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Why Supply Chain Innovation is Necessary

Why Supply Chain Innovation is Necessary

Aug. 18, 2023
A new survey shows 65% of companies will invest in supply chain and logistics innovation initiatives in the next two years.

Supply chain challenges continue. A recent study by Descartes of 1,000 supply chain and logistics executives in North America and Europe identified that the challenges of the past several years caused more (57%) companies to accelerate their innovation initiatives with an even greater amount (65%) planning to invest more in supply chain and logistics innovation initiatives in the next two years. 

The top reasons for investing in innovation ( 37%) were to lower costs and improve reliability. Additionally, 43% described their pace of innovation as “ahead of the competition” or “industry leader.”

The report discusses the importance of innovation and what drives it as well as the role of technology. 

Why Innovation is Important

The expectations for supply chain and logistics innovation change over time and are highly influenced by recent and current experiences. The results of the study reflect this, in that lowering costs (37%) and improving reliability (37%) were cited as the main reasons today why companies are innovating their supply chain and logistics operations.

The impact of management importance, financial performance and employee turnover on these findings was negligible. Better customer experience was the third highest response (27%) although, in this case, there was some difference based on financial performance: 30% for better financial performers and 22% for poorer financial performers.

While the environment is an important accelerator for many respondents, it wasn’t cited as a primary reason; the highest it ranked was as the third priority from respondents in France (27%) and the Nordics (26%)

What’s Driving Innovation?

From dramatic shifts in demand to supply chain disruptions to labor shortages, the past two years have forced many companies to become more agile and rethink their supply chain and logistics strategies, tactics and technologies.

The study showed that the majority of respondents (59%) said their company accelerated the pace of innovation as a result of the challenges in the past two years. This is the case for those companies who: had senior management support for innovation as very important (68%), were better financial performers (67%) and had lower employee turnover (66%).

There was a significant gap in supply chain and logistics innovation acceleration for companies who: had senior management views on innovation as less important (45%), were poorer financial performers (48%) and experienced higher employee turnover (51%).

How Important is Technology to Innovation?

Technology solutions have become closely associated with supply chain and logistics innovation. For many companies, technology is a differentiator, but others have not gained any significant benefits from their deployments.

According to the study, 61% of respondents said their current supply chain and logistic technology solutions are helping the company, not hindering it. This leaves 39% that have experienced either no negative impact at all from their supply chain and logistics technology solutions, or no negative impact.

Specifically, 19% have not seen any impact from technology on business performance and 20% believe technology solutions are actually hurting business performance. Unfortunately, a lot of factors can dictate success for supply chain and logistics technologies that have nothing to do with the technology solution itself.

The study did reveal, however, that the positive impact of logistics and supply chain technology solutions rises (70%) when senior management considers innovation very important and the company has better financial performance (69%). Conversely, the positive impact decreases when senior managers consider innovation less important (46%) and the company has poorer financial performance (49%). 

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