Supply chain issues show few signs of improvement. Learn why (and how disruptive supply chain technology is poised to change that).
According to Michael Zezas, Head of Public Policy Research & Municipal Strategy for Morgan Stanley, the most important trigger of supply chain disruptions has been “a surge in demand for physical goods from record stimulus programs and a sharp shift in spending from services to consumer durables.” In other words, folks started spending money on physical goods when the pandemic hit, and they couldn’t go out.
Several factors impeded supply chains over the last two years, including COVID-related production issues, labor shortages, and precautionary inventory buildup. However, the biggest culprit remains an unprecedented surge in demand for physical goods.
While this demand declined sharply in the early days of COVID—prompting many businesses to scale back inventory and production—the ensuing combination of social distancing and government stimulus encouraged consumers to stay in and buy goods. As a result, spending on these consumables increased by 40% from October 2019 to October 2021.
Normalizing consumer demand should alleviate some supply chain pressure (especially for companies who’ve invested in supply chain optimization). However, transportation bottlenecks are still driving transportation costs through the roof. With travel restrictions throughout the year, shipping is projected to churn slowly along key transcontinental routes until late 2023. Pair that with persistent labor shortages in the trucking industry, and you’re facing logistics burdens throughout 2022. Moreover, Transportation & Airlines Analyst, Ravi Shanker, predicts only temporary relief in 2022, saying increased automation and insourcing are potential levers for improvement.
Adversity breeds innovation, and the ongoing supply chain disruptions have pushed new and existing technology to exciting heights (so, it’s not all doom and gloom after all)!
As Shaker suggested, investments in disruptive technology solutions promise to improve supply chain performance. But what exactly qualifies as disruptive supply chain technology?
Put simply, disruptive supply chain technology is anything that has the potential to completely change how products are manufactured, distributed, and tracked. Some of the best examples of this technology include:
Through integration (or sometimes interconnectivity), this technology provides insights and executes business rules that address the causes of supply chain disruption. Take, for example, the unforeseen demand increase that followed the pandemic: automated systems equipped with artificial intelligence collected actionable, real-time data to predict demand accurately and to stock inventory appropriately. Equally impressive is the ability to automatically rate shop carriers to ship your goods at the best price.
Beyond mitigating the clearest and present risks, this technology promises to bring long-term benefits to investors. While labor shortages are another issue altogether, reducing labor costs is just one of the many benefits of supply chain integration. Overall, you can think of these benefits in terms of how they increase and leverage visibility.
Visibility is vital to any business operation. In terms of supply chain success, it’s a necessary ingredient. With integrated technology that enables real-time package tracking, shipment processing, and communication with carriers and suppliers, end-users can eliminate time-consuming manual processes.
“Reducing labor costs” may sound nefarious, but really, it allows lean teams to focus on more high-level operations by automating manual processes. With rampant labor shortages, this can be a godsend for growing enterprises and small businesses! In terms of visibility-enhancing technology, predictive analytics also drive cost reduction through real-time actionable insights, strategic sourcing optimization, and inventory visibility optimization.
Speaking of inventory visibility, the ability to monitor assets across the supply chain journey can help eliminate misplaced inventory and lost shipments. As a corollary, this fosters greater carrier accountability while retrieving packages from the warehouse. Additionally, the same technology that manages warehouse inventory can promote warehouse worker safety.
Lastly, technology like an integrated supplier portal can help you achieve visibility, collaboration, and cost savings. With real-time purchase order (PO) information available at their fingertips, suppliers can view POs virtually anywhere. The result is a standardized process flow that always keeps you and your suppliers on the same page.
For even more disruptive supply technology, check out these related resources: