Geopolitics has seldom been as precarious as it is today, with tensions arguably at their most fraught in a generation. Ongoing conflicts in Ukraine and the Middle East have set the stage for uncertainty that is expected to persist well into 2024.
Couple that with a sluggish economic recovery post-pandemic, and supply chain managers have a very difficult “macro environment” to contend with, according to Fraser Robinson, co-founder and CEO of Beacon.
The online retail boom of the pandemic era and subsequent drop in demand as lockdowns were lifted wreaked havoc on inventory levels and global supply chains. As retailers rushed to pile on inventory to meet surging demand, freight rates skyrocketed. When consumer enthusiasm waned, businesses were left with excess stock that was difficult to shift, warehouse space was at a premium and freight rates collapsed.
With this so freshly in the rear-view mirror, Robinson thinks that the future of global supply chains will be influenced by its recent, highly volatile past. He explains: “There’s no way to eliminate risk and volatility from your supply chain entirely, but improving information sharing and collaboration across stakeholders can go a long way to help control the fallout.”
A world of supply chain challenges
Post-pandemic, supply chain issues continue to be a global reality. Deloitte’s 2023 Central Europe CFO Survey outlines the lasting impacts of various factors on supply chains since 2020’s upheavals. The survey of more than 500 CFOs across 15 central European countries found that higher shipping costs and issues with the delivery of final goods to customers were the primary concerns for 70% and 77% of respondents, respectively.
“The single biggest cost of shipping is fuel, so suddenly shipping costs go up while demand has gone down,” says Robinson. Unrest in Ukraine saw oil prices spike in 2023, adding further pressure. “All these inflationary shocks make their way through the macro system, meaning everything becomes more expensive.”
Customers are feeling worse off now than they have in a long time. Robinson expects today’s “high-interest rate, low growth post-Covid environment” to continue into the new year “until prices, demand and supply start to normalise.”
Some companies have begun to employ tactics to manage low demand by creating supply constraints. Strategies range from slow steaming, where ships deliberately sail at a slower pace, to blank sailing, where ships miss stops along a multi-port journey, “essentially reducing supply to artificially create a demand backlog”.
However, these measures are not an effective long-term solution. Even if current supply chain pressures ease, Robinson says businesses should invest in tools for a collaborative, transparent approach to supply chain management, especially as market dynamics remain unpredictable.
“We’re going into a year with multiple general elections in key countries, such as the US and the UK. These things can move markets in either direction, and, of course, consumer demand will be the key driver of inventory levels,” he explains. “There are lots of moving parts, and markets and economies don’t love volatility.”
Moving towards genuine collaboration
Deloitte’s CFO survey finds that more than half of the respondent companies are looking to meet supply chain challenges by diversifying suppliers and supply routes and increasing collaboration with suppliers.
With more stakeholders across supply chains – and different routes – the need for collaboration and transparency is more important than ever. The survey also shows that 40% of CFOs are looking to use digital planning tools to keep supply chains moving under tough economic and geopolitical conditions.
“The two themes of collaboration and supply chain visibility go hand in hand because the path to a more efficient, resilient supply chain is rooted in a sound understanding of its data,” says Robinson.
“If you have your data, you’ve got access to it, and you use it, you have a strong foundation for supply chain resilience,” he continues. “Information that can be hidden in that data needs to be disseminated, shared and made visible to all the people that need access to it. It’s not good having data hidden away in a portal if nobody can benefit.”
Robinson says that many of us are already familiar with the technology that allows for easier collaboration. Take Google Docs, he suggests, which allows people to share and edit documents without multiple versions. “Supply chain visibility tools allow all actors along the supply chain to see exactly where goods and materials are at the same time. That means you can be alerted to any disruptions in real time - and respond quickly. That’s what collaborative technology is about.”
In most cases, merchandise will pass through designers, makers, sellers, and transporters before eventually landing in the hands of a customer. In a process so labyrinthine, real-time information is vital. Because everyone along the supply chain is invested in the product, everyone needs to know how many have been ordered, from where, what demand is like, and how long it takes for materials and manufactured goods to get from here to there.
When each person is unified around a common goal, outdated tech can quickly become the weak link, says Robinson. Forward-thinking supply chain managers have already begun rejecting siloes, he adds, noting that an increasing number are ousting email chains and spreadsheets in favour of specialised tools for true transparency.
Automation, in which Robinson is “a big believer”, can also drive efficiencies and improve planning by analysing historic data. Unlike a spreadsheet, he says, advanced tools are capable of identifying inaccurately entered dates, for example, or performance anomalies, such as extended or abbreviated travel times. It’s this level of visibility which enables stakeholders to proactively address and mitigate potential delays while replicating successful and efficient performances.
In the transition to new platforms, concerns about sharing data with external partners are valid. Robinson says that while security “is never a completely solved problem”, this is something that Beacon has built into its supply chain transparency tools. The platform mandates security credentials, including secure log-ins and dual-factor identification, to ensure that only authorised individuals have permission to access critical information.
“Certainly, in our world, it takes time to build that trust from the ground up, so that’s why we just have fact-based solutions,” he says. “Trust is built much faster if the system accurately reflects reality, and users learn that very quickly.”
“Trust and technology” are two concepts that will be crucial to an effective, collaborative supply chain this year. If all stakeholders are presented with factual data on the real-time whereabouts of ships and trucks at once, trust in the technology will follow.
For more information, visit beacon.com.