The future of supply chains will operate in an automated, data-driven environment. Automation has sky-rocketed with increased adoption of artificial intelligence (AI) and robotic process automation (RPA) technologies, and this will continue. Whilst COVID-19 has significantly disrupted supply chains, it has sparked new digitisation initiatives and uprooted traditional ways of thinking. These new ways of thinking have seen further efforts implemented to reduce uncertainties that were evident before COVID. Efforts like increasing supply chain visibility and transparency, as well as the implementation of data-driven technologies, will have a strong influence on how supply chains are operated in the future.
With the future of work predicted to be significantly assisted by AI and RPA automation technologies, similar trends will emerge throughout the supply chain process. These trends will challenge how supply chains are currently operated, and lead to new and innovative processes. The adoption of automation technologies will create platforms for more agile environments to better cope with the significant uncertainty and increasing customer demands.
The COVID-19 pandemic tested supply chains globally and highlighted significant weaknesses across the board. Weaknesses born out of vulnerabilities that left consumers without critical goods and services. This generated an automation-based response from manufacturers, to increase the resiliency of their supply chains and prevent future scenarios where consumers go without critical goods and services. How was this achieved? It was achieved with the use of automated artificially intelligent technologies, particularly around future planning. With high degrees of uncertainty originating from the pandemic, manufacturers turned to data and AI technologies to enable them to better interpret and predict future outcomes. Henkel are a prime example of this. When they compared the demand forecasting between AI and their human planners, they found AI enabled them to do it better. Thus, they made the switch to smart software. But that's not all they did. Automation technologies further enabled them to revolutionize and rebuild their supply chain. A process that optimized daily transport logistics, increased supply chain visibility, and improved the customer experience by analysing faster and more accurate data.
Although it’s one thing to know about what’s coming next, it’s another to prepare for it and action the necessary changes. So, what needs to be done in preparation for the future? There needs to be a willingness to adapt, with the possibility of major restructuring. The changes that have come, and the ones that are yet to come, are not minor. They are significant and will heavily influence future outcomes.
In the past, supply chains saw the building of cost-effective solutions, often as close to manufacturing warehouses, as the be all and end all. This is now no longer the case. Customer demands and expectations have significantly changed. These demands being speed and convenience, in both cost and location. Demands that have proved to be a challenge in last mile delivery for many supply chains. Forbes suggest that 96% of consumers interpret ‘fast delivery’ as same-day delivery. However, only 51% of retailers can achieve this. Why? Many deliver stock through centralised distribution models to realise cost-efficiencies, as it’s easier to ship bulk products to one location rather than multiple.
This traditional way of thinking has now been challenged, and therefore a willingness to adapt is needed. The benefits of superior bargaining power and lower storage costs with centralized distribution models are now outweighed by the costs. Decentralised distribution models are now being viewed as the more viable solution. Instead of customers coming to retailers, retailers are now having to go to customers as market behaviour has shifted. A trend that saw 7 years of progress in digital offerings occur within a matter of months.
The cost of customer churn due to late deliveries is increasing too. Sendcloud report that 41% of consumers will abandon shopping carts if delivery times are too long. And now that it costs 5 to 25 times more to acquire a new customer, generating customer retention is more important than ever. For example, within the financial sector an increase of just 5% in customer retention is enough to increase profits by more than 25%.
While it may be easier said than done to advocate for increased automation and shift to decentralised distribution models, there are other factors to consider. Although the supply chain environment is in a disruptive state of change, automation technologies have enabled new avenues for growth and exploration. What happens next may be unknown, but those wishing to be set for the future will need to be agile and resilient. Agile in being reactive to predicted changes, and proactive in actioning the next steps forward, and resilient in continuing to move forward despite the unknown challenges ahead.
