Recently, I participated in a podcast with Lora Cecere where we discussed the following question: What would the supply chain of 2025 look like? Questions like this are always fun to consider. Of course, they would be easier to answer if one had a crystal ball. Below is where my mind went as we discussed this topic.
One of the things I have found quite remarkable in the last couple of years is how quickly cutting edge products are becoming available through big parts of the developing world. It seems the information revolution and the internet age have ensured people everywhere are aware of new products equally. Be it the next greatest electronic device or a viral music video. The highways of information dispersion are fast and efficient. Once the information reaches the four corners of the world, typically the effect is to generate a desire for the product or at least some of its features. This desire is the first step towards an actual demand. Historically, this has created some demand but it was always insignificant. However, I believe these days it is no longer insignificant and indeed is making for a long tail of the normal curve. (The phrase long tail was coined by Chris Anderson in his book by the same title).
With this easy access of information and the resulting effect on demand, one would imagine that the actual business would follow where goods and money exchange hands. However, in this regard, what we see is it only works this way where the distribution network is also efficient. Let us consider the example of apps. Apps as a group of products have shown a very heavy demand over the past few years. Now, because they can be downloaded instantly over the internet, they are now omnipresent. One of them is even linked to a revolution or two!
More often than not, the distribution network and the infrastructure has not kept pace with the reach of the information and the resulting desire for the product. While the information gets there instantly, the flow of goods still has to go through the old infrastructure and which has not been easy. It is here I believe the supply chains will make the biggest improvements in the next 10 years.
I believe the supply chains of the future will look at the strengthening portions of the long tail and decide to actively engage with them. Rather than seeing them as just opportunistic or spot businesses, I would see them developing supply chain strategies to take advantage of these demands. This could involve all of the following (plus other yet to be invented techniques):
- Getting involved directly in creating the distribution networks
- Designing cheaper alternate products for these markets.
- Looking for local channel partners
- Producing locally
While some of this has been done for a long time now, my suspicion is we will see an altogether different level. Companies that take the lead in engaging these long chains rather than waiting for them to become truly significant will define the new supply chain.
As an example, I share two stories I became aware of recently. Amazon started its own distribution company in India because it was not satisfied with the setup there. Then there was the news of Nestle using Barges to sell products along the Para and Xingu rivers in Brazil. The willingness on part of these and other companies to engage proactively with these regions will help guide the way to the supply chain of the future.
I think the supply chain of the future will be global in ownership, but will have very strong regional characteristics. It will be designed to cater to the long chain of local demands.