Where is Supply Chain Optimization Heading by 2020?

— August 22, 2019

The concept of supply-chain optimization isn’t new. In fact, some sources trace its roots as far back as 1911, when mechanical engineer Fredrick Taylor — who penned The Principles of Scientific Management — targeted the process improvement of manual loading in his work.

Since then, improvements in basic, labor-intensive processes have progressed to the current day where we see industries — particularly manufacturing and retail — benefitting from advancements and technologies including cloud computing, AI, augmented reality, and drones.

Essentially, the “supply chain” of any business involves all the steps that precede that business making and/or selling its product. It encompasses raw materials, transportation, warehousing, logistics, and more.

At its best, supply-chain optimization increases efficiencies and reduces operating costs. And, as advancements continue, both the makers and sellers of goods stand to reap the benefits. If you’re a business owner, optimizing your supply chain will increase your profits, and also make your business more attractive should you decide to sell.

So, where is the supply-chain movement headed as we look forward to 2020? Here are some of the trends to watch.

The supply chain of the future will grow increasingly complex, all while becoming more efficient and less expensive. We’re already seeing this with brands such as Amazon.

As we move into 2020 and beyond, business owners will see more automation and robotics in the supply chain, including AI-powered routing systems, inventory management solutions using RFID, and more IoT integrations in all aspects of the supply chain. Anything that drives costs down and efficiency up will continue to permeate the supply chain — from raw materials all the way through to the delivery of the end product to the customer.

Advancements in supply-chain components

Energy and transportation are among the largest cost contributors to the supply chain for any business. Thanks to the growth of electric and solar-powered vehicles, costs will continue to come down in these areas.

Labor is another major cost contributor to the supply chain. While robots won’t fully be replacing humans anytime in the immediate future, technologies such as AI and autonomous vehicles will expand into more roles that were previously the sole domain of humans. Over the past couple of years, we’ve seen autonomous vehicles proving their ROI more and more, and reducing delivery costs. In fact, some companies are reporting savings of 15 percent or more. In the coming year, autonomous vehicles and similar technologies will continue to lower overall labor costs.

Inventory is another cost contributor and those costs will continue to increase as companies offer and store a wider selection of products to keep pace with consumer demands for availability, variety, and fast — or even same-day— delivery.

For brick-and-mortar retailers and businesses needing manufacturing or warehouse space, rent costs will continue to rise. Location has always been a factor for retailers looking for high traffic, but in this age of fast delivery demand, companies must also be strategic about where they store their goods and house fulfillment centers. The days of affordable, remote locations may be coming to an end as time and proximity become an imperative consideration for business owners.

Overall, the more streamlined and optimized the supply chain, the more companies of all sorts will continue to reduce their cost of doing business. And the lower the cost of doing business, the higher the profit and/or the lower the retail price of their product. Thanks to drones and the other solutions mentioned, the sky is truly the limit when it comes to the technologies and advancements that will drive progress in optimizing the supply chain into 2020 and beyond.

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Author: Bruce Hakutizwi

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