January is in the books. That leaves 11 more months in 2021, a year that hopefully will not be as disruptive to the global supply chain as the previous one, in which the COVID-19 pandemic brought the world economy to a standstill. Trade lanes shut down, production lines halted and products spoiled as companies around the world struggled to adapt.
In the first quarter of 2020, the total shutdown of the Chinese manufacturing ecosystem sent massive supply shocks across the globe, with 94% of Fortune 1000 companies experiencing supply chain disruptions. During a six-week period in the spring, losses for the U.S. retail sector alone totaled $700 million due to production and transportation shortages.
While these impacts were traumatic, they shone light on the critical importance of supply chain infrastructure and the need for digital transformation. For supply chain investors, 2020 was a banner year, with $52 billion invested in supply chain tech in 2020, up from $2 billion in 2011 and outpacing fintech investment growth over the same period.
As we look to 2021, optimism is abundant. To determine where the greatest opportunities are for the remainder of the year, we surveyed 11 leaders in the supply chain space. Responses from the VCs, founders, analysts and operators we surveyed highlight interest in three key areas: 1) transparency and visibility; 2) supply chain as a strategic function; and 3) automation and optimization.
Transparency and visibility
JETT McCANDLESS, founder and CEO, project44: “With COVID, shifting global regulations and other unexpected scenarios (i.e., increasingly severe weather, widespread fires), shipping challenges have become more common and are likely to grow … more so over time unless strategic changes are made. The best way to navigate shipping slowdowns is having the ability to seamlessly shift from one transportation mode that is running into problems to another. … We live in a world where e-commerce companies can modally shift within a day or two for domestic legs and within a month for international legs. This is a huge advantage that must be pursued and embraced by everyone within the supply chain.”
BRIAN LAUNG AOAEH, co-founder and general partner, REFASHIOND: “Supply chain visibility is going to become a must-have feature, and visibility is going to become the foundation on which other important functionality is developed. You can’t have supply chain visibility without data and other types of information, so I expect corporations to invest more heavily in software and services that synchronize data and information across multiple counterparties in their value chains. It is part of a trend that will lead to the creation of supply chain platforms.”
Supply chain as a strategic function
DAVID ROSS, research managing director, Stifel: “After several shocks to the system in 2020, we believe 2021 will be a year of further investment in supply chain improvements, both on the carrier side and the shipper side. As logistics is viewed more as an investment than a cost, expect things to keep changing and new winning companies to emerge.”
DAVID MAHIN, principal and industrials strategic adviser, L.E.K. Consulting: “Physical supply chains, like most aspects of 2020, experienced significant disruption. Some disruptions caused tangible impacts, such as lengthening and even severing supply chains or adding costs; others simply exposed vulnerabilities as operators realized how delicate their upstream and downstream supply chains truly are. We expect operators to react to these disruptions by taking a more strategic view toward supply chain management and see a future where winners separate themselves from competitors by turning their supply chains into an asset to be leveraged rather than a risk that needs to be mitigated.”
CHAZ FLEXMAN, CEO and co-founder of Forward Foods, co-founder of Pattern Brands: “The past five-plus years have focused on bringing transparency to the supply chain industry, providing tools and services that have brought the industry online. The next phase is connecting these silos of information that are now accessible, to give operating leverage and collaboration across a company’s various operations.”
GUILLERMO GARCIA, CEO and co-founder, SmartHop: “We expect 2021 to be challenging but filled with opportunities. The critical need to circulate COVID-19 vaccines, while battling tight freight capacity and the always persistent threat of trucking bankruptcies, require all stakeholders to find better and more efficient ways to work together. Small trucking companies and owner-operators will play a key role in filling in supply chain gaps; they are fast, agile and eager to step up. Industry leaders have an opportunity to allow SMBs to demonstrate they are capable of getting the job done.”
WILL SZCZERBIAK, partner, Greycroft: “The postmortem of the COVID-19 vaccine rollout will shed light on scores of new opportunities in supply chain that we’re currently missing/overlooking. It isn’t often that we’re tested in such a profound way and these situations — while difficult in the moment — tend to force us into new ways of doing things. The learnings will be the foundation upon which the most perceptive entrepreneurs build great companies.”
Automation and optimization
MIKE PLASENCIA, RyderVentures and new product strategy, Ryder: “Supply chain integrations across solutions and partners have been an accelerating trend. In 2021, AI and predictive analytics will stand out as decision-making tools, enabled by vast connections and data availability and leading to new solutions that optimize intercompany activity vs. intracompany. Also, e-commerce will continue to prime the market for new logistics solutions to support the hyperactive demand. Innovations in different segments of the parcel supply chain have taken root, and we will start to see technologies that are able to dynamically integrate the different pieces for end-to-end differentiated solutions, opening the prospect of virtual parcel carriers.”
DAYNA GRAYSON, co-founder and general partner, Construct Capital: “Productivity was up in 2021 while output was down, so it’s hard to get a true measure of progress right now. In any case, unpredictable demand and rapid acceleration of change were key themes of 2020 that highlighted the lack of digitization and flexibility in corporate supply chains — and this must be corrected. In 2021, I believe we’ll see further redundancies built into the supply chain, which require speed and technology enablement to achieve. AI automation to enable better predictability and increased digitization to enable full visibility from support to delivery are two areas we’re particularly excited about at Construct.”
SANTOSH SANKAR, founding partner, Dynamo Ventures: “Supply chain technology is entering the year as ‘belle of the ball,’ underpinned by a need to build resilience and flexibility in a function that’s as much a driver of revenue and customer satisfaction as operating leverage. One area I’m keen to lean into is the concept of ‘embedded optimization’ whereby process improvement and optimal decision engineering is part/parcel to workflow and workflow automation software. We’re seeing this need in load matching, order management and last-mile applications.”
TY FINDLEY, managing partner, Ironspring: “In 2021, we will watch the rise of the term ‘first mile’ within supply chain vernacular. Now that ‘final mile’ and ‘middle mile’ have been pretty well defined and invested behind, attention will start to shift upstream to the very earliest processes of when a shipper is cutting a purchase order to their suppliers that in turn sets in motion the entire downstream of supply chain activities within the ‘middle mile’ and ‘final mile.’ There is a massive efficiency and sustainability opportunity ahead for whichever solution can tie together both granular-level purchase order data housed within the sourcing and procurement departments and the associated yet often detached logistics department workflows (international and domestic).”
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