Supply chain disruptions have been ongoing news since 2020. In this QAD Precision Report we look at preparing for ongoing turbulence in the supply chain.
Everyone is sick of hearing about supply chain disruptions — and how they have been embraced by logistics experts as the new normal. However, it is important to remember that the supply chain has always been vulnerable. It takes much less than a global pandemic — or natural disaster — to throw a wrench in the works.
Despite significant advances in technological solutions, many companies still run their supply chain via spreadsheets and email. This simply proves the existence of gaping cracks in their supply chain operations that far precede COVID-19.
The pandemic merely transformed these issues into above the fold worthy news. Today, computer chips are still in short supply; at the start of the pandemic, it was toilet paper. However, for every action there is an equal and opposite reaction. As a result, disruption can be a catalyst for positive change.
In the United States for example, many companies have been talking of strategies like near-shoring and reshoring. These help shorten supply chains and get goods closer to end customers. However, there are other major issues to address aside from geography.
Growth-minded companies need a better connected and more transparent supply chain. The unfortunate truth is that currently, the majority of supplier-to-buyer ecosystems exist across networks with siloed data. This leads to fulfillment operations inhibited by a lack of visibility and shared information. For companies concerned with operational excellence — and profitability — this needs to change.
End customer expectations have shifted. More and more buyers are engaging in the exploding e-commerce market. Not only do they expect items in a timely fashion (like 1-2 or even same-day shipping thanks to the Amazon Effect), but customers also demand visibility. Luckily, connected chains allow for the sharing of real-time information.
For example, the information your logistics department uses to track deliveries can be shared with your customers, and your customer support team. This same information can be used by your trade compliance team to ensure that a sale can proceed. The information your trade team uses to determine landed costs or admissibility of goods should be shared with procurement teams, so that you always purchase goods at the lowest possible price.
However, a truly connected chain has connections outside of just the four walls of an organization. In fact, it extends information sharing between partners and unlocks data-driven decision making while increasing overall value and profitability. This level of connectivity allows for supply chain maturity and the growth of market share and opportunities. Of course, this level of supply chain maturity is not something that happens overnight.
Many companies are making a shift to direct-to-consumer (DTC) channels. This precedes the pandemic, although COVID accelerated the trend. However, with widespread lockdowns and differing governmental regulations, companies that already possessed robust DTC or e-commerce channels able to continue serving customers when in-store shopping essentially came to a halt.
Failure to innovate and adapt to changing market conditions kills companies, regardless of the value of the product. Adapting to customer demands matters nearly as much as the product itself.
For example, when Dollar Shave Club began its monthly subscription service in April 2011, it wasn't widely anticipated that the company would be real competition to established brands in the industry. Gillette, at the time, had 72 percent share of the US razor market. But by 2016, Dollar Shave Club had captured 51 percent. This success was enhanced through a model of consumer convenience which proved to outweigh widespread brand recognition.
Regardless of the market shift, it can still be difficult for companies to pivot away from traditional wholesale models to DTC. This is because companies are composed of people — and people can be resistant to change. Making this shift is undoubtedly challenging because it is very different selling a pallet of a thousand shirts to one company versus selling one shirt to a thousand individuals with quick delivery expectations. Ultimately, some questions that should be asked when making the DTC shift are:
Are you going to undertake this transition in-house, partner with a 3PL, or both?
How will returns be handled?
How will you make sure that unused returns go back into inventory instead of being scrapped?
What carriers are needed?
What supporting technology is needed?
In high volume shipping environments, technology is crucial to improve smooth long term operations. For example, parcel shipping software does much more than simply produce shipping labels. It also:
Automatically assigns parcels to the best carrier and service that will meet deadlines at the lowest price.
Tracks packages in real-time through the carrier network providing impeccable traceability.
Ensures all relevant and needed documents are included.
Guarantees compliance by monitoring shipments against carrier agreements.
Companies have to possess adaptable supply chains, and a reliance on historical data simply doesn't deliver the level of accuracy that is demanded by today's consumers. With integrated global trade and transportation execution solutions, companies are able to gain more control and visibility up and their respective chains from global sourcing to the end customer.
If there is an obstacle in your organization's supply chain, from global trade compliance to transportation management to e-commerce solutions, we have software that can help.
To subscribe to our blog, or to receive notifications about QAD Precision GTTE events, webinars, and news, please click here.
NEW REGULATIONS: THE CHALLENGE OF SUPPLY CHAIN DUE DILIGENCE
GLOBAL TRADE RECOVERY: PREPARING FOR THE 2022 SUPPLY CHAIN
WHAT IS A FOREIGN-TRADE ZONE (FTZ)?