Plugdin Insights: How can technology alleviate the supply chain crunch?

Read time: 7 minutes

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Global supply chains are under strain, still reeling from COVID-19 and struggling to catch up with soaring post-pandemic demand for goods and products. And in the UK, things are heightened as we get used to new rules relating to border restrictions arising from Brexit.

The Business Continuity Institute’s 2021 Supply Chain Resilience Report reveals that the challenges of recent months have caused an uptick in the adoption of IT to record, measure and report supply chain disruptions. But 44% of companies surveyed still do not use technology in any of these areas.

Could continuing supply chain challenges serve as an incentive for technology innovation in an area that has been slow to adapt to modern times? Here, three BDO thought leaders look at the technology options for relieving supply chain pain.

What is the current level of supply chain technology innovation and integration?

Historically, companies tend to be OK when goods enter their boundary, in terms of receipting, storing, dispatching, delivering and planning production runs.

But understanding what suppliers they have, the relative important of those suppliers, what they produce, what are the quality standards, contract terms or delivery timelines - that’s not traditionally been enabled by technology.

There are good reasons for that: companies might not want to expose what’s down their supply chain, or there may be suppliers that don’t want to have who else they are trading with exposed because of commercial sensitivity.

Furthermore, in managing the supply chain, there’s an awful lot of reliance on third parties. And they don’t necessarily share information in the right format or in a timely manner. The technology is there in terms of tracking, dispatching and arrivals, but as far as we have seen there hasn’t been much that’s pulling it together.

How are things changing in the current climate?

Current supply chain issues are largely the result of an uptick in economic activity in western economies emerging from COVID-19 lockdowns, coupled with continuing coronavirus impacts - including closures and staff shortages - affecting shipping, ports and hauliers.

You’ve got supply being outstripped by demand, so the price of everything has shot up, exacerbated by the cost of transportation. Then overlay that with Brexit, with additional paperwork to import goods, and things get pretty tricky.

Demand is now increasingly unpredictable because of the impact of lockdowns on shopping habits and channels of distribution. But customer expectations haven’t changed.

The ‘Amazonification’ of trade means consumers want to know where their delivery is all the time, and they want it tomorrow, with certainty and predictability.

Against this backdrop, could there be increasing competitive advantage in developing systems that can help analyse and reduce supply chain risk?

Any tech firm developing a system that helps reduce supply chain risk has the potential to make a lot of money in the current climate. Supply chain technologies have a fair amount of ground to cover in terms of technology innovation.

We don’t even have a standardised terminology, so the chances of beginning to apply something like blockchain down a supply chain right now is probably quite a big ask.

Where the opportunity is, and where you are starting to see some sort of gap in the market to be addressed, is in collaboration across an industry. 

"If everybody buys into the supply chain from start to finish, that’s where you start getting things like a blockchain solution."

Now we have the technological platforms to provide that solution should somebody want to go down that route. The question is whether 2022 is the right time within individual supply chains to do that, and whether people are willing to invest in it.

That challenge varies by supply chain, by sector.

Which companies are most likely to lead supply chain innovation?

Businesses that offer platforms to automate daily receipts, warehouse operations and dispatches, allow their clients to reduce costs, be more efficient and facilitate reporting and tracking of goods.

Others take a sustainability approach, offering solutions that help clients be part of the green transition by optimising delivery routes and controlling fuel use.

Alternatively, companies focus on a sustainable procurement, offering risk management systems or reporting as a service.

Finally, some businesses offer platforms that integrate the relevant information of their logistics processes, providing market insights, easy quoting of services and other management tools.

The appetite to invest in supply chain technologies will likely depend on the size and complexity of a company’s operations. IS it onw time for a technological solution? If you've got 50,000 suppliers and 20,000 customers, then yes, probably. 

But even where there is a clear and present need for better supply chain management, it could be some time before an all-singing, all-dancing technology solution emerges. The starting point is mapping the supply chain as far as you can, so you’ve got visibility of what you’re dealing with.

What deals are we seeing in this space?

Listed logistics giant Wincanton has strengthened its e-commerce fulfilment services capacity by buying Cygnia Logistics, which serves brands such as BrewDog, Moonpig and Molton Brown.

The move allows Wincanton to capitalise on a shift to online retail, according to CEO James Wroath.

Meanwhile Nottingham-based Microlise Group has strengthened its position as a leading provider of transport management technologies with a listing on AIM. The money from the listing will help Microlise grow its fleet management software offering.

A further recent supply chain technology-related deal was Rutland Partners’ investment in Southgate Global, which is Europe’s largest trade supplier of machinery, equipment, and associated consumables to the industrial packaging marketplace.

The deal is another sign of growing interest around supply chain technology suppliers, allowing Southgate to grow in the UK and internationally - potentially through acquisitions.

With rising inflation further complicating the outlook for supply chains in 2022, we could expect continued strong interest in companies that can use technology to help goods reach their customers more cheaply and easily.

Do you need support with digital strategy? Get in touch with your local BDO advisor at plugdin@bdo.co.uk.

If your business operates in this area then take a look at the BDO Growth Programme, which aims to support high-growth technology businesses transforming logistics and the supply chain from April 2022. See our BDO Growth Programme.