Supply chain technology seeks to reduce costs, enhance visibility, and ramp up efficiency in global supply chains. These intricate networks can span numerous geographies, employing various modes of transportation and storage. In the case of a product like an automobile, the supply chain can involve hundreds of first-tier suppliers, with thousands more across all layers, each facilitating the production and movement of myriad parts required for manufacturing. Businesses are seeking solutions that can better handle disruptions, diverse sourcing, and enhance visibility and tracking; regulations and industrial policies are also catalysts for change.

A recent shift in supply chain strategy is notable. While the focus for decades was on “leaning out” and adopting just-in-time inventory principles to maintain lean stockpiles, the volatility experienced during the pandemic revealed the fragility of such approaches. Businesses are seeking solutions that can better handle disruptions, diverse sourcing, and enhance visibility and tracking; regulations and industrial policies are also catalysts for change.

Enterprise Supply Chain Management (ESCM) systems

Enterprise Supply Chain Management (ESCM) systems constitute a comprehensive suite of platforms, solutions, and technologies designed to facilitate the seamless flow of materials, parts, and relevant information within an organization and across its network of partners. Situated within the realm of enterprise applications, ESCM encompasses supply chain planning, sourcing/procurement, and execution applications. Historically, ESCM applications have been deployed to streamline supply chains and cut costs. However, recent global events, such as the COVID-19 pandemic, geopolitical conflicts, and strained trade relations, have prompted a strategic shift towards prioritizing increased visibility and resilience to mitigate supply chain risks.

In tandem with broader trends in enterprise applications, cloud-based solutions for ESCM are experiencing robust growth, while on-premises systems face a potential plateau. According to market researcher IDC, cloud-based solutions are projected to contribute 51% of ESCM revenue by 2026. Key incumbents in the ESCM space include established names like SAP, Oracle, Manhattan Associates, Descartes Systems Group, E2open, Anaplan, Infor, and Blue Yonder. Concurrently, startups are entering the segment with offerings ranging from niche applications to novel technologies, including IoT for enhanced visibility, AI for optimizing and orchestrating supply flow, and platforms supporting and integrating e-commerce and mobile applications. Some startups are also addressing ESG concerns, focusing on tracking and assessing carbon footprints and materials sourcing across supply chains.

The ESCM landscape is further diversified by subsegments, including:

Asset Tracking & Management: Involving systems, sensors, and software to track and optimize the movement of products, parts, and materials within organizations and across supply chain and distribution networks.

ERP & Inventory Management: Encompassing management applications and systems aimed at optimizing flow and costs throughout an organization and its partner networks.

Procurement & Sourcing: Providing tools to support supplier assessment, selection, risk evaluation, cost management, and performance monitoring.

Supply Chain Finance & Payments: Involving financial platforms that offer working capital, automate payments, and provide additional services such as insurance across the supply chain.

In developing markets, some startups are leveraging mobile applications for rural suppliers and distributors, bypassing traditional manual processes and operations. This strategic leapfrogging aims to enhance efficiency and connectivity in areas where conventional infrastructure may be limited.

Opportunities in Enterprise Supply Chain Management:

A prevailing trend among software companies in enterprise supply chain management is the transition to cloud-based subscription models. This shift not only reduces IT overhead compared to on-premises systems but also enables the development and deployment of microservices and customized updates. IoT and inventory tracking systems, such as RFID or barcodes, typically integrate software and hardware models. Financing and payments supporting supply chain activities often revolve around transaction-based schemes.

E-commerce:

• Investment is driven by the efficiency demands of e-commerce fulfilment.
• Managing and tracking inventory across various channels remains a critical goal.
• E-commerce’s impact on logistics is significant, with customers seeking reliable and timely fulfilment, driven by a desire for the instant gratification of physical retail experiences.
• Direct-to-consumer models from brands and manufacturers introduce new challenges and optimization opportunities in fulfilment and delivery.

Supply Chain Planning:

• Companies are reevaluating their supply chain management approach in response to shocks like the pandemic, geopolitical events, and shifts in global manufacturing.
• Adding resiliency and redundancy to enterprise supply chain management to mitigate supply risks requires balancing against other strategic objectives, such as maintaining lean production and distribution systems.
• The scope of supply chain design expands as customers seek to meet sustainability goals, monitor, and minimize emissions, and address emerging regulations around sourcing.
• Demand greater granularity of data, risks, and scenarios in supply chain design and planning solutions.
• Navigating this landscape and optimizing operations require new planning tools to quickly assess dynamic scenarios and mitigate heightened risk and costs.

Visibility:

• Supply chain volatility has fuelled demand for clearer visibility into suppliers, shipments, and distribution nodes.
• IoT, RFID, and other advanced tracking technologies are growing to meet this demand and deepen integration across various supply chain tiers.
• Further integration and incentives are essential to enhancing inclusion and compliance as product and supply chain complexity increases.
• Large retailers and customers like Walmart can impose technology solutions on suppliers, while mid-tier firms must be nuanced with incentives and cautious of competitive dynamics across supply chains to enhance visibility.

Sustainability and Regulation:

• Tracking, monitoring, and mitigating the environmental impact across supply chains are growing priorities.
• Companies are striving to meet sustainability goals and objectives.
• Heightened regulations around sourcing and provenance of parts and materials in response to new geopolitical realities must be met and managed.

Risks and Considerations in Enterprise Supply Chain Management:

Easing Stress on Supply Chains:

• The recent alleviation of stress on supply chains may lead to a potential decrease in the urgency to address issues exposed by recent volatility. This could result in a slowdown in initiatives aimed at enhancing supply chain resilience and efficiency.

Recessionary Pressures:

• Near-term recessionary pressures might compel technology decision-makers to temporarily halt plans for the adoption and deployment of supply chain management solutions. Budget constraints during economic downturns can impact the ability to invest in technology upgrades and innovations.

Impact on Technology Deployment Plans:

• Economic concerns, stemming from recent supply chain challenges and broader financial uncertainties, may affect the pace of technology deployment plans. Projects, such as the deployment of RFID systems, might experience delays as organizations reassess their priorities and investments in the wake of economic challenges.

While economic uncertainties and a potential easing of recent supply chain stress may introduce temporary headwinds, the fundamental drivers and the increased recognition of the importance of addressing supply chain challenges suggest that the demand for enterprise supply chain management solutions will endure. Organizations are likely to remain committed to navigating and optimizing their supply chains, albeit potentially adjusting the pace of technology adoption in response to economic conditions.

GLy ecosystem update:

Nio and Geely Holding Group have entered into a strategic partnership agreement focused on battery swapping. This collaboration will involve joint efforts in developing standards, technology, and models related to battery swapping. The “co-investment, co-construction, shared, co-operative” model will encompass establishing an efficient battery asset management mechanism, creating a unified battery swap operation, and developing battery-swappable vehicles compatible with each other’s systems. Battery swapping is seen as a potential solution to alleviate strain on power grids during peak recharging times, and both companies aim to explore its feasibility by working together.

Lotus Technology, the luxury electric vehicle subsidiary of sports car brand Lotus, has successfully secured $870 million in financing as it approaches the finalization of its merger with blank-check firm L Catterton Asia Acquisition (LCAA). The funding, based on a $5.5 billion valuation, will be utilized for the advancement of next-generation automotive technologies, product innovation, global distribution network expansion, and general corporate purposes. The merger will result in Lotus Technology having a free float of over 19%, excluding existing LCAA shareholders, with investors receiving public shares upon the completion of the business combination.

Polestar officially started series production of Polestar 4 at the Hangzhou Bay factory in China.

Zeekr revealed that its 007 all-electric sedan garnered an impressive 20,000 pre-orders in just 48 hours after the commencement of pre-sales at the Guangzhou Auto Show on November 17.

Volvo has introduced its new fully electric premium MPV, the Volvo EM90, designed to cater to the growing popularity of the multi-purpose vehicle segment, particularly in Asia. This launch follows the introduction of the EX30 small SUV earlier in the year.

Xinji Meizu Group announces it will roll out a self-developed car, Meizu DreamCar MX, which will be unveiled in Q1 2024.

What We’ve Been Reading This Month:

According to a recent report conducted by American Clean Power (ACP), a cumulative 2,142 MW/6,227 MWh of large-scale BESS was brought online in Q3 2023, marking a 21% increase compared to the previous quarter and a significant 63% increase YoY.

Huawei has announced plans to transfer core technologies and resources from its smart car unit to a new joint company, with up to 40% ownership by Changan Auto. The joint entity will focus on developing, producing, and selling intelligent automotive systems and component solutions, as Huawei aims to collaborate with more auto companies amid the industry’s shift towards electrification and intelligent transformation.

BMW has ceased the production of combustion engines in Germany as part of its transformation to add electric vehicles to all segments. The automaker is investing €400 million in a new vehicle plant at its main production site in Munich. While BMW continues to build engines in Austria and the UK, it is expanding capacity for EV components at its Dingolfing site in Germany.

Autonomous driving startup Pony.ai, in collaboration with Toyota, unveiled a robotaxi concept based on the GAC Toyota electric bZ4X model at the China International Import Expo. The concept vehicle incorporates Pony.ai’s seventh-generation hardware and software kit for Level 4 autonomous driving, marking a significant step in the joint venture formed in August with Toyota China and GAC Toyota to advance the mass production and deployment of fully driverless robotaxis.

The Australian government’s launch of competitive Contracts for Difference (CfD) tenders for dispatchable renewable energy capacity with energy storage has been described as an unprecedented step for national energy policy. The Capacity Investment Scheme (CIS) will underwrite projects delivering a total of 32GW. The scheme uses a CfD structure where participants bid a strike price, and payments depend on the difference between that strike price and the spot price on the National Electricity Market. The CIS is seen as a significant development in Australia’s electricity policy, contracting a substantial amount of new electricity production.

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