Trends That Will Shape the Supply Chain in 2014

E-commerce will have an even bigger impact
E-commerce has been vitally important for many retailers for a long time, but in 2014 it’s going to have an even bigger impact on their supply chains.

The 2013 holiday period demonstrated customers’ willingness to shop online. Retailers are becoming reliant on e-commerce sales to boost overall results – particularly during holiday periods – and are introducing new ways to maintain customer satisfaction levels.

‘Click-and-collect’ services, where consumers order products online for pick-up in store or at another designated location is a great example. These services are particularly popular with busy web-savvy buyers of groceries, fashion and electronics who can’t wait at home during the day for deliveries and prefer to pick up goods at a time and location that is convenient for them.

“These two trends are working together to not only change the number of packages that need to be delivered the ‘final mile’ to customers’ homes, but also the amount of stock delivered to stores. In the case of e-commerce, more items are going to homes and fewer to stores. Click-and-collect services are working the other way, placing a bigger burden on shops’ storage capacities. Retailers will need to address this issue as demand for such services increases.

Related: E-commerce Consumers in Control

Social media is the next step
In 2014, we’ll see many firms look to integrate social media into their supply chains. It’s the next logical step on from e-commerce.

In Stockholm, Sweden, DHL Supply Chain has been involved with a pioneering project called MyWays – a new way of delivering products the final mile. It was developed to support the local government’s aims of reducing vehicle congestion and emissions in the center of the city, and to give end customers control over when and where their packages are delivered.

Through the MyWays scheme – which is available as an app on tablets and smartphones – customers sign up to for this delivery option when purchasing goods online, then local MyWays members are notified when parcels need to be delivered. Members who might take that route normally, to college or university for example, offer to pick up and deliver the packages, which earns them credits that can be exchanged for cash. This innovative project connects users socially in real time, and benefits the environment.

Related: The Social Side of Supply Chain Management

3D printing has revolutionary potential
In time, 3D printing has the potential to revolutionize manufacturing and cause a seismic shift in the supply chain. Certain sectors are already putting it to use: the life sciences industry, for example, is already starting to trial 3D-printed bespoke dentistry tools and artificial implants.

Some manufacturers also see the potential for 3D printing to change the way they source spare parts. At the moment, the technology is ideal for creating very specific items on demand, reducing the cost of your inventory and associated storage. If 3D printing proves that it can produce enough items, at the right speed, then it will significantly change supply chains, because parts will no longer be produced in multiple locations and shipped globally, they will be made locally on demand.

For now, the role that 3D printing can play in mass production is unproven. It takes a long time to 3D print a single item: anything from two hours for a basic smartphone case, to much longer for more complicated items. But if, for example, it takes 18 hours to print a spare part, and normally that part is shipped from a factory in Asia, printing the item is still quicker and possibly cheaper than sourcing it elsewhere.

Related: 3D Printing and The Supply Chains of The Future

Big data will become business as usual
Big data was everywhere in 2013, but in 2014 we will see more firms get to grips with what big data analysis actually entails and how it can help them to improve their supply chains.

It’s very easy to collect huge amounts of data: about your customers’ behavior, vehicle movements, and traffic flows. Supply chains will be able to learn from the examples of big organizations – the likes of Google and Facebook – that can demonstrate the business value of analyzing and using data. In the future we will be able to understand customers’ requirements and behavior in real time, meaning we can satisfy their exact requirements as part of the online or in-store shopping experience.

The challenge for 2014 is how to use this information – which is available in quantities that we’ve never experienced before – to improve end-to-end supply chains, product availability and cost management.

Use cloud computing to improve resiliency
This year will be the year of cloud computing for logistics and warehouse operators. This will build on the ability to host your IT supply chain programs online, rather than on physical computers in multiple locations.

Cloud computing gives us the ability to set up warehouse and logistics operations quickly in areas where we may not have an established infrastructure, creating a ‘warehouse in the cloud’. As long as there is a physical site, you can access software and data that’s in the cloud and set up operations. This drastically speeds up the time taken to deploy IT systems and get operations up and running, as well as improving your supply chain’s long-term efficiency, resilience and agility.

Rising demand for replicable, consistent processes
Another trend for 2014 will be an increased drive to replicate consistent operations across sites, countries and regions. This is a difficult challenge for logistics operators, but one that our customers are demanding from us.

The rise of big data will help firms in all sectors understand where the differences in their processes are hindering operations, and will therefore help them rectify those issues. Clear operational methodologies will also enable supply chains to establish consistent processes, as technology, data and leadership will make it easier for processes to be replicated and deployed locally and globally. 

The obstacles to creating consistency will differ between sectors, although I’m expecting companies in all industries to be striving to achieve this. In the consumer and retail sectors, the challenges will be around costs of raw materials, market share and competition. Technology firms will focus on cost control, competitiveness, and speed to market.

Related: The Promise and Pitfalls of Big Data

Emerging markets have become global players
Emerging markets will continue to influence the supply chain throughout 2014 and beyond, although we are reaching the point where it is no longer appropriate to refer to somewhere as economically powerful as China or India as an emerging market.

Consumers in these economies are spending more and more on retail products as they seek to emulate the lifestyle of people in established markets. Emerging markets are becoming a powerhouse of local consumption of international products. Jaguar Land Rover, for example, reported record sales in 38 countries in 2013 including Russia, Brazil and Korea, with sales also up 30 percent in Asia-Pacific (including China).

Companies who want to expand their businesses into new markets will face a number of supply chain challenges, including infrastructure setup, political issues, security issues, health and safety problems, tax compliance, and import duties.

Related: 2014 Global (Supply Chain) Economy Outlook

Urban deliveries are becoming more complex
The final trend we’re watching for 2014 is the increasing complexity of logistics in urban areas. There are two forces driving this trend: cities are setting higher environmental standards; and consumers are migrating away from out-of-town hypermarkets to local convenience stores.

Cities are getting bigger and more congested. Old cities – such as London, Paris and Istanbul – are struggling to cope with the volume of people and traffic, and are therefore pressuring users to become more ecologically responsible. Planners of new cities are trying to make them environmentally friendly from the beginning. Retailers, manufacturers and logistics companies therefore need to work together to make their deliveries more environmentally friendly: through using alternative vehicles, load sharing or other innovative solutions.

Particularly in Western Europe, there is an emerging new trend for consumers to shop at convenience stores in railway stations, petrol stations and on high streets. How can we serve these stores, with the right mix of products – including, increasingly, items that customers have ordered online for collection in-store – while maintaining safety and environmental standards? This is a big question that retailers and logistics companies will need to work together to solve in 2014.

Related: Logistics Collaboration: An Olympic Effort

“Although the impact of each of the trends I’ve discussed will vary for each individual business, it’s highly likely that your supply chain will have to adapt to at least one of these trends next year,” says Patterson.

Source: DHL Supply Chain Matters