Green, lean and run by machines? The future of supply chains

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Operating high-performance supply chains today is harder than ever before.

While a digital set-up forms already now the foundation for efficient and competitive supply chain networks, many businesses still struggle to catch up.

But operating manual processes and disjointed systems within supply chain networks won’t be an option in future. So where will the ongoing changes lead us? Let’s look at some central areas of supply chain logistics with a high economic impact.

Moving and storing goods has always been a major cost factor. With various borders to cross, many parties involved and an increasingly global customer base, margins are constantly eroding. Transport is expensive, with over half its costs accounted for by staff, particularly drivers, followed by fuel costs.

To reduce costs, companies are increasingly using route-planning and fleet management software, cooperating with other dealers or suppliers and taking in- and outsourcing measures. In future, more consistent and advanced automation will generate more savings. This includes fleets of self-driving trucks and fully automated distribution centres with stock put away drones, autonomous forklifts, and mobile automated guided vehicles (AGVs).

What will people do then? Rather than operating individual equipment, such as trucks or forklifts, entire fleets will be remotely controlled and managed by people in future. Human interaction will evolve from the physical handling of equipment and materials to developing, operating, and maintaining it.

The increasing deployment of artificial intelligence (AI), used already for accurate capacity planning and demand forecasting, will enable businesses to be much more efficient and proactive in their supply chains in times to come. Predictive analytics solutions will help to optimise the deployment of delivery vehicles and direct them to locations where demand is expected, which will further reduce operating and warehousing costs.

Another area to keep an eye on is sustainability. Its increasing importance will call for much more drastic changes in future. Current efforts to reduce CO2 emissions, for example, will need to significantly ramp up. And as further environmental impacts come to light, such as from sulphur hexafluoride emissions (used widely in the UK for fire safety), supply chains will need to adopt much faster to new official control frameworks.

Luckily, this trend coincides with consumers’ increasingly “green mind set. This allows operators to generate win-win synergies across transportation and distribution networks. The right approach will lower costs, meet customer demand, and reduce emissions at the same time. More and more providers will offer delivery options directly linked to their economic and sustainability impact. “Green slots” for deliveries at lower prices will become the norm – a requirement rather than a “nice to have”. This will allow further pooling of resources, consolidation transports, and reduction of inventory.

As part of these developments, we will also see the piles of papers disappear that currently still accompany the movements of goods. Today, this forms a significant burden for businesses, transport operators, public authorities, and the environment.

Digitalisation across all modes of transport and sectors kicked off some time ago, but we are still not “paperless” at all points of the value chain, particularly when crossing borders. Recognising the need to support this development, the European Commission adopted a proposal for a regulation on electronic freight transport information in May 2019, which aims to provide for a fully digital and harmonised environment for information exchange between transport operators and authorities.

Businesses throughout global supply chains in manufacturing and logistics have many challenges ahead to master this quickly transforming environment. And it’s clear that those who embrace technology and push forward the digitisation and integration of their supply chain networks will stay ahead in this race.

Geoff Taylor

Geoff Taylor is Managing Director of AEB in the UK and has been with the company since 2017. Together with his team, Geoff works closely with manufacturers and traders across industry sectors to understand the impact of market developments on global trade processes and what it takes to build efficient and flexible supply chains in the digital age to ensure future success.

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