Doing More With Less: How to Strengthen For the Future

Supply chains throughout the world are weathering enormous strain. From consumer pressures, to rising transport costs, to property constraints and an ongoing imperative to reduce costs and increase efficiency. Here, Supply Chain Insights explores a number of different coping strategies as well as ways to do more with less.

Today’s supply chain manager is faced with the ongoing challenge of finding ways to streamline operations and maintain high levels of customer satisfaction, while also dealing with limited capital and resources at the same time.

 In parallel, technology is continuing to transform the supply chain landscape, with elements of automation, robotics, data analytics, artificial Intelligence (AI) and the Internet of Things now essential in operating a successful and efficient supply chain operation.

 While the pace of supply chain transformation has rapidly increased, there’s a shift in consumer spending and it’s starting to slow down. Data from the Australian Bureau of Statistics released at the end of May revealed that Australian retail sales were flat in April 2023, as consumers who face high living costs and rising interest rates have cut back spending on food, shopping and dining out. Retail sales were also down -0.8% year-on-year early in the year in Singapore, where even the return of overseas visitors following the easing of COVID restrictions was not enough to offset the negative impact of surging prices. 

“There’s definitely been a decrease in people’s disposable income and as a result discretionary spending has started to come down,” Travis Erridge, Chief Executive at TMX Global said.

This downturn is also happening alongside one of the most challenging periods on record for global supply chains.

“While the rate of rising general costs should be expected to stabilise, an underlying shortage of workers will keep upwards pressure on wages and the cost of labour. Land will not get any less scarce, and the ongoing increase in urbanisation will continue to drive up the cost of land and building space for a long time to come,” said Michael Bradshaw, Senior Director of Systems and Solutions Design at Dematic Asia.

For TMX’s Travis Erridge, there’s a secondary part of the narrative which is rising power costs, inflationary pressure on wages, and an upward trend on cost to serve.

“This is presenting a really challenging environment for retailers and supply chain organisations to operate in,” he said. “It’s a trying time, there’s no question about it.”

Similarly, Royston Phua, Vertical Strategy Lead for Asia Pacific Supply Chains from Zebra Technologies says that even without the challenge of inflation, there is still the traditional shortages in products, materials, and labour that continue to disrupt supply chains worldwide.

 “All of this change and disruption  indicates the need to rethink and transform the supply chain – but the challenge is, how can this be achieved in a capital light environment and the honest to goodness truth here is, there is no quick fix,” Royston said.

Manhattan’s Managing Director, Australia and New Zealand Raghav Sibal says a lot of focus is now on cost optimisation. “Traditionally, businesses would turn to cost reduction in challenging times but now businesses are asking the questions around how do I make my supply chain more connected? How can I manage my inventory more efficiently? It’s more about cost optimisation now than simple cost cutting,” he explained.

Don’t lose sight of the long term

Michael Bradshaw from Dematic warns against reducing investment in the supply chain as he says losing sight of the bigger picture in supply chain operations could be extremely costly in the long-term.

“Some businesses have chosen a ‘do nothing’ approach, hoping the situation will blow over and things will return to how they were. In almost all cases where I’ve seen this kind of strategy employed, businesses find themselves well on the back foot in terms of competitiveness and in their ability to cope with further changes that inevitably happen.”

“While there are many solutions that can be adopted with technology and automation, even the options that can be relatively fast to implement often take significant time to evaluate, plan, and integrate. Skipping over this phase of evaluation and planning is also likely to bring about shortfalls in taking advantage of the opportunities that are presented in addressing today’s challenges,” Michael said.

Similarly, TMX Travis Erridge says he has seen some organisations stop investing in their supply chain – or take their foot off the accelerator – thinking they have some breathing room while sales are down.

“I would warn any organisation away from doing this. The first thing to come back after a recession is discretionary spending and this is going to be predominately e-comm. The consumer is forever changed, and they will not be running back into stores to purchase goods. The omni-channel offering will need to be even better than it is today to deal with the next influx of consumer spending – and this is going to take a lot of work for many organisations,” he said.

Michael believes that businesses that see opportunities in the challenges and take action are the ones that will be far more resilient and adaptable to the new changes and challenges when they come along.

 “Businesses that have a good handle on their customer’s requirements, their operations, and their costs are far better placed to adapt to change using appropriate measures. Digital transformation has been a key strategic pillar for many businesses and important for positioning them to fit into the new digital world,” he explained.

Illuminating the supply chain with real-time decision making

While some businesses are starting to tighten their supply chain transformation budgets, one area of tech and transformation that cannot be overlooked is data and analytics.

“We’re still seeing a high level of investment and resources go into illuminating the supply chain to be able to make real-time decisions,” said Travis.

Manhattan’s Raghav says the investment in tech and data analytics is all about building resilient supply chains. “When we think about it at a very high level, it's all building a more resilient, dynamic supply chain. We're going to see continued investment in automation and overall visibility across the supply chain. For the movement of goods across the supply chain, we need to have visibility and monitoring of what's going on at all times,” he explained.

For Royston, supply chain 4.0 and the digitisation of supply chains is still a major priority for business leaders. “Having a digital supply chain where all the different ecosystem players are actually working in unison and are able to capture whatever data that is required and then process it accordingly into meaningful information can really help to manage operational risks and to leverage opportunities.”

 One innovative technology that businesses are starting to explore, is the metaverse. According to McKinsey, the metaverse is the emerging 3-D-enabled digital space that uses virtual reality, augmented reality, and other advanced internet and semiconductor technology to allow people to have lifelike personal and business experiences online.

With lots of organisations having no choice but to stay put in their current facility, the metaverse is helping organisations visualise what can be optimised in their current environment.

“The great thing about the Metaverse is that we can put the DC in a virtual environment and work out the best way to optimise it. We can simulate what’s happening in there and then come back and present it to the client. Having the ability to optimise in the virtual environment without any impact on service levels or current operation is truly revolutionary for some of our clients,” said Travis.

Collaboration in a crisis

Another helpful tool that does not require a significant amount of investment is collaboration – with suppliers, partners, and customers.

“The initial response and reaction to the pandemic where companies started to build and stockpile inventory is going to have to change – and I think that’s already happening. I'm not sure if it's going to go back to just in time, but what we will start to see is more collaboration between suppliers. This is going to become very important because companies will have to try and access deals and negotiate better terms with their suppliers and partners during this challenging period,” Raghav said. “The collaboration element with suppliers is going to be very important this year, if companies can get better deals and negotiate better terms with their suppliers then these changes can really help when profits are down,” he added.

Travis explains that as we go into a capital light environment, organisations should be looking into who they can partner with to come out of this period stronger,  “IT, web, and CRM providers have been creating partnership ecosystems for years – achieving great outcomes too. Can we do that in a physical environment with sharing freight and warehouse space for example? It will be interesting to see how these ideas develop in this downturn,” he said.

Similarly for Zebra Technologies, Royston said there are numerous innovative partnerships already taking place in warehousing and transport and logistics. “We’re seeing lots of partnerships across the supply chain really start to take shape and benefit operators and customers with business intelligence and cost savings when times are tough.”

Plotting the path to supply chain success

Looking ahead and offering advice on the next steps for a supply chain manager in today’s environment, Raghav says that as the role of the supply chain manager has increased in visibility at board level – it’s time to make the most of this opportunity.

“Now is the time to make those asks about investment in tech or new systems needed. I think sometimes in the past, many supply chain leaders knew about the changes they needed to make – but didn’t have the right voice or seat at the table to make it happen. This is an opportunity to look across the entire operation and think about what is required from an end-to-end supply chain connectivity point of view and ask for it,” he said.

Royston recognises the very challenging and nerve-wracking job of a supply chain manager. “The first piece of advice I would give is truly embrace risk and invest in your supply chain. The disruption is here to stay, and we don’t know when it will ever go back to normal. For that reason, it’s imperative to modernise and digitise the supply chain,” he explains.

For Royston, with digital transformation in the supply chain it’s possible to think big but start small – the most important thing is to accept and embrace risk.

Further, Michael says the path to success involves taking the time to understand the challenges that could affect your business and the opportunities that addressing these might present.

“Invest time in identifying and evaluating options that will bring the right benefits to your operations (whether it be productivity, space efficiency, accuracy, speed, capacity, flexibility or all of these things), and also evaluate the right partner to work with. With the available solutions becoming more and more complex, navigating such a process requires specialist expertise to not only design and plan them, but also to implement and support them over the lifecycle. Choosing the right partner with the right capabilities and experience is critical to success,” he adds.

For Travis, it’s all about keeping focused on the long-term strategy – even in a downturn. “Keep doing what you’re doing in terms of looking into the future and focusing on supply chain transformation and digitisation,” he concluded.