A new supply chain model is beginning to take shape. It will be driven by digital ecosystems and market networks that enable an economy built on hybrid forms of cooperation and competition. In the best-case scenario, end-to-end supply chain visibility soon becomes the norm, logistics takes a huge leap forward, and everyone reaps the rewards of more dynamic, responsive and digitized delivery networks. The days of moving products and services through linear supply chains (from raw materials to delivery) will quickly fade away to fully networked ecosystems of hundreds of suppliers, carriers and companies working toward a common goal.
In this new construct, technology enables shippers to see their inventory in real time and make rapid adjustments to unexpected market shifts. These same digital tools also allow logistics companies to be more responsive, reducing the time it takes to fulfill urgent needs and keep everything moving.
It’s all very intriguing. It’s also critical to building a global supply chain that can stand up to a world that is in a near-constant state of flux. Transport companies that can’t adjust to this reality will become commodity players, or worse, not be players at all. The disruption of COVID-19 has been a wake-up call: there is a realization that the demands being placed on an aging, inadequate supply chain infrastructure are not tenable in the long term. The global supply chain is increasingly ill-equipped for today’s world and needs to become digital and autonomous if it’s to be able to automatically identify and respond to external events.¹
This journey to a more responsive supply chain needs to begin now.
A global supply chain riddled with uncertainty
Because of the complexity of products – especially electronics – companies often have unfinished products or parts in one part of the world and the shipping containers that would be used to transport them in another. Multiple industries have been affected by the global shortage of semiconductors, a component key to so many devices used around the world every day. As the economy continues to reopen, the shortage of semiconductors has forced automakers to undertake production cuts and slow down or temporarily halt production in some cases. Value chain players are undertaking initiatives to combat the supply and demand imbalance, and considering localization and alternate sourcing of semiconductors to mitigate future risk.
The six-day closure of the Suez Canal in March due to a ship blockage was yet another recent supply chain concern, along with worries about capacity dislocation, supply/demand imbalances, infrastructure maturity, rapidly changing customer preferences for products and services, and general anxiety over what might be the next disruption.
Two top concerns in supply chain for manufacturing are pricing pressure and inadequate service. For manufacturing companies, higher rates are just one more thing they need to worry about along with geopolitical tension and overall resiliency planning for their business. If it was just higher rates, they could simply pass the cost to customers or take advantage of all that pent-up demand and sell more product. But that takes us to the other big concern: broader, systemic supply shortages that cause lost sales and, ultimately, loss of market share.