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Technological change, shifting consumer markets, and policy issues are together reshaping global supply chains
Businesses are being reinvented at the customer end in the digital age, and even more so are global supply chains. As digital access enables truly competitive supply chains to form, the intricacies of global – and domestic – supply chain management itself will change. Whilst one component of this is regulatory oversight, the other – as both structures and time-to-market morph in today’s hyper-competitive arena – is operational strategy. Technology is a key driver, but so is a changing customer base into which suppliers will mesh, just as supplier bases themselves will proliferate as access becomes truly global. Digital disruption has also fuelled trade protectionism, export control and sanctions that create new opportunities and challenges for companies doing business globally.
Technology is allowing firms like Toyota Kirloskar and NRB Bearings real-time visibility into their supply chains, helping optimise production schedules and inventory, and driving a stronger customer experience
Technological shifts are driving the digitalisation of supply chains, changing how products and services are made and delivered, and enabling the sharing of information in new ways. Tools such as machine learning, blockchain and augmented reality are helping companies transform the way they manage their supply chains. These shifts are likely to have several implications for organisations: lower operational costs, greater efficiency, and improved quality and transparency. Companies like Toyota and NRB Bearings have already made good progress in terms of gaining real-time visibility into their supply chains; enabling production schedules to align with customer demand; greater product customisation; inventory optimisation; and driving a stronger customer experience.
Advances in digitisation have enabled high-levels of personalisation in marketing and product design, and fuelled the on-demand economy. Adding complexity to this trend are faster lead times and growth opportunities in new markets, especially among new customer segments. These dynamics are likely to push companies to locate product procurement and finishing closer to customers, which will shift supply chains away from global ones, and towards national, regional and local networks of buyers and sellers. To enable this, companies need to develop greater ‘agility’ in their supply chains, bettering align supplier output with the end-customer. Technologies like blockchain can facilitate this by enabling the seamless movement of goods across borders through single-window customs clearance.
Faster lead times and EM growth opportunities will push companies to locate procurement and finishing closer to customers, shifting supply chains from global to regional or national ones
The global supply chain model also faces challenges from shifting global trade agreements and norms. On the one hand, there is a growing sense of protectionism as the US and China move to square-up over trade. On the other hand, free trade agreements (FTAs) are proliferating. ASEAN countries, for instance, are moving to ratify the TPP despite America’s exit, and will sign the RCEP later this year. Such mixed signals from the global trading system creates new opportunities and challenges for companies doing business globally. Further complicating the landscape is that more and more countries are adopting stricter export control regime, and embracing sanctions to protect their own interests, making it difficult for firms with international supply chains. For instance, the US and UK export control regimes restrict the export of various sensitive technologies, including cloud computing – a challenge for firms with global operations.
Future supply chains will be self-learning, insight-driven, asset-light, and customer-centric, managed by specialised talent, and enabled by intelligent technologies. However, companies need to take several immediate steps to prepare for this future by re-examining their operating model to remove traditional silos. Instead, they must be thinking in terms of customer-centric solutions; developing skill sets that are needed to design and manage supply chains; embracing a bottom-up approach to supply chain innovation by bringing together younger and older staff; and connecting with an ecosystem of third-parties to access shared assets.
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This article is based on discussions with Tanushsree Bagrodia, CFO and VP - IT, NRB Bearings and Shekar Viswanathan, Vice Chairman and Whole-time Director, Toyota Kirloskar, at the Doing Business Globally conclaves hosted by IMA India and Baker McKenzie in Mumbai and Bangalore in April 2018
THINK TANK
Technological change, shifting consumer markets, and policy issues are together reshaping global supply chains
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