Modern-day supply chains are one of the most extraordinary achievements of human coordination. It includes the interconnected interactions between people, places and production processes around the globe.
Supply chains have become massively complex. Little does the customer know that when they buy a bar of chocolate at the store, select products online or even when they order a meal by phone they have activated a global supply chain. In turn, this chain activates dozens if not hundreds of business processes that must be carried out effectively to make sure that you get what you want, when and where you want it and at a reasonable price that still allows a company to make a profit. Although optimized on the individual level, the global supply network is often grossly inefficient on the macro level. For instance, a DVD player that may retail at just US$ 20 can travel around the world four times during its production process accumulating several tens of thousands of air miles before it even gets into the retail store. The bottle of water put on the table in the restaurant that we never even drank perhaps came from the other side of the planet. It will be thrown away with its plastic container shipped back around the world again.
So much of this wastage could be minimised with transparency in the supply chain. This would have a powerful effect on most companies and consumers. When taken as whole supply chains suffer from a centralized approach that has led to massive fragmentation and complexity. Just like an iceberg, the end consumers see only the tip above water. The rest of it is only visible to the actual professionals in supply chain management. The emergence of technologies like blockchain, AI and IoT will help in making the supply chain more transparent and reliable.
Consumers often live in blind faith while major corporations that may have thousands of Tier 1 suppliers cannot see past this wall of complexity. Even within the financial supply chain, the flow of financial information and money is disconnected. This has created major challenges for collaboration and transparency. Just like an iceberg, the end consumers see only the tip above water. The rest of it is only visible to the actual professionals in supply chain management. The adaptation of technologies like blockchain, AI and IoT in the supply chain will help in making the system more transparent and reliable. The global supply chain has now become all-encompassing, interacting with every aspect of human activity. Thus it must account for those impacts to tackle issues of sustainability.
New insights, new thinking, new business models, new incentives and relationships along with new technologies will pave the way.
In this respect, the critical structural transformation to moving towards a more sustainable model is moving from the linear fractured and centralized paradigm of today towards the open networked ecosystem model of tomorrow. We live in a world of hierarchical supply chains with different tiers where lack of information exchange supply happens within silos and lines locking up resources and capabilities. This creates huge redundancies. Fundamental change requires shifting this underlying dynamic to one that gravitates towards openness, partnership and co-creating value. Closed organizations and linear processes should be replaced with open ecosystems where anything can be accessed on-demand with a reduction in transaction cost.
Businesses are about to go through an incredible transformation to become something we have never before seen in the history of commerce. This change in thinking is supported by the exponential rise of digital technology and connectivity. The centralized information systems of today work to lock up assets within a given supply chain. This centralized computing can provide accessible and trustworthy information about the original journey and impact to build trust and brand.
The shared, secure and trusted decentralized data storage can reduce or eliminate fraud and errors in the supply chain preventing the illicit trade of goods. The decentralized web offers the potential to redirect and reshape the architecture of today’s global supply chains. With data transparency, SCM can start to incorporate all relevant factors to build sustainable systems with peer-to-peer networks. The producers and consumers should be connected more directly bypassing many layers of intermediaries to create a more equitable system. A decentralized system is also a more resilient and flexible one. What was once a linear supply chain path is transforming and collapsing on to decentralized networks becoming an integrated network characterized by a continuous flow of information and analytics between peers? These emerging networked organizations will be built on connectivity and data.
The value is shifting from creating things to facilitating connections from linear production processes to networks of dynamic exchange. The understanding of the supply chain today is shifting from thinking of it as a linear single chain to a nonlinear networked chain. Essentially, the supply chain is a complex adaptive system composed of multiple agents constantly adapting to each other’s behaviour.