It’s time to start looking ahead again. Rob O’Byrne makes an early start with his round-up of supply chain and logistics trends that might make industry headlines in the coming year. His observations include trends in first and last-mile logistics and the increase in SMEs entering global markets.
2020 Supply Chain and Logistics Trends: What’s Around the Corner?
It’s that time again… Well, almost! As we draw toward the end of each year, I like to start collating information from our experiences at Logistics Bureau, along with anything I find in the supply chain industry media, about industry trends that look set to compete for business-managers’ attention in the year to come.
I was a little late getting started in 2018, and we were already into 2019 when I got round to publishing my usual trends article. This year I decided to start early, but where to begin? As 2020 moves closer, one concept that I’m hearing discussed more and more in discussions and appearing online is that of the circular supply chain.
The Death of the End-to-End Supply Chain
Now there’s a heading to make you look twice, at least without any context to draw on. After all, the last few years have been full of talk about integrating supply chains from end-to-end. Happily, though, that’s not something you can expect to change in 2020.
However, I think we may soon stop talking about supply chains as end-to-end sequences of events, because, in many cases, the two ends appear to be joining up.
The circular supply chain is a model in which the supply chain does not terminate with products in the hands of end-customers. Instead, it continues, to include the entire lifecycle of a product, from sourcing of raw materials to the return and recycling of the product, and reintroduction of recycled materials into the manufacturing or production process. In short, the supply chain is no longer linear, but circular.
The circular supply chain also integrates the reverse logistics process, taking products returned from customers and reinserting them into the forward flow at appropriate points. Again, this might include recycling or refurbishing items damaged in storage or transit or placing undamaged returns back into a sales inventory.
Why is the Circular Supply Chain Trending?
While the recycling and reuse of products and their components are nothing new, their integration into brand-owners’ supply chains is a concept that’s gaining ground for several reasons.
Firstly, many companies are reaching more advanced levels of maturity in sustainability and greening the supply chain. With much of the low-hanging fruit already harvested, they are now looking at more complex initiatives to reduce carbon footprint and impact on the environment.
Circular supply chains demonstrate to customers and other stakeholders that a brand is prepared to take full responsibility for its products and their environmental impact and that its customers are never left to shoulder the burden of end-of-lifecycle decisions and actions.
Meanwhile, more third-party agencies and organizations, including governments, are pushing the sustainability agenda. Lawmakers are placing obligations on manufacturers to own the future of the materials they process.
Of course, there can be no stronger motivation than legislation, but money comes a very close second, and the potential cost savings offered by the circular supply chain are substantial.
Forecasters such as McKinsey estimate potential savings as being worth over $1 trillion (US) by 2025. In an era when most supply chain organizations are squeezed until the fiscal pips squeak, that’s a number to pique the interest of just about any decision-maker.
SME Supply Chains Increasingly Going Global
Globalization is not exactly a new trend, but for small and medium-sized enterprises, it’s one that’s been replete with several barriers. However, new technologies, services, and providers are helping SMEs to play more effectively and at less cost on the global stage. As a result, SME internationalization is a term that could become an oft-quoted buzzword in the year to come.
The Challenges of SME Internationalisation
As detailed in a 2017 report by Agility Logistics subsidiary Shipa Freight, businesses in the SME category—which comprises 95% of all the world’s companies and generates more than 50% of the gross domestic product in many countries—face considerable difficulties when trying to compete globally with their larger counterparts.
Some of their biggest challenges lie in supply chain and logistics management, with many SMEs struggling to access shipping solutions and distribution networks controlled by gigantic enterprises that focus on serving similarly enormous customers.
According to the Shipa Freight report, the primary challenges faced by internationalizing SMEs, from a shipping perspective, are as follows:
- International shipping costs are too high, and cost-visibility is inadequate
- SMEs find it hard to identify and engage suitable logistics partners
- International shipping is complicated, and documentation requirements hard to understand
- Logistics providers, in general, are slow to respond to the needs of SMEs
- International shipments frequently get help up during export and import customs clearance
- Goods are lost or mysteriously disappear in transit
- It’s not uncommon for international SMEs to be let down by suppliers
Technology Key for the International SME
Despite the obstacles that SMEs face when implementing and maintaining global supply chains, some 90% of participants in the Ship for Success study, all of which are already engaged in export activity, expect their revenues to grow over the course of the next three years.
Many of them attribute their confidence to recent efforts by governments, technology vendors, and freight forwarders to leverage digital solutions that make commercial freight shipping more accessible to smaller enterprises.
No longer do the large, beneficial cargo owners have an overwhelming advantage in global supply chain operations. Technology is levelling the playing field, by helping the smaller operator to engage and work with international freight forwarders and carriers, gain visibility into costs, and ensure compliance with complex shipping and customs requirements.
Many governments, for example, are making formerly hard-to-access export tools and guidance available to all via resource sections of their various agencies’ websites. E-commerce software providers are increasingly offering integrated marketing and sales solutions to extend SMEs reach and ease the business of selling across borders.
The Digital-First Logistics Effect
A new generation of tech-enabled freight forwarders is competing with incumbent shipping giants to capture the hearts and minds of smaller enterprises. They are deploying platforms that make it easy to get transparent and understandable shipping quotes, book ocean freight and airfreight shipments, complete and submit shipping and customs documentation, pay for transportation, and track international shipments in real-time.
With so much help now at hand, and the burgeoning growth of e-commerce in mature and emerging markets, it’s perhaps not surprising that more SMEs are internationalising to improve resilience.
As new technologies, such as blockchain and the Internet of Things, continue to advance and penetrate the supply chain industry, global markets will only become more accessible to smaller businesses, perhaps transforming SME internationalisation from a trend to a norm sooner rather than later.
Last Mile as a First Priority
The emergence of e-commerce saw a massive concentration of attention on last-mile logistics, as established retail giants, manufacturers, and e-commerce startups alike raced to meet the demands of newly empowered consumers and business buyers. Driven by necessity, the last-mile sector has come a long way, but as yet, there is no sign of the pressure letting up.
Indeed, efficiency in direct-to-store and door-to-door delivery has become a top priority for every company, save those few that have remained doggedly committed to offline sales, and one has to wonder if any of those will be around in four or five years.
The customer is in control of last-mile progress, and, especially in the business-to-consumer markets, the customer is not satisfied, because delivery on the day of ordering is becoming less of an ultimate goal, and more of a limitation to be overcome.
The logistics industry, in turn, is falling victim to its success as it fuels imaginations and expectations with hype about deliveries by drone and autonomous vehicles, which are still a long way from being ready for the mainstream. Instead, enterprises are being forced, by consumer pressure, to find ever-faster ways to get products into their customers’ hands.
Remember When Same-Day Delivery Was a Novelty?
Under pressure exerted by demand for instant gratification, new tech-first logistics providers are beginning to pervade the fulfillment environment. Without the autonomous hardware that promises to supersede traditional road transportation, they are instead leveraging digital tools to improve the performance of manually executed deliveries and reduce lead times from days to hours, with 24 being today’s bargain-basement service level.
These companies, through the use of customer-integrated business platforms, mobile technology, and crowd-sourcing, are finding ways to pick orders within minutes of receiving them, dispatch deliveries on-demand, and bring buyer’s purchases to them in time-frames of two hours or even less.
How can such performance be possible? It’s a fair question, and in the typical model of a tech-first, last-mile, delivery company, the answer goes something like this:
- A customer purchases items at the checkout page of an e-commerce store
- Finalisation of the checkout process triggers the creation of a shipment and download of shipping labels via the last-mile delivery provider’s integrated platform
- At the same time, the logistics provider is alerted to the delivery order, which is simultaneously routed to a delivery driver via a mobile app
- The driver (perhaps after completing a delivery already accepted) heads straight to the e-commerce store’s warehouse or other dispatch point and collects the items for delivery
- Meanwhile, the purchaser is alerted of the delivery status and receives a link to a live tracking web page, where he or she can see the shipment in real-time as it travels towards the delivery point
- Within two hours of the order being placed, the purchaser’s items arrive at the requested location, which might be any point that the customer marked with a pin on a digital map. It could be the purchaser’s home address, workplace, or even the mall at which the purchaser “showroomed” the item in a physical retail outlet, before placing an order with a different vendor online.
Logistics at Light Speed
So yes, if I am a consumer, window shopping in a mall or high street shopping area, I can see something I like, find the cheapest online outlet that stocks it, and place an order. I can go for a coffee in the said mall or shopping area, and a couple of latte macchiato later, drop the driver a tip as she hands over my purchase. Agreed, it’s not quite as instantaneous as buying the item where I first saw it, but hey! I didn’t have a loyalty card membership in that store, but I did with the online merchant who sent my delivery.
It’s logistics on steroids, and as fanciful as it might sound, is typical of many last-mile providers starting up in both mature and emerging e-commerce markets around the world.
Furthermore, as far as I can see, until drones and autonomous delivery vehicles become a mainstream reality, uber-fast logistics companies, powered by digital technology, will continue the trend of reducing last-mile delivery times to mere hours, and make same-day delivery sound like a wistful reminiscence of your grandparents.
First-Mile Logistics and Supplier Relationships Come to the Fore
In my overview of the previous trend, last-mile logistics, I mentioned the capability to pick orders within minutes of capture. The latest technologies enable such responsiveness, and hence, herald the transference of agility from the last-mile, back through the supply chain, to the very first.
The need for supply chains to get faster and more agile is spurring a growing number of businesses to look at the first mile, or the initial stage of supply, when suppliers complete the production or manufacturing process and respond to purchase orders or replenishment signals from their customers.
Many companies are seeking to increase supply chain velocity and reduce working capital by doing away with the signaling requirement altogether, and building relationships in which suppliers control the inflow of raw materials or other inventory.
It’s a worthy goal to achieve, since the efficiency of procurement and first-mile logistics can have a huge impact, for better or for worse, on the speed at which enterprises can meet end-customer demands. A single mistake at the beginning of the supply chain, for example, can jeopardise the ability to meet service-promises to hundreds of customers.
The Next Big Disruptions Could be in the First Mile
In an age when social media punishes every logistical slip-up with a slew of posts, tweets, and negative reviews, it’s the smart, tech-savvy companies that are ironically, placing a renewed emphasis on the very interpersonal issue of supplier alignment and relationship-building. Furthermore, if ever there was a text-book case of double-irony, they are using technology as the lever to streamline collaboration.
This trend in overhauling and improving first-mile operations will be an interesting one to watch over the next twelve months, especially if it picks up a similar pace to the last-mile.
It would seem logical to expect this element of supply chain management to see new waves of disruption brought about by innovations such as artificial intelligence, machine learning, and perhaps even blockchains and smart contracts.
Who knows, it might even become a proving ground for entirely new technological and strategic concepts, as yet lying nascent in the “ideas to try” trays of pioneering development companies and consulting firms.
Welcome to the Supply Chain of the 2020s
Trends come and go. Some burn bright and fizzle out fast. Others build slowly and inexorably until they become “the way things are done” or “best practices.”
There are mega-trends, meta-trends, and all sorts of trends in-between, but heading into the third decade of the 21st century, almost all that affect logistics relate to technology or depend upon it.
So I guess if there is one super-trend likely to define supply chain management practices in the 2020s, it’s a breathless series of changes and refinements driven by technologies that emerge, diverge, and mature at a blistering pace.
I’ve got a feeling that the next decade will be perhaps the most exciting, not just in the century so far, but in any period since Keith Oliver coined the term supply chain back in the 1980s. I, for one, can’t wait to see just how things pan out in the 2020 supply chain year, can you?
What to do Next
If you have any idea on what are the possible trends in Supply Chain and Logistics in the next few years, let me know through the contacts below.