Small Businesses and the New Supply Chain

In recent history, there have been two radical transformations in the way we interact and do business that have impacted the global supply chain. Read on to find out more.
Learn more about small business and the supply chain

By Kim Garner, Managing Director, FedEx Express Australasia

In recent history, there have been two radical transformations in the way we interact and do business that have impacted the global supply chain. These were driven by great innovations that touched every facet of our day-to-day lives. The first was in the 20th century, when the focus was on speed and agility. Arguably the biggest game-changer of that century was the invention of the aircraft, which allowed people and freight to travel at unprecedented speeds. Global trade became fast, with goods moving across entire nations in less than a day.

The second transformation is the digitisation of the 21st century, which has not only made things faster, it’s created greater precision and connectivity. Widespread access to the internet and the proliferation of internet-enabled mobile devices has revolutionised the way customers and businesses interact. Businesses have never been more connected to such large numbers of people across the globe. This means being more accountable to customers than ever before. For businesses transporting their products, recent technologies such as tracking devices have given consumers visibility that wasn’t even imaginable 40 years ago.

For businesses to effectively expand their customer base, both domestically and internationally, they must not only understand these shifts, but how to act on the opportunities they present.

Big changes with big opportunities

One of the most significant opportunities presented by the new realities of the supply chain is the rise of the ‘micro-multinational’ – the potential for smaller businesses to become international. In the early 20th century only big businesses were able to gain the economies of scale that allowed them to export. Now, whether you’re a multi-national conglomerate or a two-man operation being run from a garage in Wagga Wagga, you can sell to customers from Beijing to Berlin. Put simply, smaller businesses are now able to get their piece of the pie.

FedEx customer Jane Ramsay provides a perfect example of how anybody with an idea can have customers on a global scale. Her fashion business launched right after the Global Financial Crisis, leaving Jane second guessing her decision to start a company. Consumer confidence was down as the Western World recovered from the largest financial crisis it had experienced in decades. To add to the mix, Jane’s business, like many small businesses, started with minimal capital, seeing her run a fashion label from her family home.

Jane Ramsay still operates today as a successful Australian fashion label, because the new supply chain allowed Jane to ship products across the globe to customers who were able to engage with her brand via the Internet.

Efficiency is the new speed

Another trend that businesses of all shapes and sizes need to understand is the move away from focusing primarily on speed, to looking more holistically at efficiency. For many businesses, a slower process that allows for precision and predictability can serve their customers better.

For example, it may make economic sense for a business to transport certain goods by sea rather than by air, particularly for heavier types of freight. This is all about trading off the costs of holding inventory versus the costs of faster air freight. But for many commodities, businesses can benefit from lower inventory levels supported by international air freight. In these cases, customers benefit from better price mixes, and they are able to track the progress of their goods through the use of tracking devices meaning they’re less likely to experience anxiety over transit and arrival information. At FedEx, we’ve adapted to changing customer expectations by developing innovative new technology. For example customers transporting goods such as healthcare shipments may be concerned about the impact of environmental factors like light, pressure and temperature, particularly on a longer journey. In response we developed SenseAware, technology that not only tracks the location of the package, but provides this environmental data on a real time basis. It’s all about delivering what they want.

Businesses have a wealth of options, so they should tailor their solution to their customers’ needs. With consumers’ expectations changing, businesses need to manage their supply chains effectively and use the technology available to them to ensure a streamlined, sophisticated approach. A sophisticated supply chain creates a better experience, which results in the tangible business result of a long-lasting customer that is loyal to your brand.

What’s the next destination?

We cannot predict where the supply chain will go next, but we do know that the transformation isn’t over. It’s likely we will still use planes, trucks and ships to transport goods well into the future, but technological advances will undoubtedly create new modes of transportation and communication.

Already in manufacturing, people are no longer talking about ‘off-shoring’ or ‘near-shoring’, but ‘next-shoring’ – not moving manufacturing from one location to another, but “adapting to, and preparing for the changing nature of manufacturing everywhere” according to a report from McKinsey*. According to the report recent innovations such as 3D printing could embed themselves in the supply chain, with companies choosing to replace traditional suppliers of parts with targeted usage of in-house printers.

Another trend we can be sure of as technology advances and more people gain access to the Internet in different ways, is that the world population will become more connected. This will mean new opportunities for the supply chain, as businesses will be able to access more customers around the world.

Business leaders will need to keep up with these changes and ensure they’re leveraging the potential of new technologies to enhance their customers’ experience. Failing to adapt means losing the competitive edge and ultimately losing customers.

*McKinsey actually coined the term “next shoring” http://www.mckinsey.com/insights/manufacturing/next-shoring_a_ceos_guide

   SME