2020 was a year filled with uncertainties. It reduced human interaction, compelled people into staying at home, and forced a quick shift from Offline to Online mode. Meanwhile, the logistic sector was serving the world tirelessly and also took it upon itself to ensure smooth and efficient connectivity across value chains to keep the world going. The sector which was itself struggling during the adverse circumstances gets acquainted with the changes. As per reports, the Indian logistics market is expected to grow at a CAGR of 10.7 percent between 2020-2024.
In 2021, below are the major trends that will drive the sector.
Automation has been a trend in almost all industries since the previous decade. The continued success indicates that this trend will only get stronger in the coming year. Most notably, Artificial Intelligence (AI) has emerged as the primary propellant for automation in the supply-chain industry. By crunching data from past operations, AI algorithms can perform basic operations automatically. This saves a large amount of time and eliminates the possibility of human error, thus making the operations more efficient. It also redirects the human capital to perform more complex tasks.
Wider adoption of Blockchain
Blockchain has been alternatively called “the biggest breakthrough” and also “just hype” over the years. But the technology has proved its worth in various industries; the supply-chain industry is one of them. Research suggests that blockchain can save $31 billion by 2024 for the food and beverage industry alone. In the coming year, we can expect to see wider adoption of blockchain technology across the supply chain.
The primary use of blockchain has been to improve transparency. Obscurity in data sharing often has negative results in a supply chain. Blockchain allows data to be shared across a supply chain, end-to-end, with all concerned parties.
Cryptocurrencies based on blockchain are also becoming more common in the supply-chain industry. As more governments recognize cryptocurrencies as legal tenders, industries to are starting to adopt them. For cross-border trade, cryptocurrencies could become the preferred mode of payment as it provides a higher level of transparency, speed of transfer and security in comparison to legacy financial systems.
End to end IoT
The internet of things (IoT) is another technology rapidly adopted by the supply-chain industry apart from the blockchain. Like blockchain, IoT works in the direction of boosting transparency across the supply chain. GPS sensors can be fitted in modes of transportation like trucks to offer live location tracking. Sensors in the warehouse help visibility in inventory management, while those in retail outlets help in gauging demand.
Automation in SCM is not limited to just the operations, but the manual tasks as well. The first two quarters of 2019 saw an investment of $869 million on robotic automation in North America alone. On the transportation end, drones are beginning to be used for delivering light-weight goods. Driverless vehicles are not yet a reality, but it might become one soon.
Within the warehouses, Autonomous Mobile Robots (AMRs) can see wider acceptance for performing labor-intensive tasks. However, let’s dispel the oft-used fear: robots will not replace humans. In most supply chains, robots would only free human capital from menial labour, allowing them to focus on more important decision-making.
Smart contracts are transaction protocols that are meant to execute when certain conditions are met automatically. In the supply chain, it could mean automatically generating an invoice when the shipment reaches the destination or conducting financial transactions between parties. Smart contracts have started to be used to settle payments using cryptocurrencies automatically. Smart contracts remove the need for arbitration from a trusted party, thereby making the process much faster.
Agile Supply Chains
If there is one thing the supply-chain industry needs to learn from the ongoing pandemic, it is agility. The supply chain has to be flexible enough to absorb any shocks, major or minor, that comes along its way. Using AI and machine learning, SCM could build models to predict future events and be prepared for them. Currently, not many companies are leveraging this technology. However, the COVID-19 pandemic could be an eye-opener and motivate the supply-chain industry to become more agile in the coming year.
Another aspect of agility in the supply chain is the personalization of shipments. Traditionally, the shipments are created in bulk, based on pre-orders. Any changes to the cargo in the middle of the supply chain are generally impossible. However, as industries move towards giving more power to the end customers, easy customizations are both a necessary edge and an eventual need.
The supply-chain industry has understood that it can no longer treat technology as an isolated service, i.e., as a means to an end. Technology will inevitably become the backbone of the supply-chain industry. Hence, we will observe a more significant push toward integrating and layering technologies, eliminating data silos in the supply chain, while creating dynamic, actionable data across technology stacks and platforms.
Rise of E-commerce
As people were compelled to stay at home due to safety measures, a massive boon was seen in the e-commerce segment. We saw people shop for essential items via online modes during the pandemic. In light of the same, many brick-and-mortar businesses during these times were forced to adapt to the online mode to survive, which further led to the increase in the e-commerce segment. In 2021, more businesses will be making a shift towards the online mode which along with the change in consumer behaviour will help derive the segment.
Solving the Last-mile Delivery Hiccups
It is believed that the last mile cost accounts for 40-50% of the entire supply chain. With the change in consumer behaviour and increased demand of the e-commerce sector, it increases the risk of encountering inefficiencies. In 2021, the demand and need for a more efficient last-mile segment will be of utmost importance as we expect consumer expectations on delivery services to move up the value chain. Apart from increasing the last-mile efficiency, companies will also be making a shift towards Electric Vehicles (EVs) for their last-mile operations with the sector giving more importance to sustainability. In January 2020, Amazon India made an announcement to include 10,000 EVs (both 3Ws and 4Ws) in its fleet of delivery vehicles by 2025. IKEA also intends to be 100% electric globally in terms of mobility by 2030. By embracing innovation in the form of various technologies, the industry is all set to face the challenges in the times to come and help businesses achieve greater operational efficiency.
Lets lookout how these trends transform the Supply Chain function in 2021!