The pandemic has exposed the fragility and inherent inefficiencies of traditional supply chains, with industries caught off guard and routine operations impacted. The just-in-time methodology that many companies relied on for the supply chain was developed in the 1970s and designed to optimize the supply chain through reduction of inventory and work processes. However, many industries today have complex supply chains and face significant pressure to achieve a cost advantage by sourcing materials and conducting value-addition activities across multiple geographies, making unfettered interconnectivity the primary key to success.
Four major shifts are expected to impact the traditional supply chain.
Acceleration of online retail penetration
With distancing measures and the pandemic transforming gradually into an endemic, online retail penetration will continue to accelerate in the next few years. Estimates indicate that online retail in SEA will jump from US$19b in 2018 to US$53b in 2023.5 In addition, the region’s digital economy is projected to exceed US$240b by 2025.6
Shifting and expansion of new business models
There are new developments in how products and services are presented to and consumed by consumers. An example is the development of community platforms, which enable multichannel engagement directly with consumers through gamification and personalization.
Supply chains will become complex and agile
Combining physical shopfront, online and mobile app presence that companies use to better connect with customers, the omnichannel outreach also means companies may need to leverage predictive and demand forecasting capabilities to improve merchandise planning and product development.
Supply chain optimization will become an important driver in decision-making
The supply chain strategy will shift from focusing only on traditional costs such as logistics and warehousing to also include the impact of lost sales, inventory holding and obsolescence costs.
Further, global trade tensions have indicated that the political landscape may face heightened uncertainty and challenges in the decade ahead. With SEA nations now being increasingly seen as low-cost manufacturing hubs, there is a key opportunity for companies to diversify and develop a resilient supply chain, while reducing overheads in the long run.
For this, the requisites of a resilient supply chain include the following.
Customers expect suppliers to anticipate their needs. With the pace of change, supply chains must be able to adapt quickly to match fast-changing customer preferences.
From linear to digitally networked supply chain
Although most companies are evolving from a linear supply chain, many do not consider themselves digitally networked or autonomous. Supply chains are moving to become a networked ecosystem where all data is in the cloud, and any event can be seen and acted on by players across the value chain simultaneously.
Supply chain investment priorities
A key goal is to adopt and pilot emerging technologies with scale in mind — not as an afterthought. Traditionally, supply chains were viewed as a cost center. However, going forward, decision-makers should see their supply chain as a way to effectively compete in the marketplace and steer strategy.
Overcoming talent shortage
People are the backbone of an entity, and as the industry transforms, so must the talent that drives it. Supply chain leaders need to drive the vision and rethink ways of working to attract and retain the right talent. The workforce must transform through retraining, recruitment and retention as the business reinvents its supply chain for resiliency.