A New Paradigm For Supply Chains
Shekar Natarajan is the founder and CEO of Orchestro.AI.
Imagine you’re building a new house: you need water lines in several rooms. Would it make sense to hire one plumber to put a line to the kitchen, another one to plumb the restroom, another the master bath and another to pipe in the laundry room? No, of course it wouldn’t. It would be terribly inefficient, inexpensive and inconvenient. The plumbers are all using similar resources and equipment and they have the same objectives. Wouldn’t it make much more sense for them to pool resources and work together?
The same can be said for global supply chains.
Supply chain companies compete for the same resources, whether it’s labor, warehouse space or trucks on the road. As the packaging market for ecommerce continues to skyrocket, doesn’t it make more sense to embrace cross-industry collaboration over competition?
Rethinking Inefficiencies
What often happens when business leaders employ tactics to streamline and digitize supply chains is that they focus on specific links in the chain instead of the big picture. They default to linear thinking and, as a result, the solutions are often at odds with reality. Supply chains are sophisticated networks of interactions that more closely resemble complex physics than simple linear paths. Despite good intentions, many initiatives fall short by neglecting this complexity.
When companies focus on internal optimizations, they lose sight of the big picture. This can lead to underutilization, with warehouses and vehicles often operating at less than full capacity. Each company works in isolation, hoping to dominate its segment of the market. Instead of seeing success, they often find more inefficiency.
The pandemic laid bare these vulnerabilities. With container backlogs and crew shortages, we saw firsthand how traditional supply chains falter under pressure. Large shippers exacerbated problems by monopolizing resources and squeezing out smaller shipments. This chaotic period underscored the need for networks that prioritize shared information and resources, optimizing volume and density for everyone involved.
The Case For Collaborative Networks
A shift towards collaborative networks, where companies share resources and information, could redefine resource optimization, moving away from closed systems to open networks where supply and demand are met more effectively. The telecom and energy industries are already doing this. By pooling resources and leveraging interoperability, these industries operate efficiently without sacrificing control of their businesses.
The concept of coordinating stakeholders in an open network may seem daunting or even impossible, but it will be imperative in keeping up with the rising global demand. Low or inefficient utilization is unsustainable if we want to keep the flow of goods moving on par with the growth of the “parcel-lypse,” with parcel volumes set to surge beyond our current logistics capabilities.
The Parcel-lypse
According to Mordor Intelligence, the ecommerce market will grow from $78 billion in 2025 to nearly $150 billion in 2030. A Digital Commerce 360 report confirms that ecommerce sales have not had a year-over-year decline since 2009 and that, in the fourth quarter of 2024, ecommerce sales accounted for 24.6% of total retail sales in the US.
In 2021, supply chain disruptions cost the U.S. an average of $228 million. For business leaders at distribution centers, increasing efficiency is a top priority.
PwC’s 2024 Digital Trends in Operations Survey reported that 45% of supply chain CEOs “believe their company won’t be viable in 10 years if it stays on its current path.” Nearly 70% say that technology investments haven’t delivered expected results.
Embracing Change
Resistance to a collaborative approach remains a significant barrier to creating a more collaborative industry model. Many companies mistakenly equate control with market power, but no one company owns their supply chain. No singular company, no matter how big or powerful, owns all the warehouses, or distribution centers, all the freightliners, trucks, roads and ports. Without reconsidering what supply chain ownership means, businesses risk sticking to costly and inefficient practices. But true leverage comes from shared capacity and a community-driven approach.
In addition to a shift in mindset, business leaders need to leverage AI technology. AI can help streamline communications, make sense of data and automate previously manual tasks. AI can help democratize the decision-making processes so that individual goals align with collective objectives. It can also ensure that no singular behemoth has outsized influence.
When I worked at Walmart, we created Project Gigaton, which is a compelling example of a collective approach in action. By uniting suppliers under a shared initiative to reduce carbon emissions across the supply chain, it lifted the entire ecosystem by setting communal standards that promote sustainable practices, such as using electric fleets and recyclable packaging. In China, ecommerce giants Alibaba and JD.com partnered with logistics providers to optimize nationwide delivery networks. Instead of each company building isolated networks, they share infrastructure, which lowers costs and speeds up deliveries.
A New Era Of Collaboration
Adopting a community mindset isn’t optional; it’s a necessity. We need to foster collaboration, clarify the role of AI, and understand that collective goals can also benefit individual success. By creating shared networks that empower innovation and efficiency on a broad scale, we can mold a future where supply chains are economically viable, environmentally sustainable, and equipped to meet the demands of an increasingly digital world. Let’s join forces to kickstart a new era of collaboration in the supply chain industry.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?