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The challenges and opportunities for innovation in the supply chain during periods of disruption

The challenges and opportunities for innovation in the supply chain during periods of disruption


By David Landau, Chief Product Officer at BluJay Solutions

Now more than ever, supply chain and logistics managers are facing increasing pressure to maintain customer satisfaction in the face of changing consumer expectations. This has no doubt been compounded by the widespread business disruption caused by COVID-19. According to Accenture, 94 percent of Fortune 1000 businesses are seeing supply chain disruption caused by COVID-19.

In March when major lockdowns happened across the world, we saw closed borders significantly interrupt supply chains. At the same time, we also saw a massive increase in transportation volumes and the end of any consumer resistance to online shopping.

COVID-19 has brought both short-term and lasting effects on online retail. In fact, Amazon has hired 175,000 extra people to meet additional customer demand. Among those employees, 125,000 will stay on after COVID as the online retail giant forecasts a lasting increase in online ordering.

So, what does this mean for logistics service providers?

With more units coming into systems, a higher degree of automation is needed to handle the increased volume and better predict shifting demands. Consumers also now want to know in real-time, where their parcel is and when it’s arriving. On average a customer looks at a track and trace of a single unit about eight times.

Continuous innovation is vital to providing an optimal customer experience.

But where should logistics service providers start?

Innovation can be different things to different companies. Set aside the means. Instead of starting with the thinking ‘Do we need to add AI or blockchain?’ focus on what needs to be accomplished. This will help organisations prioritise the innovation that drives direct results.

The right approach involves evaluating how to solve a problem and then finding the right technology to achieve the desired result. However, research indicates a number of barriers that can hinder organisations in their pursuit of supply chain innovation and customer satisfaction. Here are the challenges and opportunities.

Challenge 1: Lack of data visibility

Optimal customer experience is now the most important differentiating factor for the quality of the supply chain. This means total control over the supply chain is required.

If customer expectations regarding the availability of stocks, delivery times or customer service are not met, repeat orders are not made. Ultimately this results in both reputational and financial loss.

Recommendations: With the right tools, data, and network in place to systematically assess real-time data, companies can monitor, understand and better respond to changing circumstances quickly.

Challenge 2: The data silo issue

In the past few months, we’ve seen rapidly shifting product demand and supply. For instance, in retail categories such as fashion apparel we’ve seen drops in demand, but spikes across categories such as health, hygiene and personal goods.

Using data is critical to anticipating future events such as changes in demand or major disruptions. However, data and system silos remain a significant barrier to supply chain innovation and optimisation. In fact, more than one in five supply chain providers claim that data silos are the biggest barrier to innovation.

Recommendations: By investing in data-driven technologies that can consolidate company data, organisations can provide real-time visibility into where shipments are and where they will be. This also enables better insights into broader supply chain operations that will help to make business-critical decisions quickly.

Challenge 3: Data quality   

While APIs are increasingly popular, Electronic Data Interchange (EDI) and email are still the two most common ways data and information are exchanged with trading partners.

However, the data is not always good quality. For example, only 40 percent of companies qualify the data they receive as ‘good’. Poor data quality results in poor supply chain visibility, which in turn results in negative consequences including lost sales, higher transportation costs, excess inventory, and reduced customer satisfaction.

Recommendations: Research findings underscore the need for companies to clearly define roles and responsibilities around data quality and start viewing it as a valuable asset. A good place to start is with the solutions you are already using and your current network of supply chain partners. Identify the points where data exchange and connections can be automated to reduce errors. Focus on reducing or eliminating manual entry. Prioritise data quality within the organisation by demonstrating the value of using data to drive decisions that will save time and costs without sacrificing quality.

Challenge 4: Lack of management support and funding

While technology is a tool/enabler, it’s not a silver bullet if the mindset from the top down doesn’t also shift. Stakeholder buy-in is subsequently critical.

The supply chain has typically been perceived as more of a backroom/operations function. It’s a critical function, but not the most visible in terms of having a presence at the board level. However, the disruptions in the last few years and especially seen during COVID-19 have brought to the forefront the critical role supply chain plays in organisations. And this presents new opportunities for supply chain executives to play bigger decision-making roles within their organisations.

Whether an organisation considers itself an early adopter or a laggard, a lack of support from senior management stands as a major obstacle to innovation and digitisation, according to industry research. Research shows that almost a fifth of logistics companies considering themselves as ‘laggards’ view a lack of management support and funding to be the biggest barrier to innovation.

Recommendations: The time is ripe for supply chain leaders to claim a seat at the table and continue to communicate the importance of supply chain operations to overall business success. Technology is essential to keeping up with the rapid pace of change and providing the ability to adjust when necessary. Leaders who can translate supply chain investments or cost-to-serve into financial terms with a bottom-line impact are likely to fare best in gaining support and funding for the digitisation they need.

While cost savings may be edging out customer experience in driving innovation during the most major disruption of our time, successful supply chain execution is defined by striking the delicate balance between the two. The catalyst for change is here, and now is the time to seize the opportunity.