Reasons to track – eight percent of goods, 3.6 percent of profits vanish in supply chain
Eight percent of stock in the supply chain, between production and consumption, never even arrives – mostly because it either spoils in transit (4.3 percent) or is discarded as surplus (3.4 percent). This failure of stock preservation and demand forecasting (“overproduction”) in the supply chain costs $163.1 billion worth of inventory per year, worth 3.6 percent of annual profits to “businesses” involved in the global supply of goods.
This is the result of a consumer poll and business survey by US materials science and digital identification company Avery Dennison, which makes labeling materials, bonding solutions, and tagging solutions for industrial, medical, and retail applications. Research was conducted by UK consumer research agency Canvas8 via an online survey in June of 7,500 consumers and live interviews in August with 318 supply chain “tech execs”.
The research focused on five sectors in five regions: apparel, automotive, beauty, food, and pharmaceuticals in China, France, Japan, the UK, and the US. The report, The Missing Billions: The Real Cost of Supply Chain Waste, says the supply of beauty products and food items is most wasteful, with 10 percent of stock discarded (6.2 percent and 2.9 percent because of overproduction, respectively; four percent and 7.1 percent due to spoilage of damage).
All of which points to better tracking and monitoring of assets in the supply chain, of course – and better planning and prioritising of technology investments. And the report finds, actually, that logistics companies are making investments to improve supply chain visibility and traceability. Three in five (61 percent) have already deployed tracking solutions, and a third intend to do so – taking the total to 95 percent (at some point, if they follow-through).
The study finds as well that, within five years, 99 percent of companies plan to use smart devices, including sensors and drones, and 97 percent of companies will use industrial IoT. Ninety seven percent plan to invest in blockchain within this timeframe, up from 12 percent so-far invested. There is more: 87 percent of “global firms” reckon they can already track or measure supply chain waste, and 81 percent have invested in tech to drive sustainability.
Thirty percent rank “autonomous delivery vehicles” as ‘most strategic’ to address supply chain waste over the next two years, the report says. The pressure is on; 90 percent of business leaders are “under pressure to become more sustainable”. But there is a disconnect too, apart from the fact almost a tenth of supply-chain efforts are wasted. Only 4.4 percent of technology budgets on average are dedicated to supply chain sustainability, the report finds.
Which is a statistic that might unravel under scrutiny. But the message of the report is clear: that there is a major problem with wastage and sustainability, which the industry wants to fix, and a potential solution with tracking and analytics technologies, which the industry knows about, and yet alignment of these two function in the equation is not so easy. Avery Dennison says: “Companies are acutely aware of the problem, [but] are not investing… to fix it.”
It goes on: “Respondents say that on average 28.9 percent of their organisation’s sustainability impact comes from the supply chain. However, just 4.4 percent of technology budgets on average are specifically dedicated to supply chain sustainability improvement… Respondents [also] cited challenges to achieving supply chain resilience including ‘integrating disparate systems’ and ‘insufficient coordination among internal stakeholders’.”
At the other end of the supply chain, there are “mixed signals” about and variations with consumer shopping habits, influenced by economic pressures as well. Quality and cost are the key concerns for consumers. UK consumers are the most cost-conscious (28 percent list it as the top priority), followed by France and Japan (both at 25 percent). China is an outlier in the survey, with just six percent stating cost as their number one concern.
More concerning, maybe, is that just 16 percent of shoppers put sustainability in their top three factors and only 12 percent prioritise ethical sourcing of products. Avery Dennison suggests a desire for durable products – ‘durability’ is ranked by 48 percent as a top-five concern – is an opportunity to “shape the future… by putting a greater focus on product durability”. Transparency helps, too, it says. “Forty-three percent [say]… transparency… is important… when buying food and beauty products.”
Francisco Melo, senior vice president and general manager at Avery Dennison Smartrac, commented: “The current supply chain disruption is leading to a waste crisis making the case for sustainable practices even more urgent. There is a huge opportunity for organisations to accelerate digital transformation that will help to create longer-term systemic change. The moral and economic case is clear.
“The study shows the desire from organisations to embrace technological advancements for the benefit of business and the planet. Digital triggers such as RFID, provide unprecedented end to end visibility in a highly efficient and accurate way. Connected products not only shine a light on supply chains but also reveal valuable new information to enable consumers to make better decisions, including transparency and carbon footprint data.”