. Lego, the world’s most renowned toy maker, for example, recently named a SCM guru its new CEO.
The particulars of the supply chain industry are ancient in many ways (models, structures, people, IT, etc). Due to a rapidly changing world and accelerating pace at which humans and businesses alike operate, companies must understand that SCM is not another name for logistics.
SCM handles relations between each entity composing a chain. This includes the flow of: materials/product, information, financial transactions and decision-making. Logistics, responsible for optimizing the flow of materials and products, is a tangible, key SCM subset.
Global innovation helps people, around the world, increase their standard of living and easily access consumer goods. Globalization, with all its challenges, makes supply chain management and logistics an increasingly difficult task.
Here’s some of the trends to follow in 2017:
Data-Driven Supply Chains
The technological landscape for logistics and supply chain is rapidly changing. However, deployment remains sluggish thanks to existing old legacy systems that cannot be instantaneously flushed, causing a competitive disadvantage to companies as they lose the time-window to modernize their operations and structures. Better-equipped companies will prevail.
Understanding big data and its genuine benefits, along with implementing best practices results in a massive advantage for optimizing existing supply chain manufacturing, warehousing, and logistics practices.
To stay on top of the evolution, processes must be automated, and systems integrated.
Alibaba released their quarterly reports just recently. Big hand to them! They are the perfect example of a company investing more and more in big data and its closely related technologies.
Consumerization refers to the impact that consumer-originated technologies can have on enterprises. It reflects how enterprises will be affected by, and can take advantage of, new technologies and models that originate and develop in the consumer space, rather than in the enterprise IT sector.
Just look at what has happened to travel agencies on the passenger side; then question how air cargo can still remain about 40 years behind. The reason lies in industry protectionism, which is starting to explode. Shippers will jump into the drivers seat and empower consumerization. We have seen numerous companies pop-up in the world of inefficient freight forwarding (FF) recently. These newcomers will eventually make this so called “complicated process” of booking freight and clearing customs etc. a seamless working solution. At that time, we can kiss most of today's FFs goodbye. That is, unless they quickly start repairing the holes in their socks.
Supply chains will become more consumer-driven with efficient future demand prediction, to ensure supply meets the predicted demand.
The logistics industry is testing and evaluating various IoT use cases, and chances are, some will add tremendous value (especially with more valuable assets being shipped).
The industry should keep close on this, while also keeping in mind cost efficiency, decreasing margins on bulk, and primarily the real added value for end-customers. Amazon Go is a great example of an IoT application that is adding great value.
Augmented Reality (AR) in Labor Intensive Functions
Augmented Reality has become a topic of interest in some areas of logistics, such as warehousing, packing and ground handling roles, which are typically low-paid, rather boring and inefficient. Workers can use “smart glasses” to integrate product information right before their eyes (literally). These smart glasses can scan barcodes, help indoor navigation, and eventually increase the efficiency (less faults, better visibility, better performance and more fun in the job) of manually handling products.
Returns Management Excellence
There are 2 major components to consider regarding returns management.
1. Customer satisfaction. If you manage it well, the customer will shop again.
2. Cost savings as the result of a transparent process and execution.
Autonomous Vehicles and Drones
This is an area that is sure to grow, but 2017 is still a bit too early. Customer facing deliveries are somewhere in the future still, even though many last mile delivery companies and postal operators have already tested drones in practice. At this point, it is more PR related than anything else.
However the role of unmanned vehicles inside factories and warehouses is already in full swing. Robots have played an integral part in developed warehouses since the 1980s and 90s.
It’s an interesting area to keep an eye on. The estimated value of the global logistics market is close to $4 trillion – which represents about 10% of total GDP. Technology and continuous innovation will be the key to improving and growing the industry.
Market Consolidation, Alliances, and Collaboration
Gartner recently predicted that by 2020, the top 10 global 3PLs would control 80% of the world’s logistics volume.
A lot of consolidating has occurred, and will continue to occur, while others companies will continue to disappear.XPO Logistics announced it was acquiring Con-way for $3B as it extended into the trucking business. For ocean carriers, alliances (referred to as Mega Alliances) are the name of the game. These 4 alliances 2M, O3, G6 and CKYHE now represent 16 of the world’s 20 largest container carriers. The Air Cargo business is seeing big performances from its Middle Eastern players. This trend is expected to continue. The same companies are also getting active in consolidating the market
There are also a couple of macro-level topics that will inevitably influence the market and industry:
1. Due to recent political changes in USA and UK, large multinationals must pay close attention to their supply chain network structure. This includes where their factories, partners and warehouses are located and how they deliver products to customers. Companies must also ensure that their systems are able to adapt to changing situations.
2. E-commerce continues to reshape the world. Currently, e-Commerce makes up nearly 10% of global retail transactions. That being said, the customer experience is simply not where it should be. By default, neither late nor lost shipments should occur. E-commerce is a phenomenon that can yield growing revenues, better profitability and increased customer loyalty to all stakeholders in the equation. Imagine the landscape when e-Commerce hits 30% of all global retail transactions. We are living in a connected world.
Keeping up with global logistics trends will be essential to survival and growth. If you cannot scale and meet customer demand, it is possible that you may find yourself fighting to dig out of the trenches. For additional insight into the changing world of logistics download the free eBook provided below.