Driving Sustainable Growth Through Supply Chain Resilience
Driving Sustainable Growth Through Supply Chain Resilience
by Martin You – Sales Director for Asia Pacific at E2open
Every industry sector and every business across the board, in APAC and around the globe have been impacted by the Great Supply Chain Disruption over the last two years, causing a blow out of transportation costs and continuous delays at every stage of the channel.
With the crisis in Ukraine and sanctions imposed on the Russian Federation, fuel and energy prices are now soaring. The evolving pandemic, growing geopolitical tensions, nervous financial markets and increasing economic uncertainty means supply, both globally and locally, is at the very least, uncertain.
The question is, how do we navigate our way out of this never-ending chaos to continue driving sustainable growth? The answer, quite simply, is through a relentless focus on resilience across the entire supply chain.
HOW DID WE GET HERE?
As of January 1, 2022, it was taking a company an average of 73 days to deliver goods to truck or rail carriers after booking with an ocean carrier and completing the cross-ocean journey, according to E2open’s Ocean Shipping Index. This is 15 days longer than the same quarter last year and an additional five days than the previous quarter.
More specifically, it took 83 days for container transport from Europe to Asia, and 88 days from North America to Asia.
The delays are attributed to supply chain issues at every stage – from the time of booking transport to gate in at the port as well as ocean transit time of shipping containers. And companies at every stage of the supply chain have inflated their prices as demand exceeds supply.
The Freightos Baltic Index Global Container Freight Index shows the cost of shipping freight remains hugely elevated – more than double the price a year earlier. In fact, global freight rates have increased tenfold since the start of the pandemic. And this was before the Russian invasion of Ukraine began.
GLOBAL CRISES DRIVE PRICES SKY-HIGH
Until now, businesses have been absorbing the rising costs of supply chain pressures, yet this is unsustainable. Supermarkets, retailers and importers are beginning to lift prices in response to the crises, essentially passing the costs onto their customers.
As a result, consumer behaviour is likely to become more and more unpredictable. Just take a look at what’s been happening over the last 3-4 months.
According to the Conference Board, despite lockdowns and COVID-19 related restrictions, consumer confidence in Asia rose in the last quarter of 2021 to 128 points from 126 points. Over the holiday season, expectation of consumer spending was high with 51% of Indonesians planning to spend $35, 25% of Singaporeans to spend $732 and the average Filipino family to spend $145. Even in Malaysia, retail sales during Christmas and Chinese New Year showed an 26.5% increase from the previous year, higher than the estimated 18.3%. So, it appeared consumer demand would remain high despite COVID-19. A research from Google, Temasek Holdings and Bain & Co showed the region’s online spending could reach $1 trillion by 2030.
Since the New Year however, rising inflation and household living costs combined with increasing uncertainty due to COVID-19 variants have been impacting consumers’ appetite to spend. In February, Thai consumer confidence dropped to 43.3 points from 44.8 points the month before, for the first time in months. Even in Australia, consumer sentiment index decreased to 102.2, forcing businesses to adjust to reduced and unpredictable demand.
Unavailable stock, delivery delays and lack of clear expectations have caused consumers to lose trust in their go-to brands, opting instead for suppliers that guaranteed their product and assured delivery.
Brand loyalty is no longer the driver for consumer purchasing decisions. People simply want to purchase products from businesses which provide a more transparent and streamlined service, and who deliver on their customer promise, even if it means inflated prices to obtain it.
It’s predominantly millennials who are willing to pay a premium for expedited same-day or immediate delivery. The alternative/challenger businesses such as the ’10-minute dash start-ups’ are aiming to build cult-like followings of early adopters. And it seems to be working.
The result? There’s growing confusion, unpredictable and inaccurate stock levels across all sectors as well as uncertainty around pricing and supply chain agreements.
The risks, therefore, expand 10-fold for businesses reliant on limited, distant, and increasingly unreliable suppliers. This is forcing organisations to change the way business and logistics management are being handled to improve forecast accuracy, ensure compliance, reduce costs of goods and to handle delays effectively.
SUPPLY CHAIN DIVERSIFICATION ENABLED BY TECHNOLOGY WILL BUILD RESILIENCE
According to E2open’s latest Supply Chain Innovation Report, the top action that organisations foresee to create a more resilient supply chain is diversifying their supplier base (40%).
Technology, such as integrated cloud-based platforms of applications with connected networks and data will help to improve supply chain performance. Communication tools like order tracking, cloud-based shipping and ordering, and radio frequency identification (RFID) chips, enable real-time visibility of orders, shipments, and inventory. Narrower timeframes, and business intelligence are essential to optimise the customer experience.
Utilising one platform to collect and analyse data for the entire supply chain helps to achieve better visibility and transparency within the system. This provides early warning signals that customers’ demands are changing, or other issues which may occur could impact the supply chain.
AI WILL FACILITATE AGILE AND RESILIENT DECISION-MAKING
Risk and resiliency is now top-of-mind for CEOs as they look to rebalance their supply chains in order to survive and thrive in the face of frequent disruptions. Artificial Intelligence (AI) is one of the most effective ways to grasp the full picture of the end-to-end supply chain, and make connected, resilient decisions, to pivot quickly and on a large scale.
Constructing a clear pathway to digital transformation and enable the convergence of planning and execution in building an agile and responsive supply chain, there are four critical AI characteristics required:
- AI requires data, and lots of it. Simply put, the quality of an AI decision depends on the extent of the data available – to recognise patterns and glean insights. The more data fed into AI – including far-reaching data from every tier and ecosystem of your end-to-end supply chain – the more it learns and the better it performs. Internal data alone won’t cut it.
- AI requires a powerful network to retrieve data from internal systems and ecosystem partners. The only cost-effective way to get the data required to power supply chain AI is through a multi-enterprise business network with reusable connections to ecosystem partners. The network with embedded AI efficiently obtains data from all parties and cleanses, enriches, and contextualises it to create a digital twin of the physical supply chain. This becomes the foundation for true end-to-end business decisions. Once decisions are made, the network puts them into action with closed-loop execution back to all parties across all tiers and ecosystems. And with networks, bigger is better because the number of reusable connections determines time to value and reduces the cost of ownership.
- Embedded AI that is purpose-built for supply chain. Generic AI tools are helpful when searching for nuggets of insight from data lakes, but this type of AI is not designed to run core day-to-day supply chain operations. AI built specifically for the purpose of handling mission-critical processes and drawing on streams of data in real time is what is required today, and into the future. Embedded AI is the only effective way to build a supply chain digital twin and make the end-to-end decisions required for agile and resilient operations.
- AI that’s proven manages risk and resiliency. Proven AI, offering years, if not decades of field experience at scale, working through unusual scenarios and corner cases within many of the world’s largest and most complex businesses and across various industries, is required. It’s also important to remember that AI gets better over time, with mature technology predominantly outperforming something fresh out of the lab.
RESILIENCE REQUIRES OMNICHANNEL OPTIMISATION
Regardless of channel, consistency in order fulfilment plays a critical role in supply chain operations and consumer perception. Managing the supply chain for exceptional order fulfilment and omnichannel experience has become a global end-to-end problem, requiring orchestration of processes between all partner ecosystems, through every tier of the supply chain right through to the consumer.
To help navigate complexities and optimise performance, businesses need to anchor their management efforts on quality data, process excellence, and lean on powerful software solutions for seamless supply chain and omnichannel management.
Seeking advice and help from strategic digital supply chain experts, businesses can better understand which data metrics and KPIs best reflect their objectives to transform and consolidate their processes, adopt centralised governance, and achieve best practice operational models.
BE READY FOR THE NEW NORMAL
In an environment guaranteed to present continuous supply chain disruptions, the message is clear –orchestrate your supplier and partner ecosystems to drive cross-functional, data-driven decision-making. This is crucial to ensuring a resilient supply chain today, resulting in exceptional customer experience, growth, and profitability for your business.