Solving supply chain challenges

Digitalization is often seen as a tool to drive efficiency and cut costs in the supply chain, but it presents wider opportunities for companies amid an increased focus on building sustainable supply chains. 

This is where innovative tools can come into play, wading through the masses of data available to provide a clear picture of where companies and supplies stand on key issues, such as modern slavery, supplier diversity, and compliance with regulations.

“Take modern slavery, for example. For large brands, the issue isn’t just about compliance—it’s about their reputation,” Julian Harris, RobobAI CEO, explained.

“Consumers care deeply about whether a company is involved in modern slavery, and it can significantly impact a brand’s image. Investors also take this seriously; banks, for instance, may offer different financial instruments depending on how good a corporate citizen the company is. So, it affects the company’s finances as well.

“There’s also the legal and compliance side. In Europe, there’s an increasing focus on regulations related to modern slavery, and in the UK, there’s the Prompt Payment Code. The Australian equivalent, ensures small suppliers are paid within 30 days.

“These regulations, along with others around Environmental, Social, and Governance (ESG), are becoming more prominent. For example, in Australia, there are specific laws around paying women-led businesses or working with indigenous suppliers.

“With companies increasingly tasked with managing ESG KPIs, we enable them to track and report on their progress effectively.”

Rising trend

Digitalization has been a long-standing area of evolution for the airfreight industry. But in recent years, the pace of change has accelerated significantly. Harris believes the embrace of available tools was fast-tracked by a decade or more due to Covid-19.

“The pandemic essentially acted as a burning platform, pushing these changes forward much faster than they might have happened naturally. Without it, we likely would have still seen this shift, but it would have taken another 10 to 15 years to reach today’s level of remote work and digital collaboration,” Harris explained.

The embrace of digitalization and insights is visible in recent events. For instance, with the new legislation in the U.S. encouraging more onshore manufacturing, you’ll notice decreased spending from China in the data.

Similarly, as inflation rises and interest rates go up, suppliers start offering buyers early-payment discounts—often 3-5 percent if the invoice is paid within 10 days. This happens because suppliers are eager to improve their cash flow in a high-interest environment.

“The challenge is that if buyers aren’t analyzing their data in real-time, they miss out on these discounts, which can hurt both parties. The buyer loses a cost-saving opportunity, and the supplier may face cash flow issues,” Harris declared.

“This cycle is clearly visible: when interest rates go up, suppliers push for quicker payments; when rates fall, cash flow pressures ease. But these are only accessible if you’re actively monitoring and analyzing the data.

Avoiding risks

Logistics is a prime example of how digitization is transforming industries. In the cargo supply chain, companies are moving toward real-time trading on rates and achieving significant cost optimization through better routing and similar efficiencies. The potential for gains here is enormous, and there’s still a long way to go.

However, digitalization also brings substantial risks. As more companies move their operations to the cloud, we face the challenge of potential single points of failure. For example, if any of the major cloud providers—Microsoft, Amazon, or Google—were to experience a significant outage, many businesses would suddenly find themselves without critical digital infrastructure, forced to revert to manual methods.

“We saw a hint of this risk with recent cybersecurity events like the CrowdStrike breach. So, while digitization offers tremendous efficiency, it also underscores the need for robust risk management as we become more reliant on these cloud platforms,” Harris cautioned.

“But realistically, what can you do if a provider like your ERP vendor—say SAP or Oracle—goes under? Suddenly, you’re left without an ERP system, potentially back to using spreadsheets. Or if Microsoft Azure goes down and you’ve moved everything to the cloud, what’s the backup plan?

“Duplicating every system as a contingency isn’t feasible because it would more than double costs, making it inefficient and unsustainable for most businesses. While having contingency plans and understanding critical dependencies is essential, it’s incredibly challenging as we all shift to digital platforms and the cloud.”

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This article originally appeared in AIR CARGO WEEK. Read the source article here.