Procurement executives often speak of disruptive technologies, new market influences and key drivers for change when it comes to supply chain management. However, it is often difficult to categorise these developments into key themes in order to see the bigger picture. Big data, for example, is a much-discussed topic, as are the challenges it presents to the supply chain industry.
Yet the precise benefits of this relatively new development remain to be seen. It’s therefore necessary to take a step back in order to assess broader trends that are taking place within the industry and to highlight the benefits and opportunities they present.
The rise of e-commerce
Undoubtedly, one of the most significant changes we have seen in recent years is the rapid growth of the e-commerce sector. One of the fastest-growing industries in Europe, online sales in the UK, Germany, France, Sweden, the Netherlands, Italy, Poland and Spain are expected to grow from £132.05bn in 2014 to £156.67bn this year – an increase of 18.4% – according to statistics from the Centre for Retail Research. Alongside this we have seen the rapid growth of online services such as click and collect, which allows consumers to select their goods online and collect them in store themselves.
While the prevalence of such services offers customers increased convenience, it also presents new challenges for companies’ supply chains. For example, the returns cycle is much more complex for online purchases. A consumer may buy ten pairs of shoes online and keep only one. The situation is even more complex when food is being transported, which must be kept at particular temperatures throughout the supply chain cycle.
Companies must therefore plan their supply chains accordingly. Some organisations are already investing in more complex logistical processes to respond to this increased demand. However, the benefits of this approach must be weighed against the risks. On the one hand, consumers may value the flexibility of a more sophisticated supply chain, allowing them to return goods easily and quickly. On the other, companies run the risk of failing to maintain particularly complex logistical processes.
Big data: Seeing the bigger picture
A similar rapid expansion can be seen with regard to big data. Recent reports have stated that executives are aware of the growing importance of big data, yet many remain unaware of its true benefit when it comes to supply chain analytics. A number of organisations are already reaping some of the benefits offered by this new access to information. Optimised inventories, reduced waste and the faster delivery times are some of the immediate ways in which companies have used big data to gain an advantage. Yet there is one aspect that is not being capitalised upon: insight.
The volume of big data faced by companies each day is vast. It is estimated that 2.5 quintillion bytes of data are created every day. The challenge is to select the insightful aspects of the data and to utilise this in future supply chain planning. The success of promotional campaigns varies widely between different markets and regions, for instance. Big data, if harnessed in the correct way, offers the opportunity to account for such disparities with extreme precision. In turn, this allows companies to manage their supply chain and stock levels more appropriately. It is therefore important to note that the long-term, strategic benefits of big data are as important as its immediate advantages.
Globalisation: a changing landscape
Finally, one of the disruptive influences on the supply chain industry has undoubtedly been globalisation, which having its greatest impact on risk management. From the conflict in Ukraine to the threat of pandemics such as bird flu, the geopolitical risks that supply chains face are more universal than ever. It is therefore crucial companies have the appropriate contingency plans in place to mitigate these risks. If particular trade routes are no longer usable, alternative approaches must be implemented without sacrificing cost nor time.
Of equal importance is traceability. The horsemeat scandal highlighted the importance of being able to trace the origin of goods and how they have got to where they are. Without this, companies run the risk of failing to win the trust of their customers, as well as the more pressing threat of a contaminated supply chain.
While the broad challenges and opportunities outlined here may seem distinct, in many ways they are intrinsically linked. The rise in e-commerce has resulted in an increase in the amount of big data accessible to companies. Additionally, if businesses are able to utilise big data to generate insight, they will be able use their more efficiently to mitigate risks. Making these links is vital if organisations are to thrive in this new, dynamic age.
Klaus Rueth, senior director analytics & supply chain services, HAVI Global Solutions
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.