As we come on to the 2-year mark of what is widely believed to be the beginning of the world’s supply chain issues, there is a lot of divisive talk around whether this year will be the point at which things will begin a positive turn—both in the forms of reactive measures to fix existing problems, but also in the form of investing in proactive technology.
The culmination of the supply chain issues in 2021 shined some glaring lights on the shortcomings of an industry that has some of the most advanced technologies operating in tandem with embarrassingly antiquated systems and processes.
In our own research and reporting for our Industry Insights: Logistics and supply chain Management report, our findings indicate that there are a large number of startup companies in the industry. However, there is a clear lack of overlap between the various technologies.
The report looks at Fleet Management Optimization, IoT, Last-Mile Delivery Tracking, Warehouse Automation, and Blockchain. IoT and Blockchain are mostly standalone clusters, as they demonstrate a limited overlap. This may indicate that these two clusters use similar technologies that differ from the rest of the clusters.
Last-Mile Delivery Tracking and Warehouse Automation have distinct cluster groupings populated in a very close range, building an intersecting border between each other. And the final cluster, Fleet Management Optimization is a fragmented group that has candidates mainly concentrated within one area, suggesting a range of similar solutions provided within the field.
In a world where if it is not tracked it essentially does not exist, it is no surprise that global supply chain management is far behind industry norms. The various segments are riddled with inconsistency amongst various centralized data handling processes.
Even our own reporting shows that clusters of technological innovation remain fragmented compared to the pre-pandemic decade, and the apex of supply chain issues in 2021 illustrated an even further need for a unifying hand. This lack of uniform digital record keeping has left many CPOs without a clear overview of the metrics and overall health of their supply chain.
A flash survey conducted by Deloitte in mid-2020, just after the onset of the COVID crisis, found that “only half of CPOs enjoy high or very high visibility into tier 1 suppliers, and 90% of organisations rated their visibility into extended supply networks as moderate to very low.”
In addition to the general lack of standardization amongst global supply chain management, there are also volatile external factors that also make it difficult to predict whether this year's skies will be blue or grey for the industry.
[Related Article - Hindsight 20/20: A look Back at the 2021 Global Supply Chain Crisis]
So in this article, we’re going to take a look at those internal and external factors, but we’re going to do so with an air of positivity. However, not for what it could, or could not, mean for the industry—but more for what it could mean for investment, R&D, and innovation opportunities.
Sunrise on the logistics startups
COVID. It seems to be a gift that just keeps on giving. While the mid-part of last year saw many of us emerging from our homes like bears from hibernation, in 2021, global supply chain management was recovering and creating a potential threat to global supply—particularly as the Christmas month drew closer. However, there did seem to be glimmers of hope.
Yet, here we are at the sunrise of 2022, and the pandemic is still causing uncertainty across a number of global industries. For the supply chain, this has left many of the major players in a race to protect their operations rather than focus on the innovation initiative.
However, according to our own research from our Industry Insights report on logistics and supply chain management, there is no shortage of smaller logistics and transport startups with big ideas and big aspirations for repairing the shortcomings of the industry with smart technologies.
So from our perspective, it seems that there is a tremendous opportunity for partnerships or acquisitions from the larger player to help unify and develop global standards that strengthen the foundations of the industry against future disturbances.
The rise of risk management
While there has been a push amongst CPOs to rapidly bring their supply chains up to 21st century standards during the last decade, the dark cloud of 2020 overshadowed many of those ambitious goals.
The forward momentum in the areas of digital transformation, automation, and the handling of data that we saw in 2019 and beyond has largely been diverted toward maintaining supply chain health. There is a greater need than ever for updated standardizations, however, the post-global supply chain is largely focused on risk management rather than innovation.
In other words, the technologically idealistic global supply chain futures that many of us were shown at trade shows back in 2019 have now been replaced with more pragmatic solutions that seem to be more localized.
A recent report from McKinsey, shows that COVID “pushed risk to the top of virtually every corporate agenda.” However, the report goes on to state that of the 95 percent of the respondents surveyed for the report that had adopted new risk-management processes, only 4 percent of those started from scratch.
Another way you could look at this is that the vast majority of large-scale companies and their CPOs are taking steps to strengthen existing processes, but the idealistic days of placing bets on new innovations are resting solely in the hands of the smaller players. In the specific words of the McKinsey report, “Companies with little or no risk-management experience tended to invest in new software tools, while higher-maturity organizations mainly focused on the implementation of new practices.”
This provides a unique opportunity for those willing to take it. However, while main CPOs are focused on risk management, there is still a widespread consensus that they are still struggling to access the right data to help them measure the overall health of their supply chains.
Trends could ease the squeeze
It’s fairly clear that the future of the supply chain is going to be shaped by the startups that have the agility to risk more, but how that startup potential is leveraged is still largely undecided. As the major players in the global supply chain still clear their houses of the rubble after the devastation of the global pandemic, is it becoming more and more clear that future market competition is going to be largely based on who cleans up the fastest in order to get back to shoring up their innovation initiatives.
In our research, there are a number of trends that are being leveraged by logistics and transport startups around the globe and could pose potential value to the overall future of the supply chain.
The green wave is accelerating
Climate change, and all of the public and governmental force that is being fed into it, are yet another unavoidable accelerator for supply chain transformation. Not only are consumers shifting to more green alternatives, but they are also demanding greener logistical solutions.
In a move that has no shortage of irony, Amazon’s own demand to switch their fleet from fossil fuels to EV has created a supply shortage that EV manufacturers are having trouble meeting. An article in The New York Times illustrates how founder and CEO of Amazon, Jeff Bezos, has had to both curb his expectations and walk back public statements in regards to when his new fleet of EV delivery trucks will hit the road.
Amazon is not the only player in this race for EV delivery dominance. FedEx, UPS, and Walmart are also showing themselves to be major players, illustrating how EV transportation is going to be a major determining factor in localized supply chain markets.
The circular supply chain
For many years the global supply chain has been built on a model of supply, consume, and dispose. However, the rising costs of raw materials and their volatile availability are proving that this model is neither unsustainable nor cost-effective.
We are now seeing a rise in circular supply chains where companies are setting up solutions for their customers to return their products after use to then be repurposed or broken down into their raw material form.
There is tremendous potential in the circular economy, as many large-scale companies see this as the inevitable future. However, exactly how a holistic circular supply chain will look is still up for debate. To truly build a circular supply chain, companies need to make the commitment to reusing, refurbishing, remanufacturing, and recycling.
Third-party integration
As The Amazon Effect becomes a more and more ubiquitous methodology in global supply, there is much more of a demand for supply chain optimization amongst companies. CPOs and other supply chain managers are going to open up to integration with third-party technologies and partnerships with third-party logistics providers (3PLs). These could prove to be particularly useful for supply chain companies that operate in air, sea, and on land, as integrated systems will allow for greater oversight of data—leading to faster delivery times and better customer service.
Blockchain is still a talking point
Ask anyone who has been to a supply chain trade show in the last ten years and they will know that Blockchain has been consistently promised as the savior of the extensive paper trail problem. For those that are unfamiliar, one of the largest challenges that the supply chain industry faces is that record keeping is still centralized. Whether it be on physical paper, computer hard drives, or on company servers, the accuracy of specific records is determined by the organizational prowess of the various hands they move through along the supply chain.
Blockchain removes this potential for data leakage or inconsistency but creates specific decentralized tokens (or blocks) that can be moved between hands and only unlocked by those with a key. While the promise of blockchain standardization is long overdue in the industry, it is still widely seen as the logical future for the industry.
A heavier lean on robotics
The pre-pandemic focus on automation and robotic implementation into the supply chain was a multi-billion dollar enterprise. According to the Association for Advancing Automation, the first half of 2019 saw an investment of $869 million in robotics in just North American companies alone.
In a separate article by Inbound Logistics published last year, their reporting shows that the pandemic has even further accelerated the investment interest in automation. This due largely in part to some of the work that could be automated that has been strained due to labor shortages.
AI efficiency
The pre-pandemic focus on automation and robotic implementation into the supply chain was a multi-billion dollar enterprise. According to the Association for Advancing Automation, the first half of 2019 saw an investment of $869 million in robotics in just North American companies alone.
In a separate article by Inbound Logistics, published last year, their reporting shows that the pandemic has even further accelerated the investment interest in automation. This is largely due to the automation of work that has been created by labor shortages.
Supply chain management sum up
As we are just pushing into 2022 and having avoided some of the more catastrophic global supply chain predictions that were proposed last year, there is some semblance of light at the end of the tunnel. However, what is interesting is that light could be coming from the numerous startups and Tier 2 and Tier 3 logistics, transportation, and data science companies that are developing technologies to keep the supply chain management from simply falling back to the status quo.
While no one could have predicted or been fully prepared for the COVID 19 pandemic, it’s fairly safe to say that going back to the status quo—full of disjointed data management and lack of standardisation—is not where the true potential for the supply chain lies. So for those looking to invest in the future, partnerships or acquisitions in forward-thinking technology are arguably going to be the true differentiator.
