The impact of disruptive transformations in the supply chain

It’s no surprise that we are living in an ever-changing reality. New technologies emerge every day, as well as new ways of producing, selling, working, so the supply chain must always be changing and evolving.

But these transformations are not always positive. The market can suffer disruptions, such as climate disasters, wars and, most recently, at a global level: the COVID-19 pandemic.

But the interruptions, or disruptions, that we’re talking about can accelerate the supply chain transformation process.

For companies to move forward in the transformation, not being caught off guard in the event of a disruption, the best way is to be up-to-date in their digital transformation.

New technologies can provide comprehensive supply chain visibility with real-time data and intelligence to help companies make fast, timely and effective decisions based on changing market dynamics.

Artificial Intelligence (AI), the Internet of Things (IoT), predictive analytics, and other transformative technologies can help respond to sudden shifts in demand and supply trends.

While investing in the right technology is critical to evolution, companies must also focus on helping their employees become more digitally savvy by understanding the best ways to use new technologies.

Another point that must be observed in the search for technological solutions is to make sure that the equipment design and interfaces are user-friendly and intuitive, not presenting a steep learning curve.

The Black Swan Theory

Disruptions like the COVID-19 pandemic are no longer rare and unpredictable events of the black swan theory. The high threat of natural disasters, political unrest, economic crises and pandemics will continue, so companies must build the resilience they need to minimize such disruptions.

Black swan theory, also known as black swan event theory, is a metaphor that describes an event that occurs as a surprise, has a large effect, and is often inappropriately rationalized after the fact, with the benefit of hindsight.

Such theory was conceived by risk analyst Nassim Nicholas Taeb to explain:

• an event of disproportionate impact or a rare, seemingly unlikely event beyond normal historical, scientific, financial, or technological expectations;
• the impossibility of calculating the probability of rare but consequential events through scientific methods;
• the psychological bias that leads a person, individually or collectively, not to see or not want to see the decisive importance of a certain rare event in the course of history.

In contrast to the early philosophical concept of the “black swan problem”, which claimed that all swans are white, something that was later proved false with the discovery in the 18th century of a race of black swans, the Black Swan Theory it refers only to unexpected events of great magnitude and consequences in the context of their historical influence. Such events, considered extreme and atypical, collectively play a more important role than normal events.

The COVID-19 pandemic and the restructuring of value chains

In today’s fast-paced world, the most valuable currency is time. Despite being valid for all sectors, it is especially critical in the field of international trade.

Every organization involved in this industry tries to find new (and innovative) ways to reduce from their daily logistical operations those few seconds here and there.

In this context, information is almost as important as time. More precisely, not just any information: simple and punctual information, capable of allowing assertive decision-making. At each stage of the supply chain and logistics cycles, the interested parties (stakeholders) involved demand real-time information on aspects related to the process.

Companies that consistently get their time and information management right find themselves at the top of the hierarchy in the global marketplace.

To optimize the time and information-related aspects of each logistical cycle, it is necessary to include state-of-the-art technologies, such as sensors and IoT, which collectively make up connected logistics.

Connected logistics

Also known as logistics 4.0, connected logistics emerged after the industrial revolution, it is an evolution of traditional logistics and its basic premise is the need for investment in technology to be able to increase market share.

For this to become possible, there is a reduction in the consumption of raw materials and finished products, a restriction in stock levels, an increase in process agility and an optimization of delivery processes.

In this way, companies no longer depend on large distribution centers and their entire supply chain gains in efficiency, quality and reduced deadlines.

Digital transformations in the supply chain

In addition to investing in connected logistics for the digital transformation of the supply chain, other changes are needed:

• Continuously embrace innovation

To keep up with the fast pace imposed by the digital age, in order to meet the growing demands for innovation, companies must become increasingly agile.

Supply chain solutions need to be updated as the market, customer, or legislation demand changes to be delivered quickly, without the need for new projects that require great efforts.

• Make room for fearless innovators

Transforming a company’s business operations goes beyond corporate IT. Disruptive businesses, which change the way they interact with customers and how this influences product and service offerings, are already a reality, such as Spotify, Uber, Airbnb.

Supply chain innovation will develop with the customer’s business in mind rather than just the IT technicians. Solutions will be faster, better and more useful to bring companies back.

• Go beyond

Digital transformation comes to prove that technology is essential for secure and optimized management. In this sense, it is time to think about end-to-end supply chain automation as a process facilitator, reducing operating costs, centralizing information and ensuring better results for everyone involved.

For the future, it is necessary to start empowering people and machines to make decisions at the point of impact, i.e., where problems or changes are taking place.

According to forecasts by the US IT company Cisco, with the Internet of Things (IoT — Internet of Things) we are just beginning to enter a new world: the Internet of Everything (IoE — Internet of Everything), where things will gain context awareness, greater processing power, and greater detection capabilities.

By adding people and information to these forms of transformation, you can get a web of networks in which billions or even trillions of connections create unprecedented opportunities.

• Advancement in Data Science

With the digital transformation, instead of expert users, we will have business users. Which means that instead of analyzing a single data type and transactions that have taken place in the past, we will analyze all data types and in real time, as they are generated.

With regard to business, information will also be accessible in an easier, more intuitive and targeted way, clearly enabling business decision-making.

Conclusion

In order to transform international commerce, countries and organizations need to embrace standardized application of connected logistics to get it in sync with other industries that are eventually moving to adopt Artificial Intelligence, Internet of Things (IoT) and other advances in digital technology in their daily operations.

Eventually, steps must be taken so that a digital supply chain can become the norm rather than the exception. While this requirement comes with its own set of issues, proper implementation can help organizations overcome them. Over a long period, the list of benefits far outweighs the potential drawbacks of its implementation.