International expansion is always a strategic objective in this Globalized World. The interdependence of countries requires the movement of goods and services across the continents. Thus International Supply Chain Design is seeing a renewed focus. Supply chains are the essence of business as they satisfy the essential utilities of time, place, form & possession, of absolute importance to customer satisfaction.
The 21st Century and its dynamics of International trade need an intense relook at the Digitalization of Supply Chain Designs. Thus, the design of Digital Supply Chains is an integral aspect of sound International Business Strategy. International movement of goods is a complicated affair and needs tight control over the direction of inputs on the supply side to ascertaining customer satisfaction on the demand side. Thus, today’s extended supply chains involve all partners in the movement of material, digital information & borderless finance across the entire business value chain. The supply chain is no longer the game of logistics or transportation alone. As a business coach, I am increasingly sensing the pressure on the tech-enabled reconfiguration of supply chains that organizations of today are witnessing, which is the prime reason that inspires this blog. We no longer live in a world of simple supply chains and are eternally moving towards tech-enabled specialized integrated extended supply chains.
21st Century International Business is increasingly becoming digital in its innovative core nature. Information and communication technologies are causing rapid disruption. Cloud-based supply chains will be the essence of the strategic fit of supply chains here onwards. Strategic fit practically in supply chains is the starting point for any design of the supply chain. It defines the tradeoff between the accomplishment of strategic objectives and responsiveness. Responsiveness being directly correlated to the cost of the supply chain or its efficiency. The challenge of any supply chain lies in the continual, bringing down the supply chain’s cost or increasing the supply chain’s efficiency with ever-increasing responsiveness to customer needs.
Though transportation or logistics solutions was the key focus in the 20th Century, the 21st Century is all about the efficient and effective use of all supply chain partners. Information and collaboration become prime drivers as operations technology sophistication has gained rapid acceleration over the years. Transportation systems, warehouses, and distribution channels are now becoming intensely digitalized.
The ultimate driver of running any supply chain effectively is through an accurate forecasting system that can ensure responsive inventory control across the primary value chain. It must avoid the bull-whip effect of inaccurate ordering across the supply chain stages resulting in excess inventory or stockouts and other disruptive noises. This inventory minimization at each stage is possible only by eliminating human biases owing to a managers’ bounded reality that governs their decision-making. The only way out thus uses technology to its hilt.
On the input side, the suppliers must have access to information that empowers them to make efficient the vendor managed inventory system. This becomes a win-win option based on ensuring mutual strategic objectives, including profits that are guaranteed. For any vendor-managed inventory system to succeed, information, and timely decision making are the key. An Enterprise Resource Planning system that ensures materials management integration on the supply side ensures production capacities to be utilized effectively. Though it is merely common sense, yet many companies have not yet established technology integration at the vendor level. Automation of vendor processes is also a key investment area that organizations must focus on while they do the due diligence of partnership agreements.
Interestingly I see production facilities are using automation to make the operations processes more responsive to market demand. Load balancing and movement of information, material, and finances for internal operations are being effectively coordinated. The only pain area is the collaboration of human effort and the sharing of specialized knowledge that inhibits the internal supply chain from operating at its peak. Cloud-based collaborative platforms are enabling this effectively. With the advent of Digital Nomads, the specialized ubiquitous knowledge workers, these technology platforms will see increasing sophistication as the years pass. Human collaboration is the key to success in the 21st Century of turbulence like pandemics and uncertain business cycles owing to geopolitical competitiveness and hybrid warfare, which will become the new norm.
Logistics is another area that is all set for massive disruptions. Internet of Things will revolutionize the way logistics operations are conducted. Devices that will capture demand behavior at the point of sale and drones that will enable contactless personalized deliveries will be the new norm. The last mile will now become increasingly contactless and empower the customer. Digital payments will further accelerate this process. A cloud-kitchen that can enable a contactless delivery of gourmet cuisines will be a classic metaphor to drive home this point. Digital tracking and tracing will be an essential service even at the most commoditized business model.
While drones will ensure the last mile connectivity, retail stores will shrink, and cloud-based technologies will enable borderless customization and bespoke experiences. After all, the cost of real estate also adds to the inefficiency of the supply chain. Increasingly customers now go to the store for showrooming while the purchase happens on the web. Thus, the future lies in warehouses shipping directly to the customer through a web-based showroom. The advent of 3D printing will further redefine the warehousing dynamics as articles of interest will be printed at home or a 3D printing shop close-by to start with. Digital technologies and robotic sensors would enable capture of customer biological data, and simulated cloud-based trial rooms would allow the crowdsourced opinion of purchase with the customers processing bespoke orders at their convenience to suit their needs. Imagine an apparel fashion house catering to made-to-order clothing by crunching the entire supply chain through digital technology. It eventually eliminates the issue of not getting what you like the most and allowing the company to tap information on real-time customer preferences and fast-changing behaviors. High-end capital goods would also be thus able to offer highly customized solutions by shipping from the production facility with just an operative intermediary central warehouse.
Outsourced logistics is now ready for the orbit shift. As vessels and their routings become more responsive with drones ensuring last-mile connection, Warehousing, and technology combined with transportation solutions will see the rise of 4PL and 7PL. While the specialized Fourth Party Logistics will play a vital role as specialized outsourced innovation partners to make the supply chain ascertain the strategic fit, 7PL will ensure state of the art turnkey solutions and specialized assets for the Industry solutions. These big players will redefine the way supply chains operate. Outsourced specialized manufacturing and 7PL solutions will make organizations lean and mean and make International expansion an easy proposition. Crunching pre-transportation, transportation, and post transportation activities are the key, as the inventory in transit is a dead inventory unfit for any consumer use. Pretransportation documentation and regulatory requirements are best outsourced to specialists as they make good business sense. 4PL & 7PL thus ensure that unproductive inventory in transit is brought to use in an agile method as soon as possible thus ensuring speedy International cash-flows and transactions.
Countries with strategic geographic locations that can offer transshipment infrastructure in the form of Intermodal Stations; a selective combination of road, rail, ocean, pipe, waterways, and air will emerge as the most powerful nations in the new supply chain solutions. Peninsular countries with access to international land-based and inland water-based freight corridors will emerge as preferred partners in International Supply Chain blocs. While there will be free trade blocs, supply chain blocs and agreements make Nations collaborate effectively in International trade. Thus, Governments with strategically located nations will make the best use of their natural endowments of the supply chain.
It can thus be safely concluded that Supply Chains are now ready for technological innovations. They are the new area of focus, and as International Business grows, specialized partnerships and technology will redefine the way Supply Chains are designed.
The new world order of technology enabled-borderless-responsive collaboration enabled Supply Chains that will make International Trade or goods and services seamlessly borderless. While this happens, the new frontier also will be efficient borderless reverse logistics as we move more towards contactless customer satisfaction and rapid digitalization.
The future of tech-savvy supply chain professionals is exceedingly bright in this new world order of International Business. While production facilities will be based around the principle of ease and inexpensive availability of production factors; Supply Chain Facilities Design & Infrastructure development backed by Information & Communications Technologies is the next exciting frontier for Global Economies.
Copyright 2020 Niket Karajagi International Business Blogs Series.