The name Malcom McLean may not be one that you recognize right away, but you’ll certainly be familiar with his work. In the mid-1950s, the innovative North Carolina native dreamed up the intermodal shipping container—a humble metal storage unit that went on to transform the way goods were transported around the globe. The standardized sizing of Mr. McLean’s containers cut down on wasted space, resulting in increased cargo security, shorter transit times, and vastly reduced costs. By the time the great entrepreneur passed away in 2001, there were millions of the containers he’d inspired weaving their way across the globe every day.
The 60 intervening years since shipping containers were invented have seen global supply chains evolve at an incredible rate, with industrial innovations, the introduction of ERP tools, and improved communications helping to form a tightly intertwined global economy.
Supply chain innovations as transformative as Malcom McLean’s container don’t come along every day. However, it has become very clear that the emerging “game changer” for global supply chains is coming from the powerful combination of finance and technology—otherwise known as FinTech. Innovations in FinTech are ushering in the next big transformation in global supply chains, and transforming how buyers and suppliers connect, collaborate, and transact.
In a previous post, we looked at some of the overarching factors that may shape global supply chains in the future—from rising wages in China, to increased trade between emerging markets. We also touched on the significant role technology will play, but it’s a subject that merits closer inspection.
One of the reasons technology innovation is becoming increasingly important to businesses is that they have already secured most of the supply chain savings they can make by sourcing cheaper suppliers. Today, suggests The Economist, “Supply-chain managers have a new focus: to move from cutting costs to enabling new processes and making corporations more connected and agile to create value across the entire enterprise.”
The Economist study spells out what this changing management function looks like in practical terms by giving an example of how real-time weather reports affect Home Depot’s supply chain processes. By examining accumulated data, the company stocks its stores with the items most commonly purchased when storms roll in. They then optimize the customer experience by using social media, email, and text messages to inform shoppers of stock availability at different locales and avoid frustration in-store.
These real-time details of modern supply chain management are especially relevant in the area of B2B transactions. With their litany of associated complexities, unpredictable or untimely B2B payments between buyers and suppliers are common, and can become a severe wrench in the works of global supply chain performance. In light of this, more companies are looking for ways to utilize new real-time, 24/7, cloud-based transaction and payment technologies, enabling them to better connect, collaborate, and transact. This provides much needed visibility and control—and ultimately better mutual business outcomes for trading partners. Today’s opaque financial processes and late payment culture stifles global business. As one report put it recently, “Businesses have a responsibility to themselves and their supply chain to unlock value and keep money moving.” New B2B financial technology is unquestionably a leading component in which that noble ambition can be achieved, and no doubt the reason a 2015 whitepaper suggested businesses should “Make it easy for customers to pay you” in a list of top ways to transform the B2B supply chain.
As companies seek to utilize the best digital tools for the good of their global supply chain, they become more competitive, agile, and profitable. Chief among these tools in the future will be FinTech services that provide invaluable alternatives to traditional banking, and optimize collaboration and cash-flow between trading partners. And while supply chain events beyond the control of businesses have always had the potential to impact their bottom line, opting to adopt technology that affords them better visibility and control will be the definitive factor in how relevant a link they remain in the grand scheme of things.