In an omnichannel world, technology is a defining trait and a key challenge for the supply chain. The problem is that firms adopting cutting-edge technology for their supply chains often struggle against complexity. Especially in the age of pandemic, survey cited that 70 percent of 300 supply chain leaders said they were still in data collection and assessment mode, manually trying to identify their suppliers impacted by lockdown in China between January to February 2020.
The impact of supply chain complexity
Veteran supply chain expert and consultant Steve Banker stated that supply chain complexity appears to be an increasingly difficult challenge for many firms. The place where increasing complexity is most apparent is the rise of omnichannel – the attempt to reach customers across all channels in a uniform manner. This is most obvious in the retail sector, where the “brick and mortar” retailers have been losing market share steadily to ecommerce players. The retailers are attempting to turn their stores into resources by making them places where inventory can be shipped to customers, goods might be picked up, or returns made. But it is not just retail. Consumer goods companies are being asked by their retail partners to dropship goods directly to consumers, but make the delivery appear as if it came from a retailer. The growth sector of the third-party logistics industry is ecommerce warehousing solutions, but these warehouses are more complex and costly to run. Ecommerce also increases returns, which are costly and difficult to handle as well.
Additionally, ecommerce increases both consumer and business-to-business expectations for receiving goods quickly, for having good visibility into shipment statuses, and for handling returns promptly.
See also: Logistics and Supply Chain Jobs are Vulnerable to Automation
Technology to handle omnichannel challenges
Engaging in omnichannel efficiently and profitably does require new technologies. The one that appears to cause the greatest pain for the industry is Distributed Order Management (DOM). A DOM must capture inventory statuses across different inventory locations, allocate inventory to different customers, products, and channels based on a wide variety of rules. After being able to allocate these, DOM must track the status of orders across their lifecycle.
According to Banker, the biggest problem appears to be that many DOMs don’t have sufficient flexibility and configurability to deal with the plethora of product flow paths to the customer. Another problem is getting good inventory accuracy at the store level. This inventory accuracy could be very high if companies implemented less complex warehouse management solutions to manage inventory in the stores. The implementation of a light warehouse management solution is not difficult. The cultural barriers are huge. Store managers will always be more focused on customer-facing activities than operational ones.
Getting ahead of challenges
Future-proof supply chain is not just about technology. It is about people, process, and technology. On the people front, companies need to hire and groom good leaders, people who embrace change. Top down, hierarchical management will not work with Millennials. Also, getting to higher levels of Integrated Planning Maturity is key. And thoughtful collaboration with key partners, whether that occurs within these processes or external to it, also needs to be embraced.
From a technology perspective, the pace of change will not slow down. Flexible solutions, solutions that allow companies to change their processes on an ongoing basis, are critical. Customization of applications kills flexibility. Public cloud solutions that limit customization in favor of superior agility, usability, and adaptability are the antidote to complexity. They point the industry toward a future where it can embrace technology innovation without also struggling against complexity.
Read also: What Does Demand-Driven Supply Chain 2.0 Look Like?