A supply chain is a network between a company and its suppliers to produce and distribute any product and includes all the steps it takes to make the product or service reach to the respective customer. The global market size for supply chain management solutions is estimated to reach $32.4 billion by 2026 at CAGR 11% from 2018. This rapid expansion is attributed to the high demand caused by e-commerce companies to gain a competitive edge in the industry. However, traditional supply chain management has several limitations such as lack of end to end visibility, poor response times, inefficient model due to multiple intermediaries and etc. Therefore, to maintain a competitive edge, enterprises have to look for advanced and innovative solutions to be incorporated into their supply chain processes. Solutions enabled by technologies such as the internet of things and blockchain is touted to have a promising potential to eliminate such inefficiencies in the supply chain. According to a joint report by DHL and Cisco, IoT is estimated to create $1.9 trillion market alone for supply chain and logistics. This is an enormous impact that proves the disruptive potential of blockchain and IoT.
Supply chain has become increasingly sophisticated, for instance, Amazon manages its supply chain through multiple ways such as maintaining its own warehouse, having partner distribution centers and third-party networks. Despite such sophistication, retail giants like Amazon still struggle with certain issues such as providing last mile connectivity due to reliance on courier companies, visibility of products and accountability as a result of outsourcing certain roles. While such inefficiencies may not be immediately detrimental to large corporates (as they have already established a market dominance), small or medium-sized enterprises cannot afford to have such issues to stay competitive in the market. Essentially, for large and small enterprises alike, the challenges in supply chain management arise due to globalization, changing consumer trends and regulations. Commenting at those issues, Selvam VMS, a supply chain expert and the CEO of an IoT based supply chain startup, says ‘Regardless of the geographical spread, catering to the consumer demand without delay is a critical measure of supply chain success, for this, transparency in the supply chain channels and traceability of inventories becomes a main ingredient for effective and efficient supply chain management’.
Therefore, transparency and traceability in the supply chain can be improved by adopting solutions that new technologies offer and to understand the impact they can do in supply chain, a close look at certain challenges in the supply chain is imperative.
Challenges faced by supply chain management
With evolution, many challenges are encountered which restricts the progress of supply chain management in the market.
Globalization is one of the significant factors that will impact the progress of supply chain. There are several issues which globalization presents as a critical challenge say,
- Firstly, enterprises globally have started manufacturing operations to those countries where the taxes, labor cost and cost of transporting raw materials are lower. Outsourcing practices have extended company’s procurement network. Since the suppliers are spread over various geographical locations, it has complicated the supply chain. Companies need to contact, coordinate, collaborate and deal with the suppliers across borders with respect to manufacturing, logistics and warehousing. Also, they need to keep in account that the delivery of product/services to consumers must be as per the schedule. Additionally, to maintain and increase efficiency, the company must have a real-time visibility on the production cycle- conversion of raw materials to finished goods.
- As enterprises expand their sales over countries, localization of existing goods calls for a change in the supply chain as per the culture and preferences. Also having global suppliers increase the complexities of tracking and controlling the chain.
DYNAMIC MARKET AND CONSUMER PREFERENCE
Like globalization, dynamic market slow down the pace of progress of SCM. According to EduCBA, consumer behavior is affected by cultural, psychological, social and personal factors that are quickly being changed by globalization. Social media is creating pressure on enterprises to utilize these sources of information to respond to changing preferences in order to maintain its competitive edge. Fast changing markets brings certain challenges for SCM. They are,
- Due to the rapidly changing environment, the products have shorter cycles. This demands for the flexible supply chain that can be beneficial for manufacturing other products.
- Also companies need to develop and update product features which in turn requires a redesign of the supply chain to accommodate the product.
QUALITY AND STANDARDS
The enterprise must make sure that consumers are not only served with the product on time but also with the quality product. Enterprises are pressurized to create high-quality product and maintain consistency. This can be done by addressing quality at every stage of supply chain such as raw materials, manufacturing, packaging and logistics. With quality comes standards, enterprises need to follow certain local and international regulatory standards in manufacturing, packaging, shipping etc and also they need to prepare certain documents like licenses and certificates for supply chain management system.
Emerging capabilities like smart packaging, IoT and blockchains are changing the traditional way of SCM. Startups like Evrythng, Discovery and Tive have played wisely by bringing IoT and blockchain into an image by assisting in overcoming the above challenges. Evrythng provides product with a unique web address using GS1 identifiers and an intelligent digital identity in the cloud to connect that product to the web and drive digital applications whereas Tive has a low-power multi-sensor tracker which uses global cellular connectivity and on-board sensors to provide real-time monitoring of shipments. However, the tracker has a limitation of only 6 months battery life whereas DiscoveryIoT who have it’s own tag Cliot, a self-charging printable tag which gains power from electromagnetic waves like cellular network or WiFi waves. Unlike Evrythng and Tive, Discovery does not require intense cloud processing and computing capabilities, as much of the data processing happens through edge computing at the nodal level. The problem with the cloud is latency which Discovery solves by processing at edge instead of sending to the cloud and wait until it is processed. Having various sensors to gain information, highly affordable to be used on daily projects, working on the principle of backscatter technology and swarm and artificial intelligence, a perfect blend with blockchain and IoT to revolutionize SCM.
How blockchain and IoT will prove to be beneficial for SCM
Looking past the hype, Blockchain and IoT are currently seen to be the most promising technology that can solve supply chain problems. Understanding each role keenly, so far the most prominent use case of blockchain is in cryptocurrencies such as Bitcoin. In essence, blockchain is a digital distributed ledger technology that has applications in banking, finance, supply chain and its viability is being explored in other sectors. Blockchain makes processes traceable since all the transactions are recorded over copies of ledger in the form of blocks, which is distributed over many nodes and also makes it secured since every new block is linked with the preceding blocks forming a chain. There exist no central authority which brings unprecedented levels of transparency to any platform based on the blockchain. Eventually, blockchain can increase the efficiency of supply chain and manage tasks that can include storing data and making payments. For instance, when a customer gives an order, the blockchain then creates a block which contains all the information which is then added onto a distributed ledger and therefore anyone including the customer can view details any time therefore not requiring a trustworthy intermediary. In addition, there are several benefits to using blockchain such as:
- No need to maintain paper records
- Fault in delivery can be recovered easily
- Securing the supply chain
- Improving transaction flow
- Being more reactive
Multiple tier of manufacturers, suppliers, distributors, retailers, and customers makes it difficult to effectively coordinate and execute at the same level. The SCM process is getting complicated due to diverse market, different custom regulations. IoT can make big impact by connecting processes, data and things using sensors and devices. IoT have the capability to connect to a network and send and receive data. For example, if all the inventories at a retailer is tagged, it would provide visibility into the stock levels at the store thereby enabling enterprises to plan when to replenish the stock which ultimately would avoid revenue losses due to such situations. The end to end visibility will help them to balance the supply and demand and optimize the inventory level. IoT also enables the demand for goods to be tracked from the distribution centers over any geography. Blockchain and IoT together can address some of the key issues faced by the supply chains and this trend will likely accelerate into production as the technology matures.
Today, supply chain are global and often involve many complex issues. Most companies lack trust-based information and blockchain and IoT can bridge the gap with portable solution as they are in evolution and need to mature to support these kinds of challenges.