Impact of Supply Chain 4.0 on national exports

26 Jul, 2020 - 00:07 0 Views

The Sunday Mail

Trade Focus
Allan Majuru

TIMES have changed and so has the way we conduct business across all sectors.

Businesses around the world are seeking solutions that can make them remain relevant in these unprecedented times.

Through all this, there is no denying that the consumer’s convenience has always been top priority for many businesses and has shaped how supply chain management systems are conducted, particularly during this era of Covid-19.

In such a rush for faster business solutions and an era where data is the new “gold”, Zimbabwean manufacturers should not be left behind.

So, why should local manufacturers be interested in moving quickly towards automated and improved systems in supply chain management?

The export business relies heavily on better production efficiencies, which in turn reduce the cost of production, making them competitive both locally and on the export market.

For example, an automated system for sorting and packaging of products can reduce operational costs compared to a manual process, especially during current times when movement of persons or labour is restricted.

The 2018 World Trade Report argues that the use of advanced robotics, combined with artificial intelligence algorithms, minimises the cost of storage and speeds up distribution to final customers.

To achieve such efficiencies, there is urgent need to address information gaps and create systems where information can flow in all directions and manufacturers are able to adjust their products and service to meet the needs of consumers.

What is required, therefore, is a deep understanding that the export business should not only be a concern for exporting companies, but also for suppliers of raw materials as well as distributors, because all stand to benefit from increased sales.

Over the past few years, major economies have been advancing towards automated systems and creating networks that integrate with supply chain management systems to increase their efficiency.

This has simplified analysis of data as well as improved performance of products, services as well as customer satisfaction.

All these benefits have been a result of businesses adopting functional Supply Chain 4.0 solutions.

The World Trade Organisation (WTO) describes Supply Chain 4.0 as “the re-organisation of supply chains — design and planning, production, distribution, consumption, and reverse logistics — using technologies that are known as Industry 4.0”.

Supply chains often refer to existing linkages between a manufacturer and its suppliers on all points of business, from production to distribution of a specific product to the final buyer.

This network includes different activities, people, entities, information and resources.

In exports, such linkages are crucial as countries with better linkages seem to perform better in exports than those without.

Even in integrating with global supply chains, third world countries with strong networks among all players in supply chains have been focusing on export-led development, which makes it easy to quickly learn about demand patterns in high-income markets and consumer preferences in such markets.

Although Industry 4.0 technologies “are largely implemented by firms that are at the frontier of supply chain management in high-income countries”, some African countries such as Rwanda, South Africa and Kenya are already looking at solutions that can assist them within their capacities in developing competitive supply chains.

Writing in this publication in April, we emphasised that technological advancements can cushion local enterprises against the impact of Covid-19.

The article titled “Local firms must embrace 4IR”, demonstrated that companies which are quick to embrace the fourth industrial revolution will survive Covid-19 and will likely perform better post-pandemic.

As the fourth industrial revolution (4IR) has often focused on specific processes within value chains — and in most cases on individual companies — there is need to consider creating seamless interaction between suppliers, manufacturers and customers.

Thus, adopting Supply Chain 4.0 solutions will strengthen transparency, which is a key enabler of development of competitive products.

Arguably, adoption of Supply Chain 4.0 can make Zimbabwean products land with ease on export markets as its focus is on a customer-driven business model.

WTO argues that the end result of these solutions “could be making the goods economy more responsive to consumer demand”.

By responding to market needs, local manufacturers could easily increase their share of the export market, which in turn could benefit all players within that value chain.

This is because for companies, whether conceived of as an advanced management practice or simply as a cluster of technologies, Supply Chain 4.0 provides substantial opportunities for firms to enhance productivity, profitability, product quality and performance.

In successful cases, Supply Chain 4.0 is integrating information flow, making it easy for planning within specific areas of sectors or value chains.

This information integration allows for equal participation of all players within the supply chain, an arrangement that could solve some of the challenges affecting Zimbabwean manufacturers.

For example, there are cases where some manufacturers of leather products are having to import raw materials, which could be easily sourced locally had there been an integrated flow of information between suppliers and manufacturers.

This has led to an increase in the demand for foreign currency, hence Supply Chain 4.0 can potentially improve on import substitution.

In this case, digital collaboration is designed into the supply model and contributes to improving competitiveness of locally produced commodities.

Technologies that integrate with Supply Chain 4.0 are generating enormous benefits through reducing costs, making production more responsive to consumer demand, boosting employment and saving consumers’ time.

For example, e-commerce, powered by Supply Chain 4.0, is seeing a boom in employment creation in developed countries as a result of improved sales and market share.

For example, companies like Amazon are constantly looking at innovative ways that will bridge the several gaps between all players in supply chain and this has resulted in employment creation.

According to Amazon data, while overall national retail employment declined by 29 000 jobs in 2017, Amazon created 135 000 new jobs in transportation and warehousing positions last year, more than offsetting the department store jobs lost.

Therefore, improving supply chains, where all players play an equally important role in moving products across the border can ultimately lead to job creation.

Further to this, Supply Chain 4.0 fundamentally changes the way information flows through the supply chain.

The processes by which this is done is now codified making it easier to rapidly assess and respond to changes in customer demand, tracking and tracing throughout the supply chain.

This is extremely relevant to exporting companies who wish to ensure they satisfy their clients.

Supply Chain 4.0 technologies offer synergies within supply chain management systems that allow for time saving opportunities.

For example, ZimTrade the country’s trade promotion and development organisation has seen these opportunities and created platforms that work towards improved linkages between players in specific sectors.

Working with COMESA (Common Market for Eastern and Southern Africa), ZimTrade is creating a platform that will connect manufacturers with packaging suppliers.

This platform will ensure that manufacturers get appropriate packaging that meets international standards, which will bring the much-needed convenience especially for companies that wish to export their products.

Creating such technology that offers supply chain convenience could go a long way in improving the competitiveness of companies.


Allan Majuru is the chief executive of ZimTrade.


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