The ethical supply chain: Definition, examples, stats
Consumers expect more from the brands they buy from, and an ethical supply chain is now a requirement. Learn what it means and how to get started.
What is supply chain? Supply chain is the entire system and all processes involved in delivering products or services to end-users. This network between companies and suppliers includes beginning stages like sourcing and procurement to final delivery, and involves all activities, employees, technologies, organizations, data, resources, processes, and components involved with getting goods or services to the users.
And, in case you haven’t heard, supply chain is having an ongoing moment: Over the past two years, supply issues have been front-page news – from toilet paper shortages to shipping container chaos – as a result of global disruptions related to the Covid-19 pandemic, climate change, and political unrest.
What was once a topic primarily discussed among those in specific types of business, supply chain has become a dinner-table conversation as people who’ve never considered the subject before wonder if basic supplies like food, medication, and building materials will be available like they were in The Before Times (Pre-COVID-19).
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Supply chain definition and models
Supply chain is defined as the functions and processes involved in the flow of products and services to customers. This is far from simple, however.
It takes a series of winding steps to get products or services to the end customer. Raw materials must be transported, transformed, and distributed. Products must be manufactured, packaged, stored, and delivered on time.
In today’s global marketplace with supply chains that are increasingly intertwined, the supply and demand function has become extremely complex.
And customer expectations for a seamless buying experience are higher than ever, so building a resilient, balanced, intelligent, predictive chain is a top priority on every corporate agenda. In fact, it’s essential, as shortages and delays pile up: In a new survey by The Institute for Supply Management, purchasing managers found the average lead times for production materials, capital equipment, and supplies all reached the highest records back to 1987.
There are six models of supply chains:
- Agile model: Optimal for products requiring expertise rather than mass-automation, like specialty or custom-ordered goods and products
- Continuous flow model: Provides stability in high-demand areas with little variance
- Custom-configured model: A hybrid of the agile and continuous flow models, this model allows for custom configurations during production and assembly
- Efficient chain model: End-to-end efficiencies are optimized in this model for intensely competitive markets
- Fast chain model: Best for responsiveness and getting to market quickly for businesses that change their products frequently
- Flexible model: Offers the ability to meet high-demand moments, as well as low-volume periods, and can easily be switched on or off
Does supply chain affect ecommerce? Yes. Here’s how.
One of the biggest trends affecting supply chains is the rise of e-commerce.
According to Emarketer, in 2022 worldwide e-commerce sales will be over $5 trillion for the first time, or a fifth of overall retail sales. Investment in an efficient supply chain is particularly important as e-commerce continues to grow and evolve.
Yet, consumers are losing patience with supply chain issues. More than 70% of shoppers either switched brands or switched stores when the products they wanted became unavailable, according to a McKinsey study.
Supply chain shortages directly impact e-commerce operations and growth, when e-commerce businesses have to grapple with shipping and production delays, shortages of packing materials, and rising costs. That means planning for holiday inventory, for example, needs to start earlier to deal with potential supply chain disruptions.
E-commerce businesses, in turn, impact supply chains in a variety of ways, including big changes in logistics and warehouse capacity. One study found, for example, that e-commerce companies require three times as much warehouse space as traditional retail.
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Supply and CX: Closely intertwined
Not surprisingly, supply chain success is also directly correlated to the customer experience.
Today’s shoppers want real-time updates into their deliveries, which has pushed companies to go even further in investing in supply chain technology that provides better visibility and decision-making capabilities.
As a result, supply leaders want a 360-degree view into what customers want and need: According to Gartner, more than 60% of supply chain leaders are investing in developing and maintaining access to voice of the customer (VoC) data, from customer product use data to customer satisfaction data.
There’s no doubt that any supply chain crisis is, at the core, a CX issue. That means organizations need to keep a close eye on supply chain issues and communicate fully and with transparency to customers.
Never break the chain: Supply trends to watch
Although e-commerce growth in the United States has returned to pre-pandemic levels, delivery volumes – and customer expectations around those deliveries – are higher than ever.
Following are some of the top trends to keep an eye on as the world of commerce evolves:
- Agility via technology: Flexibility and adaptability within tech stacks will become more important as the customer experience continues to drive the future of commerce.
- Greater focus on last mile delivery solutions: Accounting for about half of total delivery cost, last-mile delivery is also critical to customer satisfaction and retention.
- Returns supply logistics and management: Customers expect simple and reliable return processes, meaning supply chains must be designed to handle mass returns and peak seasons.
- Advanced analytics: Real-time data and applications will provide better efficiency and visibility, while data-driven decisions will boost profits and customer loyalty.
- Sustainability and carbon footprint reduction: Sustainability has created a focus on green consumerism. Watch for more companies to implement eco-friendly efforts into their supply and demand.
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What to expect: Supply chain challenges, twists, and turns in 2022
This is not your grandmother’s supply chain. Thanks to the global nature of the modern chain, with organizations spread around the world, any kink can quickly ripple out and cause significant damage to operations and customer service.
Supply and demand challenges show no signs of slowing down in 2022. The New York Times recently reported that addressing supply disruption, from shipping delays to rising prices, “will require investment, technology and a refashioning of the incentives at play across global business.”
In 2022, that means organizations will have to make sure they invest in supply resilience, agility, analytics, automation and, above all, customer-centricity.
The federal government may be taking steps to address the supply crisis, with the Biden administration recently outlining a host of new measures, but disruptions won’t cease anytime soon – meaning that investing in a tech stack that offers the best agility, reliability, and visibility into your supply and demand is likely one of the best investments you can make for your business.
