Supply chain challenges: how does digitization change rules?

Suppliers worldwide are facing significant challenges due to changes in customer behavior since the growth of e-commerce, driven by the COVID-19 pandemic.

Digitization has taken on a crucial role in supply chain and logistics activities but it remains a puzzle that suppliers and retailers are still trying to fully understand. According to a survey by automation firm Jaggaer, only 9% of the suppliers surveyed reported being comfortable with digital operations, while more than 90% reported struggling with various tedious processes.

The challenge for all of them is to find how to adapt and use technology in the best way to take advantage of the opportunities that e-commerce is opening up. However, significant areas of friction are making this change more complicated. In a nearshoring vs. offshoring market, successfully addressing these challenges can make a difference in retaining clients.

Where friction exists

Whole digital experience: 57% of participants reported that their key processes are automated but they need a fully streamlined experience.
Tedious activities: 17% of the suppliers said they have manual processes that dull their activities and spend a lot of time on back-end processes.
Cumbersome work: 17% of the speakers reported that they have applied some digitization, but they still have cumbersome invoicing and customer communications activities.
Successful automation: only 9% of the suppliers reported working with fully automated processes.

Multitasking is a problem for suppliers

Multitasking poses a problem for suppliers, according to Jaggaer's survey. 65% of the suppliers surveyed stated that they must manage multiple platforms, while 43% mentioned that managing at least 10 marketplaces is a major obstacle for their activities. Additionally, 22% of suppliers use at least 20 systems to connect with their clients, making managing their work increasingly difficult.

Communicating with clients is a crucial activity, but it is also an important obstacle for 39% of suppliers, along with manual processes. Responding to buyers' communications, information requests, and proposals takes up more than 25 hours weekly for 32% of suppliers, with 70% spending at least 10 hours on this area. Therefore, there is an urgent need for automation in these tasks.

There are other top concerns for suppliers, such as:

Solving the need for more information and data flow between systems, an issue for 33% of suppliers.
Limited insight into customers' demand, which is a problem for 28% of suppliers.
Lack of skilled personnel, which affects 17% of suppliers.
Limited insight into inventory, which is an issue for 11% of them.

Different industries have various challenges

Manufacturing and chemical industries, for instance, have different needs and challenges that they need to solve. For 77% of manufacturing enterprises, shortages, and strained production capacity are the most significant problems, while the talent crunch affects 54% of factories. These enterprises are considering artificial intelligence mechanisms that could recommend them to specific buyers and a centralized hub for accessing new buyers as significant advances.

For the pharmaceutical and chemical industries, inflation and shortages are the biggest challenges for 83% and 67% of suppliers. These industries believe that having systems that autonomously invoice and collect from customers (67%) and data to compare with their competitors (83%) would improve their e-commerce activities.

Jaggaer's survey highlights the need for a fundamental change in enterprise commerce because more than incremental improvements are needed to address the challenges and inefficiencies that suppliers face. However, there is Good news in the next phase of the supply chain. According to Sifted, a logistic intelligence software enterprise, the supply chain returns to general efficiency levels. Their report "What's Trending in Supply Chain Logistics for 2023" states that shipping demand has normalized since the pandemic caused closures and delayed delivery times.

Shipping volume has been down almost 7% from last year since April 2022, with FedEx experiencing a 9.6% decrease and UPS realizing a 3.4% decrease. Carriers may view some of this decreased volume as a sign of economic headwinds slowing shipping down, but Sifted's data indicates that the reduced volume is more of a normalization back to pre-COVID shipping levels.

On-time delivery is also improving, demonstrating that the supply chain and logistics are recovering from the pandemic. However, it poses a challenge for logistics operators. Like in the suppliers' field, it is an adaptation issue again.

Sifted recommends taking several actions to deal with this issue, including:

Diversifying the carrier mix to reduce risk and lower costs.
Improving the distribution network by creating partnerships with fulfillment centers and optimizing the distribution footprint.
Avoiding oversize and dimensional weight surcharges to reduce shipping costs.
Working with carriers as allies to improve e-commerce and logistics operations.

Frontier Industrial offers industrial land for sale and industrial buildings for lease in the most productive areas of Mexico to develop different industries, such as retail and logistics, in a nearshoring vs. offshoring scenario. If you plan to establish operations in Mexico, contact us and ask for our portfolio.