Gaining a competitive advantage through supply chain management
With the economic recovery underway, a vaccine roll-out imminent, and the cost of capital remaining low, consumer confidence is trending upwards. International trade (further supported by the new Regional Comprehensive Economic Partnership (RCEP) agreement) is expected to increase as import demand climbs on the back of the economic activity, population growth, and the material shift in domestic household spending from travel and leisure to consumer goods. Export outcomes remain fluid however, noting ongoing discussions with some of our trading partners.
Pre COVID-19, supply chain management was largely predicated on consolidating volumes to drive lower unit costs, and minimal inventory holdings. Whilst this approach may have worked in a stable market, it gives rise to increased risk. The management challenge for 2021 will be in balancing the reduction in risk to an acceptable level whilst also pursuing profit restoration. Businesses that have invested, and continue to invest, in their overall supply chain and partners, will be best positioned to de-risk their processes, realise efficiency gains, diversify operations towards growth sectors, and maintain appropriate operational agility to respond to shifts in supply or demand drivers.
Whilst some retailers are bringing aspects of their logistics back in house and/or developing their own outsourced offering, the broader trend towards outsourcing fulfilment and distribution activities is likely to continue, as businesses pursue asset light models, look to eliminate any single points of failure, and support scalability.
Further, the shifts to micro-fulfilment and acceleration of B2C activity are transforming the sector. Online channel fulfilment, with its inherent operational inefficiencies, demands a warehouse footprint that is materially larger than that required for traditional brick-and-mortar sales. This is encouraging increased levels of automation (e.g. autonomous mobile robots, automatic storage and retrieval systems) and enhanced data solutions (e.g. AI dynamic fleet routing, data analytics and inventory management) to secure a competitive advantage.
