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Commentary: Three themes driving a new era of competition in supply chain

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FreightWaves features Market Voices – a forum for contributors with unique knowledge of numerous transportation/logistics/supply chain sectors, as well as other critical expertise.

Last week the Worldwide Supply Chain Federation held its inaugural global summit in New York City, on June 19 and June 20. In this article I will highlight three themes that arose during the conversations that took place over the course of the summit.

I am highlighting these themes because they tie-in with qualitative trends I have noticed as I meet startup founders, supply chain executives and professionals, and academic researchers – my goal always being to get ahead of the problems technology can solve in supply chain, and then to find, and eventually invest in the startups building innovations that will solve those problems before other investors discover them. Also, these themes tie-in directly with the purpose of this column, and the community FreightWaves is building.

Before delving into the discussion, it is important that I define what I mean when I use the term supply chain. A supply chain is “A network of connected and interdependent organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users.”[1]

Ecosystems are a big deal

A business ecosystem is a network of networks in which value is created and exchanged between participants, in a way that increases the aggregate well-being of the network over time. One may also think of ecosystems as platforms. People who have been trained to think about business strategy from the perspective of linear value chains may have a difficult time appreciating why ecosystems and networks are supplanting the old ways of doing business. Here are three ideas about why that may be the case:

  1. The problems end-use customers want their suppliers to solve are now bigger and more complex than they were in the past. This has happened because the world is more connected than it has ever been. The world continues to become even more connected with the passage of time. The changing expectations apply to businesses that sell directly to consumers as well as to businesses that sell to other businesses. 
  2. In 2011, Marc Andreessen explained that software was on the cusp of remaking traditional industries.[2] The trend he highlighted has only accelerated since then. It has also begun to affect industries that one may have considered immune from the threats to which he alluded in 2011. This is happening because the enabling technologies that are the foundation on which that trend depends have matured significantly over the eight years since his article. Advances in materials science, artificial intelligence, cloud computing and distributed systems have made it easier for technologists and entrepreneurs to question and rethink how business is done in traditional industries that remained largely undisturbed by advances in software up until now. A software-led approach makes it easier to build and manage ecosystems, and much of the transformation these trends engender are either invisible to the outside world, or difficult for incumbents to understand and adjust to until it is too late.
  3. The skills required to conceptualize, build and manage ecosystems and platforms simply do not exist within incumbent companies in the industries that face the most risk from software-led attackers. One way to ameliorate this situation is to collaborate with other established companies, and with emerging technology startups to plug such gaps – by building an ecosystem.

Because ecosystems are a big deal, collaboration is a big deal

There is no denying that the move towards ecosystems is being driven by external threats from companies like Amazon, Alibaba, Microsoft, Alphabet, and others. However, it is also being driven by demands from customers.

One theme that emerged during the panel on innovation in maritime logistics is the fact that customers are demanding that competing supply chain management and supply chain logistics technology and service providers with whom they have done business in the past collaborate more with one another. Customers are making these demands in order to increase visibility and transparency within their supply chains. This is forcing once sworn enemies into awkward conversations with one another. The dictum from customers is “collaborate, or risk losing our business.”

And supply chain operations are no longer about reducing costs

Historically, supply chain professionals have been focused on cutting costs. It has been the core of the value proposition that supply chain intermediaries have offered their customers. It has also been the core of the education of supply chain professionals.

That is no longer good enough.

Enterprise customers now expect supply chain professionals and supply chain intermediaries to be active, engaged and useful participants in conversations about how to increase customers’ revenues, and how to increase profits within enterprises of all sizes. On the direct-to-consumer side of things, people expect flexibility and convenience as a given. Therefore, businesses that sell directly to consumers are turning to their supply chain logistics partners for solutions that will enable them to offer individual consumers flexibility and convenience.

As I put it, organizations of all sizes are coming to realize and accept that supply chain is the basis on which competitive advantages are won or lost. Today’s supply chains encompass the physical supply chains that we are accustomed to – those that move physical goods from one point to another. However, physical supply chains become obsolete if information is not flowing freely, efficiently and securely throughout all the links in a supply chain. As a result, expertise in designing, building and managing digital and information infrastructure is just as important in the creation of digital supply chains.

This era of innovation in global supply chains is about the interaction of bits and atoms, the fusing of the digital and the physical, the integration of computational networks and the physical world to create cyber-physical networks and systems.

It is also the future of the world that we are going to live in.

[1] Martin Christopher, Logistics & Supply Chain Management: Creating Value-Adding Networks, 4th ed, Pearson Education Limited 2011, p4

[2] Marc Andreessen, Why Software Is Eating the World, Wall Street Journal, August 11, 2011

One Comment

  1. Jon

    We see that cost cutting AND better service / visibility are the new norm. Shippers push for both – and carriers / 3PL’s / brokers better be able to deliver (no pun intended). That means using the latest tools (like AscendTMS, FourKites, Smart Capacity, etc) that were built with the FUTURE in mind – and not the past (like most of the legacy software providers are).

    When our customers ask for something it doesn’t need to be said that they want both cheaper AND better – it’s a given. If we don’t, they’ll just find someone else that can. It’s just the reality of the world we live in today.

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Brian Aoaeh

Brian Laung Aoaeh writes about the reinvention of global supply chains, from the perspective of an early-stage technology venture capitalist. He is the co-founder of REFASHIOND Ventures, an early stage venture capital fund that is being built to invest in startups creating innovations to refashion global supply chain networks. He is also the co-founder of The Worldwide Supply Chain Federation (The New York Supply Chain Meetup). His background covers the gamut from scientific research, data and statistical analysis, corporate development and investing for a single-family office, and then building an early stage venture fund from scratch - immediately prior to REFASHIOND. Brian holds an MBA in General Management, with a specialization in Financial Instruments and Markets, from NYU’s Stern School of Business. He also holds a Bachelor’s Degree in Mathematics & Physics from Connecticut College. Brian is a charter holding member of the CFA Institute. He is also an adjunct professor of operations management in the Department of Technology Management and Innovation at the New York University School of Engineering.