Philip Ashton, CEO of 7bridges, discusses how COVID-19 will reshape supply chains across the economy
In addition to the tens of thousands of people who have tragically lost their lives across the country in the COVID-19 pandemic, the virus is also set to cause an immense amount of damage to the British economy – up to £192 billion, according to the Office for Budget Responsibility. Lockdowns and social distancing have forced many companies to adapt or pivot entirely to a new reality of business.
One particular way in which COVID-19 will impact our economy is the way it will force businesses to address their supply chains and reshape logistics operations, for B2B companies as well as B2C and direct-to-consumer brands.
More than anything, the pandemic and the consequential lockdowns served as a huge shock to the global supply chain. Factories and warehouses were closed at short notice, while the capacity for air freight plummeted as passenger flights were grounded. Businesses suddenly had to review the entirety of their supply chains and react to rapidly changing conditions on a national and even down to a regional level.
The COVID-19 pandemic is unprecedented in modern times, but smaller shocks to supply chains happen regularly, particularly for those that cross international borders. Disaster planning is no longer a question of fictional scenarios and matters of ‘just in case’. This year has highlighted the need for logistics teams to increase their resilience to such disruption, and the value of safeguards to ensure that business can continue whatever the macro-economic conditions of the next ‘worst-case scenario’.
Bend but don’t break
As businesses rebuild from the COVID pandemic they will be looking to increase their resilience to future disruption. The result will be a greater adoption of automation technology, such as artificial intelligence, to allow the supply chain to react autonomously to temporary market disruption or more permanent economic shifts. An example of this automation is the automatic rerouting of individual shipments or deliveries, removing the need for cumbersome manual calculations or decision-making.
Integrating artificial intelligence technology into supply chains allows for far greater flexibility, as it is not rules-based, but optimises within a set of constraints. As a result, it does not have to be reprogrammed – instead, it reacts autonomously and adapts to any new environment or condition.
AI allows businesses to predict orders and manufacturing schedules and intelligently distribute stock closer to the customer before the orders have been placed. By calculating all the possible permutations to the large number of complex variables involved in sending a shipment, AI can optimise the process for each order within a set of customer or business constraints, and thus allowing individual flexibility on a large scale. Walmart is one business that has been highly successful with this approach, using AI and other emerging technologies to drive down costs, and passing those savings onto the customer.
Ecommerce by default
Lockdown has driven a further acceleration of the trend towards ecommerce. Younger generations expect businesses to be online by default, and to be able to serve online customers seamlessly regardless of size or industry.
Any business involved in direct-to-consumer deliveries needs to constantly upgrade and improve their logistics operations. Next-day or even same-day deliveries are now expected as a minimum; consumer studies have found that shipping dates affect purchasing decisions for more than 90% of shoppers. In addition, more than a quarter of online shoppers will abandon their basket at checkout if delivery is too slow.
In an increasingly crowded and competitive ecommerce marketplace, logistics failures or slow service could cause significant business harm, as consumers take their custom to more responsive suppliers. The primary way that businesses can ensure their deliveries are always being completed in the fastest and most efficient way possible is to implement an AI-based solution that considers historic and real-time service performance.
The future for supply chains
Automation technologies, such as AI, will be crucial for businesses looking to rebuild a strong and sustainable supply chain in the aftermath of COVID-19. Not only will it add resilience and flexibility to their logistics operations, the exponentially greater computing power of AI over humans means that all possible delivery permutations can be considered, resulting in the best decision being made each time. This adds a crucial cost-saving element that will be a huge benefit in challenging economic conditions.
These technology solutions will quickly become a central part of all supply chain management systems, both for large, international enterprises and smaller direct-to-consumer operations. COVID-19 has created unparalleled challenges for logistics teams but has also presented the industry with an opportunity to safeguard supply chains and ensure that they are ready for whatever the future holds.