Megatrends Shaping Supply Chain Innovation
Megatrends Shaping Supply Chain Innovation
Feature Article by Ryan Tang – Executive Director, APAC，E2open
While the COVID-19 pandemic woke up supply chains around the world, the ripple effects continue to disrupt in both size and scope. Port congestion, capacity constraints, large increases in rates across all modes, labour shortages and long delays in shipments—these are just some of the operating realities supply chain and logistics professionals face today.
Will the environment improve in 2022 or get worse? How are supply chains planning for further disruption and uncertainty? And what are the key industry trends and innovations?
Let’s look at the three megatrends shaping supply chain innovation in 2022 and beyond – resilience, through technical capability and consistency; optimisation of the omnichannel experience; and sustainability with a focus on Scope 3 emissions.
Resilience through technical capability and consistency
There’s a lot of room for improvement to make supply chains more resilient. In a recent Federation of European Risk Management Associations (FERMA) survey with McKinsey, business operations and supply chain emerged as weak points in the areas of risk and resilience. It was stated that risk is still mainly focused on crisis response and less than two-thirds of respondents claimed resilience is central to their organisation’s strategic process – either as a top priority or to an important extent.
In E2open’s Supply Chain Innovation Report 2021, 73% of respondents claimed their supply chain is either moderately, slightly, or not at all resilient. So, a lot more work is required to design and implement strategic resilience, with a key focus on capability.
Creating a more resilient supply chain
To do so, one needs to look at the entire supply chain and pinpoint the weakest links, analysing how to improve on those weaknesses. Yet, the E2open Supply Chain Report found the top threats to supply chains are mostly due to external factors – cyberattacks, infrastructure gridlocks, labour shortages, the pandemic, and natural disasters.
Therefore, to better prepare and strengthen resilience, the FERMA McKinsey survey revealed foresight capabilities (scenarios and stress testing) as one of the core areas for ongoing improvement.
With uncertainty a guarantee in the year ahead, leaders are realising the need to adopt applications that will improve visibility into demand and inventory, as well as tools that can help them model and simulate “what if?” scenarios.
Risk planning and technology utilisation
With the threat of a cyberattack at the forefront of business concerns, action needs to be taken to minimise the threat and impact. IT systems must be properly supported by vendors and continuously updated with the latest security patches. Cloud and software-as-a-service providers must take cyber security seriously, proving they’re investing the time, money, and resources to develop, deploy and maintain security processes and systems to best industry practices.
Supply chain mapping is key to ongoing innovation
Then it’s about mapping the supply chain. Do you know where the manufacturing facilities of your suppliers (and their suppliers) are physically located? Which parts are manufactured at each location? Do you track the history and frequency of disruptions? It’s critical that you do, as mapping your supply chain, while challenging, will allow you to obtain and maintain critical data. The effort will absolutely pay off.
Building capability and consistency
The most valued capability for the future according to E2open’s research, is real-time visibility into demand and inventory. Key to this is the ability to create a more resilient supply chain through expansion and diversification of supplier base; employee training and development; stronger, more transparent key supplier relationships; carrier base expansion and diversification and increasing local sourcing and manufacturing.
The more time and effort invested in consistent resilience and capability building both during a crisis and throughout periods of stability will pay dividends for long-term business success.
Optimise the omnichannel experience
Every aspect of the supply chain is touched by a series of external providers. Therefore, it’s the quality and outcome of each interaction with the supply chain which drives the end-customers’ impression of a business or brand.
Yet ensuring high consistency and quality of the customer experience through all the routes to market and back – direct or indirect, online or brick and mortar is essential. This is the omnichannel experience and it’s an end-to-end challenge. It requires orchestration of processes between all partner ecosystems, from the consumer, through every tier of distribution and every logistics provider, to the last supplier’s supplier.
It requires a robust framework
Addressing supply chain challenges requires a framework spanning processes, people, data, and
applications – all carefully orchestrated to optimise performance across all routes to market to
ensure customers are delighted no matter the channel.
Technology plays a vital role in omnichannel optimisation, facilitating more efficient, effective, streamlined, and collaborative processes.
And it’s important to note that different channels require unique processes and procedures which feed into the supply ecosystem. Applications across the entire supply chain must accommodate these differences in addition to providing automation capabilities and a harmonised and enjoyable user experience.
Real-time data driven decision making is critical
Real optimisation of omnichannel performance is only possible based on the knowledge of what the customers want and what the company can deliver in an economically feasible way. Companies can build this understanding by securing access to decision-grade data from all channels.
This is achieved through advanced applications with embedded analytics and AI, spanning the end-to-end supply chain via seamless integration. Analytics provide a deep understanding of threats and opportunities to improve customer experience and corporate performance. AI embedded into collaborative applications that reach beyond the enterprise boundaries can interpret and trigger action on the data. Data leads to insight, which leads to action.
Utilise powerful software solutions
By seeking advice and help from supply chain management experts such as E2open, organisations can better understand which data, metrics and KPIs best reflect their objectives, transform and consolidate their processes, and adopt centralised governance and best practice operational models.
This omnichannel ecosystem then becomes a secret weapon to optimise performance across all channels, to achieve corporate goals such as exceptional customer experience, growth, and profitability.
Sustainability and Scope 3 emissions are essential
In terms of future innovation in supply chain, sustainability initiatives will continue to grow. According to E2open’s research, two-thirds of organisations identify themselves as an innovator/early adopter when it comes to having a sustainable supply chain, with a defined and measured objective within their organisation. The focus areas are reducing waste from operations; working with suppliers to ensure sustainability compliance; increasing recycling of materials; following responsible sourcing guidelines and using more renewable energy.
Scope 3 emissions must be an immediate top priority
When it comes to greenhouse gas emissions, the leaders in supply chain sustainability are now focusing on Scope 3 emissions— those that “are the result of activities from assets not owned or controlled by the reporting organisation, but that the organisation indirectly impacts in its value chain,” as defined by the U.S. Environmental Protection Agency.
In Carbon Market Watch’s recent assessment of 25 of the world’s leading enterprises across industries, an average of 87% of emissions fell into Scope 3. Yet despite net-zero commitments, few of these companies formed an achievable plan to address Scope 3 emissions.
Why are Scope 3 emissions so hard to address? Because we live in a world of outsourced mass production. Corporate decisions set actions in motion across potentially thousands of extended partners, driving climate impacts far beyond what the company can directly measure or control. This means GHG emissions are a multi-enterprise challenge. Measuring, reporting or even mitigating emissions for Scopes 1 and 2 just doesn’t move the needle much toward net zero.
To effectively measure and disclose Scope 3 emissions, extensive supply chain mapping is required. This includes all tiers of supply, outsourced manufacturing, co-packing, transportation, storage, distribution, use and disposal, and gathering emissions-related data from each party.
It’s a multi-enterprise challenge
As measuring Scope 3 emissions is a multi-enterprise problem, few vendors can offer realistic solutions at the scale required. Therefore the most elegant and efficient way to map the supply chain would be to access an existing multi-enterprise network—such as E2open’s—that already spans each tier and ecosystem in a global supply chain: supply, logistics, global trade and demand.
This direct connectivity to upstream, downstream and logistics partners provide an efficient mechanism to capture ESG data and create a system of record (SOR) for reporting and compliance, and to evaluate the ESG impact of day-to-day decisions. This SOR should exist at the core of the business—not as an overlay—to empower companies to move the needle on ESG improvements across the whole supply chain in near-real time, not simply to understand the ESG impact long after a decision is made.
Companies that act early on reducing Scope 3 emissions in their supply chain will be better positioned in the long run for compliance, competitive advantage, innovation, and brand equity. Without a doubt, it’s a win-win-win toward the triple bottom line of people, planet, and profits.