Innovations In The Supply Chain
The necessity of supply chains
The globalised world in which we live in today has formed a complex and interconnected network of supply chains, highlighting more than ever the need for efficient management. Supply chains are networks of entities, resources and activities that work together to deliver a product or service to a customer. Given their broad and intertwined nature, efficient supply chain management is critical to the success of any business. Simply put, supply chains deliver the right product at the right time and at the most cost-efficient price. Achieving this, therefore, requires the optimisation of supply chains for productivity and customer satisfaction. Innovation in the supply chain is the key to success. If implemented correctly, businesses can integrate new techniques and technologies to reduce costs, increase revenue, and gain a competitive edge.
Challenges in African supply chains
Despite many efforts to modernise and improve logistics on the continent, many challenges exist in African supply chains that impact trade and hinder economic growth. By separating these issues into technical (most notably the slow pace of digitisation) and non-technical challenges, we can identify the factors that have contributed to the stagnation of the continent's development.
Digitisation Roll out:
The slow pace of digitisation has adversely impacted African trade suppliers, making it difficult for them to track and manage inventory systems. The lack of digital oversight promotes delays and errors in the delivery of goods. Increased overhead costs due to loss of inventory are just one of the adverse effects that occur as a result.
Trade barriers: The Enemy of Intra-African Trade
The enemy of intra-African trade can often be attributed to trade barriers. Historically high tariffs and intricate customs procedures have made communication between borders difficult, hampering the swift transaction of goods and limiting access to new markets. These barriers have therefore limited the ability of African businesses to access markets and regions that would streamline their trade routes.
Informal trade: The Dark Side of Commerce
Corruption and the relaxed enforcement of trading regulations within the continent have enabled informal trade to thrive. The trade outside formal channels has promoted black markets and non-formal trade routes that are difficult to track and regulate. Without knowing their entire scope and without the stringent monitoring of these channels, current supply chains act as inefficient logistics networks that are hard to govern and optimise.
Poor infrastructure: An Obstacle to Swifter Trade
The ability to swiftly move goods across a continent is a crucial aspect of a successful supply chain. However, factors such as poor infrastructure inherited from the colonial era and the slow adoption of new infrastructure have acted as other obstacles to swifter trade. These outdated ports and airports, inadequate transportation networks, and limited access to electricity and water have limited the full capacity to transport goods, hindering the efficiency of current supply chains.
Limited access to financing trade: The Struggle for Investment
Africa's periodic instability has also made it challenging to finance trade due to the lack of trust between trading partners. Many businesses face an uphill battle to gain the funds required to invest in new equipment, infrastructure and technology. This, therefore, decreases the ability for companies to expand and invest in operations, key technologies and skilled professionals who can enhance the efficiency of supply chains.
COVID-19 pandemic: The Great Disrupter
The COVID-19 pandemic directly affected supply chains within the African continent. Border closures increased the difficulty of intra-African trade; lockdowns affected the availability of essential workers, and travel restrictions increased the frequency of delays. This event highlighted the interconnected nature of global supply chains, further reiterating the need to modernise communication avenues between borders and the management of trade logistics.
War in Ukraine: A Wake-Up Call for African Trade
The war in Ukraine revealed the precarious nature and volatility of global supply chains. Ukraine is a major grain producer, but disruptions in trade routes have destroyed the ability for farmers to transport their crops to market. The resultant limited supply of vital goods has, therefore, increased prices for grain and other agricultural products. Although European imports do not significantly affect Africa, the continent relies on exporting goods and services to Europe for income. Therefore, diversified trade routes and alternative international trading partners are required to mitigate the effects of global supply chain instabilities.
Non-technological Innovations in African supply chains
Supply chain innovation plays a crucial role in the development of businesses, and although technology is often seen as the driving force behind innovation, non-technical factors are equally important in maximising economic and business growth in Africa. By targeting 20% of the lagging factors that hinder growth in African supply chains, companies can use the Pareto principle to derive 80% of the effects, thus improving profits and productivity.
Here are three critical areas in which businesses can innovate their supply chains in Africa:
Inventory Management Innovation: In addition to technical innovations, businesses can gain a competitive advantage in their respective markets by increasing warehouse and storage infrastructure across the continent. Owning storage facilities can reduce transportation costs and result in faster and more reliable delivery times, therefore, improving customer satisfaction. Amazon's successful warehouse strategy serves as an excellent example of this.
Infrastructure Investment: Investment in infrastructure is critical to supply chain innovation. Less developed facilities hinder the efficient movement of goods across borders, making it challenging for businesses to grow. Therefore, government and private sector investments in ports, airports, and transportation networks would modernise and facilitate trade across the AfCFTA region.
Risk Management: To develop robust supply chains that can withstand disruptions from natural disasters and political instability, key stakeholders should be trained in risk management. Widespread training can quickly identify and mitigate risks that could potentially disrupt the supply chain. This would involve incorporating contingency plans for volatile times, such as the instability caused by elections or sanctions, which often reduces investment in companies.
The future of supply chain innovation in Africa
Above all else, the future of supply chain innovation in Africa will be driven by disruptive technologies that directly target supply chain problems.
Blockchain: In regions where informal trade and black markets are strong, blockchain technology would increase trust between vendors through the peer-to-peer sharing of data. Specialised decentralised apps (DApps) could aggregate a ledger of supply chain histories. With this, counterfeit, missing or stolen goods could be easily identified, further strengthening the traceability methods of products within the continent.
Robotics can easily automate tasks such as tracking inventory levels, managing stock movement and replenishing stock supplies. Since the potential of employees is often wasted on repetitive tasks (picking, packing and shipping), robotics could improve warehouse efficiency, whilst the training for higher-level roles is left to employees. Additionally, with the formation of the AfCFTA, different benchmarks for tradable goods have arisen between countries. Therefore, robots can help with quality control to inspect the quality of goods, ensuring that when border checks occur, less inventory is lost due to subpar or defective products.
Artificial intelligence: By leveraging AI technology, optimised trade routes can be generated to transport goods, reducing delivery times, transportation costs and fuel consumption. Forecasting consumer demand is also another area of interest.Historical data would help to predict relevant trends, such as the demand for fertilisers during farming seasons, in order to prevent stockouts or overstocking.
The internet of things (IoT): The internet of things provides real-time tracking of tradeable goods and therefore is advantageous for real-time visibility in supply chains. By tracking shipments and using temperature sensors to detect shipping container environments, product quality can be maintained, reducing waste and improving customer satisfaction. IoT sensors are also great for predictive maintenance. The health of equipment and machinery could be detected and diagnosed before any catastrophic defects occur that would lead to downtime to increase the overall lifespan of essential machinery.
Drone delivery: The African continent is a large land mass where reduced access to remote regions leaves specific populations deprived of essential goods such as medicines. Drones act as an alternative transportation method for these areas with poor road infrastructure. Where companies such as Zipline prove the necessity of drone delivery by delivering essential medical supplies (vaccines and blood) to remote Rwandan and Ghanian regions, their ability to reach previously inaccessible areas and improved transportation routes reduce the significant fuel costs that accumulate due to navigating difficult terrains.
Advancing supply chain innovation in Africa
One great strength of the African continent is the immense potential that it possesses for growth and development. Both non-technical and technical supply chain innovations offer viable routes for businesses to boost their revenue and economic output. Today, non- technical tactics such as increased warehouse capacities and investment into infrastructure can be immediately applied to enhance supply chain efficiency. Looking towards the future, disruptive technologies represent the optimal path to lay down the foundation for an efficient economy within the AfCFTA. It therefore makes sense for digital platforms such as ATEX to exist. By acting as the bridge between B2B and B2G transactions, ATEX facilitates efficient trade between parties by compiling a vast network of high-quality goods and commodities. Buyers can also harness ATEX's ability to finance their business in order to buy essential merchandise. As well as directly tackling the limited access to financing in Africa, ATEX also offers security through reliable trade finance solutions. Where before, access to trusted vendors was difficult, supply chains can be further optimised as ATEX operates as the trusted intermediary between the yields gained from non-technical innovation and the disruptive technology that will revolutionise the African continent.