Video: 3 ways to create supply chain value

Supply chains are often viewed as a place where companies can look to cut costs. However, there are many hidden value-generating opportunities in the supply chain that many companies overlook.

In the below video, Dr Omera Khan, head of Supply Chain Insights and Trends Lab at Maersk, dives into how supply chains can create value to businesses, for example through flexibility and agility, when facing supply chain turbulence and volatility.

Companies can take further steps to manage uncertainty and unpredictability that is characteristic of global supply chains today. The marketplace is formidable, with consumers becoming more demanding and eco-conscious. It is paramount that companies sense and translate their customer demands into services and product offerings that meet their requirements. The pendulum has shifted from driving cost and efficiency only, to also providing flexibility, responsiveness, and resilience.

1. Creating customer value in supply chain management

   Understanding what the customer values is key to supply chain management.
   Whilst traditional supply chains focused on stability and cost minimization, today supply chains need to be more demand-driven and become much more responsive to remain competitive.
   During the pandemic, consumer habits shifted markedly, creating massive volatility in almost all industry verticals but particularly consumer facing verticals. Here, shopping patterns changed dramatically. There was an instant shift from brick-and-mortar stores towards online shopping of home appliances and garden goods, as more consumers relished home comforts during the lockdown. The bullwhip effect was further compounded when many consumer orders were not fulfilled, as they were stuck for weeks on the Ever given, a cargo ship that was stranded in the Suez Canal, or delayed due to the blockage.
   The pandemic was not an isolated issue as some may think. Whilst no one could have predicted how long the pandemic would disrupt lives and impact supply chains, the fate of many businesses could have been avoided or been less impacted, if they had been more adaptable and agile in meeting customer needs, even if that meant disrupting the status quo and changing the way things were done. Those that did, weathered the pandemic best.

   Increased shopping access (omnichannel, social media, brick-and-mortar), and consumer selectivity (connected to higher prices, customers are now losing their brand loyalty, and looking toward getting more for the price. A study conducted by the consulting company, Bain and Company, showed that 54% of executives polled, had been significantly affected by consumer reining in spending in 2023).
   Companies that understand these trends can use them to their advantage, putting them a step ahead of competitors.

2. Supply chain setup for the current environment

   Most supply chains are designed with legacy solutions, when there was relatively more stability and predictability. However, today volatility and turbulence are the ‘norm’, with disruptions from the pandemic, geopolitical conflicts and weather events causing longer term disruptions. The need for resilience has never been greater.
   By analysing their overall supply chain, companies can add buffers and alternative solutions. This can be shifting from a purely “just-in-time” approach to a “just-in-time-and-just-in-case” approach, where they hold some inventory to give a buffer in cases of disruptions. Additionally, working closely with an integrated logistics provider that can offer multimodality solutions, as well as storage options, can allow for deviations in cases of disruptions.

3. Investing in capabilities

   Whilst investing in new aspects of tech, sustainability and manufacturing, companies can often fall into the trap of overlooking their biggest asset: their people. As supply chain needs change and develop, companies may need to upskill or reskill parts of the workforce. The World Economic Forum states that the “2020s will be the decade of upskilling”, with existing skills expected to become less relevant as many tasks are becoming automated by machines. As technological advances change businesses and supply chains, certain roles become redundant, just as new ones are created.
   By upskilling and reskilling, companies can avoid losing talent, as well as resources spent on workers, and companies can add agility to their business moves.
   Further underlining the need for upskilling, the World Economic Forum’s Future of Jobs Report 2023 highlights that “44% of workers’ skills will be disrupted in the next five years and that six in 10 staff members will require training before 2027”. A Goldman Sachs report estimates that generative AI will impact an approximate 300 million jobs, with 18% of global work expected to become automated. Industries like marketing, legal and finance are most likely to be impacted, and around two-thirds of jobs in Europe and the USA will have some exposure to AI automation.
   This does not necessarily mean that these jobs will be lost, but rather, that AI will act as an accompaniment or partner in these roles. Companies that understand this and know how to harness reskilling and upskilling of their workforce will best be able to weather coming changes.

Understanding instability in the supply chain setup

If the last 5+ years have highlighted one main thing for supply chains, it is that stability is fleeting. As the world continues to grapple with disruptions of all manners, companies are seeking out ways to bring more overall resilience to their supply chain moves.

In the podcast, Beyond the Box, episode Troubled Waters – How the how the Red Sea situation is affecting supply chains, Dr Khan notes that, “any disruption has immediate and significant global impacts [...] dependency on key routes does indicate structural problems, especially where there are limited alternatives. That lack of flexibility, in my opinion, has to be addressed with viable and scalable solutions.”

It’s clear that some supply chain challenges cannot be avoided, but there are steps that can be taken that can add more resilience and flexibility when it comes to disruptions. What elements of flexibility are you adding to your business today to weather the hurdles and disruptions of tomorrow?