Death of the Linear Supply Chain

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Traditional linear supply chains have long served organisations as an effective and low-cost model to meet consumer demand, particularly in markets with low customer centricity and high supply chain stability. However, the rise of e-commerce and omnichannel activities has created many challenges to the traditional model, prompting organisations to consider alternate supply chain approaches rather than a straight line from vendor to consumer.

The ‘bolt-on’ problem

The relatively low levels of network sophistication in the Australian market, coupled with the tyranny of distance between urban centres, has meant that many organisations have chosen to retain existing linear models despite market pressures. Instead, supply chain operations have typically been augmented with ‘bolt-on’ solutions to support the growing online demand, leading to an increased cost base and no clear strategy of how to return to economies of scale.

Adding further strain to the traditional model (and its ‘bolt-on’ solutions) has been the limited availability of raw materials, unanticipated labour shortages, rapidly increasing shipping rates and growing consumer demand spurred on by economic stimulus packages.

However, the huge (and ongoing) surge of online orders has been the major force pushing linear supply chains to breaking point. Many organisations who chose to retain the linear model have been unable to maintain effective operations due to a lack of agility, limited capability, monolithic Order Management Systems and immature augmentation models (if one was even present). The result; significant delays, ongoing shortages and ultimately, customer dissatisfaction.

The linear model is no longer fit for purpose – supply chains must adapt and transform to meet consumer expectations

Whilst traditional linear supply chain models have been effective in the past, they offer little resilience in the face of prevailing market conditions. The linear model struggles to keep pace with changing consumer demands, creating significant challenges for businesses operating in markets where consumers expectations are clear regarding personalisation and customer centricity.

When we look to the future it’s clear that consumers must be placed at centre of all things. Consumers expect businesses will anticipate their requirements and have designed their supply chains to ensure fast and convenient service; the linear supply chain is no longer fit for purpose.

Adopting a network approach will maintain your competitive advantage

Organisations must adopt a network approach, where customers are placed at the centre and resources are rapidly re-distributed based on consumer insights and trends. Networks must also meet sustainability hurdles set by consumers who will continue to critically analyse the environmental and social impacts of their purchase before choosing to buy. Organisations willing to overcome these challenges and adopt a customer centric network approach, will thrive in the post-pandemic world, witnessing top line growth that outstrips competitors.

Supply chain digitisation will accelerate your transition and help you keep pace with an ever changing market

The transition to a network approach requires organisations to challenge traditional supply chain thinking and adopt an intelligent supply chain approach, such as we are witnessing with Amazon’s growth in Australia. Like Amazon, organisations must embrace a digitally connected world and evolve end-to-end operations from re-active to pro-active, shorten the S&OP process, leverage insights from data and increase the speed of decision making. Partnership models should also be revaluated to ensure the customer promise can be achieved whilst balancing cost, service and sustainability.

Organisations that choose to invest in a true customer centric network will likely need to consider an alternate cost model. This investment, however, will be returned through improved customer experience and retention, lower rework costs and increased market share leading to faster optimisation potential and a speedier return to economies of scale.

Danger looms for those who wait…

Those that chose to hold on to existing linear models will quickly be outpaced by the competition, creating a gap to market that may never be closed.

Authors:

     

Luke Morris

Luke is a Senior Director within Capgemini Invent (Australia and New Zealand) leading the Supply Chain Advisory Practice. He is a supply chain professional with over 15 years industry experience in supply chain planning, operations and transformation and is passionate about helping organisations modernise their supply chains for a productive and sustainable future.