Evolution of supply chains: how the past is helping to shape the future

What the past teaches us about the future

To say it’s been an unsettling period for supply chains is an understatement. Geopolitical instability compounded by the pandemic has had a huge fiscal impact across all industries. It comes at a time when consumer demand is peaking, and when people expect seamless access to vast ranges of products. In the face of that demand, business is in turn expected to respond rapidly.

There’s also growing pressure on companies to respond to uncertainty, adopt digital technologies and to build agility. It is hoped that such a response will build supply chains that are resilient to external threats, while simultaneously meeting consumer demand for convenience and sustainable, ethical practises. From the current vantage point, it’s a tall order.

In my view, the businesses that perform best will be those that respond to those challenges now. What does that mean? It means embracing smart and hyperconnected supply chains, exploring and acting upon opportunities to embed sustainability into everyday operations and leveraging the very best technology has to offer. It also means re-evaluating the supply chain models we use and learning lessons from the past to build a better future.

What the past can teach us

The pandemic mercilessly exposed limitations in global networks and the reliance on just-in-time sourcing. It’s led to calls for greater resilience and agility in the way we source if we are to avoid major disruptions in the future. How we do that is hotly debated.

In my opinion, we need to reduce the complexity of the supply chains we use, and one of the simplest ways to do that is by establishing regional hubs and clusters. These hubs and clusters use local sourcing, production and onshoring and are similar in nature to the way old industries were built.

In the past, a company would have a production factory, access to a highly skilled and local workforce and a small cluster of companies that supported its supply chain. Local and regional training centres trained the future workforce through apprenticeships and internships.

In essence, this ecosystem was a hive of activity centred around the production and distribution of goods. It was rarely disrupted because that hyperconnected network was on a local or regional level, while access to resources wasn’t restricted because it was close by. It was a simple and effective model.

What the future demands

While I’m not suggesting we scale back entirely from global networks I do think there is lot to say for increasing accessibility to our supply chains and our resources. The future is being driven by customers who expect personalisation, convenience, and service-led business models and societies that demand sustainability. Risk too, will always be present.

With that in mind, we need to think about how we design our supply chains; we need to look at what we are doing now and ask if it’s going to be fit for purpose in years to come. My hunch is that much of what we are doing won’t be. To that end, we need to start redesigning our supply chains to be better for the people, planet, and businesses that they will serve.

We need to start designing our supply chains with finite resources in mind and moreover, sustainability embedded. Acting now is essential – environmental and climate issues cannot wait – but we need a greater vision too, to be designing supply chains with the next 10 to 20 years in mind. How will they be energy efficient? How will they serve the professionals that will work in them? How will they help the businesses to adapt and to roll with the times?

Future demand will have a major impact on industries and the risks they face. We’re starting to see shifts towards circular and sharing economies; for traditional and established industries, how does that transpire?

Moving away from fragmentation

We saw what happened to fragmented and siloed supply chains during the pandemic. Relying on goods that are made up of components which are manufactured in several stages and in different places around the world is the opposite of resilient. Moreover, it’s a model in which delays, heavy administration and unnecessary costs are common. I don’t think that is sustainable in the long-term.

To that end, a shift to regional hubs is rooted in a vision for the future of business, rather than of nostalgia for the past. To thrive in the future, supply chains will have to rely on networked resilience in which ecosystems are connected via automation and AI, making them responsive to market demands, to risk and to opportunities.

We talk a lot about collaboration in the supply chain, and this concept gives rise to that. Regional hubs connected on a global scale are the very definition of collaborative working. It fosters partnership along the entire value chain, encouraging innovation, shared learning and circularity. With the advent of increasingly powerful technology, this is an inflection point for businesses. Those that embrace the power of connected ecosystems stand to gain much – not least agility, resilience and a responsive business that can meet the future. Those that don’t risk being consigned to history.