The COVID-19 pandemic has exposed inefficiencies in a number of industries and practices from health and hygiene to business travel and office costs. Most notably, however, supply chains gained much attention in 2020, shedding light on how dependent consumers are on them and exposing how brittle the industry can be.
Why Supply Chain Software?
With such large gaps to correct, supply chain is begging for transformation and companies across industries are scurrying to modernize their processes, making it a lucrative niche for venture capitalists (VCs) to focus on.
What Do VCs Look for in Supply Chain Management?
There are many aspects of SCM, but VCs are particularly interested in what will optimize supply chains for more intuitive management. So many operations still function using manual processes, Excel spreadsheets, and ill-fitting ERP systems. But these outdated methods don’t allow for change or quick thinking, which we now know can be detrimental.
Amazon has long been keeping other supply chains on their toes, setting a new standard among consumers. But technology makes it possible to compete. Investors are most interested in SCM software that allows for next-gen capabilities such as:
- Data Access and Visibility
We now have access to all kinds of data — from shipment updates to product reviews to comments on Twitter. But legacy systems can’t put this data to use. Investors are now looking at supply chain AI and machine learning to help feed existing data into a central platform using APIs. And with access to data across all facets of the supply chain, companies can create more reliable traceability and make better decisions with real-time tracking.
- Workflows and Automation
Achieving clearer visibility also depends on system integration and fluidity. Many organizations now invest in operations personnel to stitch applications together, build workflows, and set up automatic triggers to make managing massive supply chains easier and less risky. Plus, automation drives down costs and the number of interactions required to complete tasks by eliminating human error and creating greater efficiencies.
- Long-Term Scalability
Can supply chain challenges be solved with one-off products or features? It’s unlikely. VCs are looking for total solutions — intuitive platforms that continue to grow and provide value over time. Next-gen supply chain software creates a total solution, digitizing the entire process, building collaboration between brands and their partners/suppliers, and viewing historic data to make better decisions that increase profitability.
The supply chain is primed for innovation. The COVID-19 pandemic exposed the existing issues across the supply chain and highlighted the immediate need for change. As many industries continue to operate with analog processes or siloed legacy systems, venture capitalists recognize that every industry will need to invest in new systems to unify their operations.
Not only is there an immediate need for next-gen SCM software solutions, but these investments have unlimited ROI for potential investors. As the interest in this space grows, there will be an exponential increase in solution providers that pop up to service the different challenges faced across the value chain. As the competition heats up, nimble software providers will continue to optimize and expand their platforms to include new features or integration points to support new customers’ needs based on feedback and data. Early-stage investors will reap the benefits as the solution offerings expand to sign new customers and increase company valuation.
Challenges in Supply Chain Investment
The biggest challenge facing investors in the supply chain space is the high execution risk. Whether a solution is focused on the upstream or downstream supply chain, each phase of the value chain comes with its own set of challenges. These challenges impact every aspect of a business, from operations to finance to sales and marketing, which may cause investors to hesitate in these new systems instead of legacy solutions. To overcome this hesitance, investors will need to identify potential portfolio companies with clear metrics guided by their product roadmap that allows for agility and a path to scalability.
VCs are looking for smarter solutions — those that have the potential to grow, scale, act nimbly, and cut costs with intelligent processes. The best bets in supply chain investing can be found in software providers that continuously optimize their platforms through new features and integrations to address emerging trends and meet the changing needs of customers.
The same should be true for companies looking to make their own investments in supply chain management software. As the pandemic has shown us, no industry is immune to change or detrimental disruption. To remain resilient, brands must look to supply chain technology that can help them make decisions quicker and serve customers when it matters most.
Written by Suuchi Industry Insights