COVID-19 — Accelerating Supply Chain Innovation
There is no doubting the negative effect that this pandemic will have upon the macro-economic climate and our interpersonal relationships.
However, it has also brought the supply chain into sharp focus and we have seen key technological trends rapidly accelerate, as pain points that have long been present are exacerbated or new market conditions present unique opportunities to undertake industry transformations previously regarded as unattractive or unnecessary.
To this end, we have identified three such trends driving opportunities.
I. Supply Chain Traceability
Long seen as desirable, but only at zero or low cost. Today, the supply chain is experiencing dramatic disruption, requiring ever greater agility to switch points of manufacture or product sourcing. Most manufacturers may be aware of issues at their Tier 1 suppliers but are unlikely to hold data for suppliers further down the value chain, heightening the confusion in times of disruption.
Digitalisation for traceability has always been linked to efficiency (exception management, ETA etc.) and the ability to take alternative courses of action. In the current environment, transparency has become equally important to such plans. The anticipation of disruption is the first step to incorporating agility in business models and requires better data sharing across different verticals.
Core technologies such as Distributed Ledgers Platforms, IoT sensors (SOC and printed chip), and smart enterprise solutions hold the key to better supply chain traceability systems. Our portfolio company Mercado helps their customers de-risk, “shining bright lights in the dark corners of the supply chain” by providing automated workflows, connecting supply and demand sides for real-time traceability.
II. Warehouse ETA & Dispatch
The stress eCommerce companies such as Amazon are currently experiencing is there for all to see. With essential products being prioritised, non-essentials are now experiencing up to 20 day delivery times and Amazon is going as far as to prioritise direct orders over third party eCommerce customers who also rely on Amazon’s fulfilment services.
The Amazon (eCommerce) Effect has contributed significantly to increased pressure on the last mile. In the current climate, historical inefficiencies in fulfilment and warehouse management are becoming ever apparent as key systems struggle to keep up with the huge and sudden change in demand. Many companies still rely on paper-based workflows, fragmented communication channels and limited automation in transport management (only 34% of US SMEs use digital inventory control systems).
Solutions delivering the necessary digital tools to then establish improved rules-based automation (improving warehouse operational efficiency and accuracy) or integrating communication channels (transparency in ETA and dispatch) are seeing rapid acceleration in adoption as fulfilment providers and warehouse operators look to build resilience to any further disruption, while also limiting dependence on Amazon’s own services.
III. Robotics and Automation
With most major economies pursuing a“Suppression” strategy in relation to the virus, we are looking at a minimum of eight months of policy switching on and off population-wide social distancing, with only “key workers” to continue working on-site.
Unsurprisingly, we are now witnessing accelerated adoption of (and interest in) automation technology and robotics in both high precision manufacturing and supply chain fulfilment terminals (ports, warehouses etc.). In the past, adoption has been limited primarily due to the high cost of implementation (i.e. technology acquisition, training, disruption to production), the need for infrastructure transformation and political / union pressure.
In today’s new world of factories at zero output and whole workforces furloughed, the pain to profit threshold may finally make sense for many players. Those that survive will need to adapt and ensuring greater robustness in the face of any second wave shutdown will be fundamental to a more managed response in future.
Although we are unable to fathom the ripple effects of COVID-19 on our way of life, we remain optimistic that innovation follows crises and solution-oriented thinking remains integral to securing greater resilience, efficiency and sustainability for our economies and global trade.
Author: Henry Palmer
Partner, Amplifier Ventures
