In 2023, new factors and potential disruptions have emerged and supply chain priorities are shifting in response. Speed still matters. But, with high energy prices, economic uncertainty, geopolitical challenges and falling customer demand, it can no longer be at any cost. The ability to anticipate and adapt to volatility and demand, and to operate efficiently and effectively in any scenario have become a necessity. Businesses are increasingly interested in logistics partners who can offer better visibility of their cargo. This gives them more predictability and more control to speed up, but also slow down and pivot.
Demand variability and market volatility have become greater concerns for many businesses, and not without reason. The World Trade Organisation recorded significant fluctuations in global trade patterns in recent years. Certain logistics partners can also boost flexibility and offer businesses more control by transporting and storing goods in facilities closer to key markets. When the goods are needed, they can be delivered with unprecedented quickly and reliably.
Supply chain velocity’s definition and its true cost
The definition of supply chain velocity is the speed at which activities within the supply chain are completed, and the speed at which orders move from one end of the supply chain to the other. When improvements are introduced at various stages of the supply chain, velocity improves – whether that’s with the loading, unloading, and discharge of cargo from terminal or with the design and operation of warehousing and distribution centres. It is widely accepted that the pandemic transformed expectations around supply chain velocity and particularly consumer expectation around speed of delivery. A recent report on the state of shipping by Santa Clara University found 62% of shoppers expect their order to arrive in less than 3 business days when they choose free shipping.
However, for a truly flexible and agile supply chain, predictability is just as important as speed. As Supply and Demand Chain Executive magazine writes, predictability is ‘vitally important’. It ensures a business is fully equipped with data, insights, and flexibility to navigate delays and disruptions. It can plan and respond effectively, minimising and mitigating the effects.
Meanwhile, the interest in sustainability is growing. A 2022 CGS survey found 79% of consumers now believe sustainability matters, while 42% prefer sustainability over expedited shipping. At the same time, energy costs, supply chain disruptions, and increased labour costs have made delivering quickly more complicated and more expensive. Ti Insights found more than 90% of logistics companies had been hit by higher costs in 2022.
Speed still matters, but, as PWC explains, ‘reliability, responsiveness and agility are the capabilities that matter most to compete effectively in today’s environment’. Some, but not all customers, will need or want next-day order fulfilment and many will not be willing to pay for it. Rather than having a ‘one speed fits all approach’, businesses are increasingly choosing partners who can help them differentiate their supply chains and allow them to cater to different customer segments at different speeds.
How do you increase supply chain velocity along with flexibility and agility
From weather events and industrial action to port congestion and conflicts – for supply chains these days, the unexpected is expected. Scenarios have arisen – and continue to arise – where flexibility and mobility are invaluable. At times supply chains need to speed up, at others, they need to slow down or pivot completely.
In 2022, for example, fashion and lifestyle businesses found themselves battling unprecedented levels of unsold inventory. In North America, Bloomberg reported that retailers’ inventories were as much as 65% higher than in 2021, while Latin American retailers reported inventory increases of over 40%. While better inventory management with more predictability is key in the long-term, businesses with the ability to slow down or redirect shipments could tap into near immediate solutions. These businesses could slow down their shipments until the products were required by shoppers or until they could be accommodated in a warehouse. The shipments could also be redirected to a market where the products were in demand or to a more affordable warehouse elsewhere in the world.
A resilient supply chain and responsive logistics partner gives business the control they need to respond to disruptions quickly and effectively, especially when their goods are in transit. As McKinsey points out, weather events are increasingly disrupting global supply chains. S&P Global Market Intelligence predicts geopolitical tensions and civil unrest will become even more pronounced in 2023. In 2022 alone, more than 80% of logistics industry executives told Ti Insights they were affected by disruptions because of the situation in Russia and Ukraine. This environment has amplified the need for logistics partners thar offers predictability, agility, mobility, and flexibility.
