Supply Chain as a Service

How will supply chain as a service remodel the retail and wholesale industries?

Analyst Perspective

SCaaS is a strategic means for optimizing supply chain processes to deliver four or five times the impact.

Supply chain as a service (SCaaS) allows businesses to by-pass capital investments and develop variable and efficient pricing structures. Irrespective of company size, SCaaS increases production control, warehousing, inventory management, order fulfillment, and shipping. By partnering with experienced supply chain providers, SCaaS enhances and streamlines logistics operations, optimizing business processes to elevate overall efficiency.

SCaaS is a strategic means for enterprises seeking agility in their supply chain management. It enables rapid adaptation to market demands, ensuring businesses can allocate resources effectively and respond swiftly to changing conditions. Furthermore, it provides cost-effective and scalable solutions, reducing operational overheads.

In essence, SCaaS is a game-changer, empowering enterprises to navigate the complexities of supply chain management seamlessly. It promotes competitiveness, resilience, and strategic growth by offering a robust framework to meet ever-evolving marketplace dynamics, ultimately contributing to business success and sustainability in the modern landscape.

Rahul Jaiswal Principal Research Director, Retail Info-Tech Research Group

Executive Summary

Your Challenge

Scaling the supply chain is more complex, including ensuring adequate infrastructures and collaboration, integration with suppliers, partners, and technology platforms, and securing capabilities to remain competitive.

Businesses struggle to leverage SCaaS. The supply chain as a service is broad and diverse; it is difficult to know how the model will fit best within your enterprise.

SCaaS requires the right partner. Integrated convergence of capabilities, partner infrastructure, and hyper-scalable technology platforms provide customers with unified services.

Need a fully comprehensive strategy and operating model to address evolving customer needs and scaling-up results.

Common Obstacles

The process of adopting, building, and scaling programs is complex. It includes rethinking operational models, collaboration, partner integration, technology platforms, and secure capabilities to remain competitive.

Enterprises are reluctant to execute SCaaS plans. Businesses have not taken a structured approach to implementing technology in each phase and have deployed technology before developing a robust strategy.

Businesses currently have a limited understanding of the potential ROI to effectively align them with strategic objectives.

Organizational strategy is misaligned. Business executives think digital is “IT’s problem” because digital is viewed synonymously with technology.

Info-Tech’s Approach

Uncover potential business opportunities and harness the supply chain as a service (SCaaS) delivery model plus its solutions and services to take advantage of flexible pricing structures and resources as part of your monetization strategy.

Learn how the best-in-class businesses are already reaping the business benefits of meeting technology demands with a holistic SCaaS platform.

Establish the need for supply chain as a service capabilities relevant in the retail and wholesale sectors to scale up.

Align organization, business, and technology modules to design SCaaS initiatives integrated into your business-aligned IT strategy by recognizing cost and competitive opportunities across the enterprise to capitalize on the services.

Info-Tech Insight

Supply chain as a service (SCaaS) empowers enterprises, regardless of size, to easily adjust their supply chains, accessing variable pricing structures and resources. Partnering with supply chain service providers enhances logistics efficiency and optimization. SCaaS models offer cost-effective, flexible solutions, allowing businesses to adapt swiftly to market changes.

SCaaS model optimizes supply chain process flow

Supply chain as a service (SCaaS) responds to a logistics model in which digital management of supply chain operations is outsourced to one or more partners.

SCaaS

• First Party Logistics In-House Logistics Solution
• Second Party Logistics Asset-Based Solution
• Third Party Logistics Integrated Logistics Solution
• Fourth Party Logistics Lead Solution Provider
• Fifth Party Logistics Digital Services Provider
• Sixth Party Logistics AI-Driven Supply Chain

Info-Tech Insight

SCaaS revolutionizes supply chains by offering outsourcing services to enterprises. This innovative approach can deliver four to five times the ROI by consolidating supply chain functions.

SCaaS will remodel the industry

Current state

• $10 trillion — The global logistics market, in 2022, reached USD $10.41 trillion primarily due to the advancements in e-commerce and omnichannel supply chain execution (Statista, 22 June, 2023).
• SCaaS: The size of the global supply chain as services (SCaaS) market worldwide was around $8.05 billion USD in 2022 (Market Growth Report, LinkedIn, 2023).
• Cloud Computing supports more accessibility, quicker extensibility, and API connectivity with partners to leverage networks.
  • Enterprises are mainly adopting Azure and AWS cloud usage.
  • Value-added subscription services model are growing reach.
  • Includes vendor managed as a service subscription models.

Avg. No. Apps used by organizations

(Source: Statista, 30 May, 2023)

Technology organization already invested in

(Source: Info-Tech, 2023 CIO Priorities Report)

Future state

• $14 trillion — The global logistics market in 2028 is projected to grow at a CAGR of 5.6% between 2023 and 2028 to reach a value of $14.1 trillion USD (Statista, 22 June, 2023).
• SCaaS. The global supply chain as a service (SCaaS) market is anticipated to reach USD $13 billion in 2028, with a CAGR of 8.42% (Market Growth Report).
• SCaaS model will become prevalent because of their convenience, cost-effectiveness, relative ease, and security of carrying out implementations.
  • Offers variable pricing structures and resource optimization.
  • Increased visibility with real-time tracking.
  • Boost collaborative partnerships and stock control.

Info-Tech Insight : Operating under SCaaS

• Will lead to the rise of automated dark warehouses/stores.
• Fully automated storage and retrieval systems (AS/RS) solutions.
• Software-guided robots will be performing operations.
• Minimal operators needed for storage, preparation, and dispatch.
• AIoT-automation will play a substantial role in mechanizing.

1. Overarching Insight (POP)

Logistics can manage costs more effectively

The size of the logistics industry worldwide 2018-2028 is growing rapidly…

…But the logistics industry globally needs to better manage operational costs.

(Sources: Statista 22 June, 2023; 19 December, 2023.)

Info-Tech Insight

As enterprises adapt to grow, they must optimize logistics costs in the evolving global supply chain landscape. The global logistics industry showed resilience in bouncing back from the impact of the pandemic, with a market size of around $10.71 trillion. Projections indicate that by 2028, the industry's scale is expected to surpass $14.08 trillion, reflecting a significant growth trajectory.

Omnichannel fulfillment will drive the need for logistics & IT service(s)

Enterprises need to realize SCaaS variable pricing to execute omnichannel logistics.

Real-time internet of things (IoT) insights enhance distribution & fulfillment.

(Sources: Statista, “Logistics services offered by third-party logistics providers worldwide in 2022,” 12 September, 2023; Statista, “Logistics services provided by third-party logistics providers worldwide in 2023,” 12 September, 2023.)

Info-Tech Insight

In the era of omnichannel fulfillment, enterprises must prioritize SCaaS variable pricing. This strategy enables agile responses to shifting market dynamics and customer needs. Beyond cost control, it fosters real-time data-driven optimization in distribution networks, enhancing automation and adaptability. SCaaS variable pricing is not just a financial resolution; it's a strategic imperative for delivering superior customer experiences and maintaining a competitive edge in today's fast-paced business landscape.

Enterprises are already outsourcing logistics and technology services

Supply chain technology outsourcing adoption worldwide

(Source: DHL, April 2022.)

Overarching Insights

SCM Outsourcing & Analytics Tools

Are pivotal in optimizing supply chains and gaining a competitive edge. Organizations seek to maintain ownership of this critical element in their digital future.

• Advance EBIT. Enterprises that take a proactive approach to digitizing their supply chains can anticipate an increase in annual earnings before interest and taxes (EBIT) growth of 3.2 percent, along with a yearly revenue growth boost of 2.3 percent (DHL Supply Chain).
• Increase Visibility. By embracing digital technologies, they optimize their operations, enhance visibility, and gain real-time insights into their supply chain processes.

Ultimately, proactive digitization empowers enterprises to deliver higher service levels, reduce costs, and remain agile in an increasingly digital and dynamic business environment.

Enterprises are already leveraging third-party services to scale

Awareness	Consideration	Transaction	Delivery	Engagement
CVS partnered with Microsoft to build a digital-first foundation. AI technology enables CVS to compile and analyze data from across the company to provide customers with personalized health recommendations. A digital platform, CVS Health Virtual Primary Care allows customers to access virtual services alongside traditional delivery methods (Fierce Healthcare, 2021; CVS Health, 2022).	Nordstrom leverages robotics to design and deploy parcel sortation. It has partnered with Tompkins Robotics Systems to do this. Nordstrom’s item sortation employs robots for fulfilling orders and for parcel and carton shipping sortation to outbound carriers and modes (Retail Info System).	IKEA began using smart contracts on the Ethereum blockchain to facilitate payments from retailers. IKEA customers on the blockchain can trace details about the payments, production journey, components, materials, and carbon footprint for items (Street Fight Mag, 2022).	Amazon Fulfillment harnessed the power of Amazon Web Services (AWS) to implement a comprehensive machine learning end-to-end order monitoring system. FBA packs and delivers products directly to customers while offering benefits, free delivery, simple exporting to customers worldwide, streamlined cross-border trade, easy returns, and Amazon customer service (FBA-Fulfilment by Amazon).	LVMH, Consensys, and Microsoft developed the AURA platform for luxury trade. This platform provides product tracking and tracing services using Ethereum. Customers can learn about the origin of the products using this platform (Retail Dive).
Zara uses Tyco microchips in its clothing’s security tags to identify where a particular style and size are located within the supply chain. Zara’s forecasting analytics allows complete visibility over the inventory it can sell, thereby informing its supply chain network (Thomas Insights).	Pactum AI’s machine learning algorithm automatically negotiates better agreements with human suppliers on behalf of Walmart. Walmart automated negotiations of its 100,000+ suppliers with artificial intelligence-powered software comprising a text-based interface chatbot (“How Walmart Automated”).	Fleet Farm deployed price management analytics for merchandising services via Engage3's cloud- and mobile-based solution to expand omnichannel visibility and analytics. ML-powered contextualized item solution enables Fleet Farm to leverage the item catalog price position tracking to identify risk opportunities and improve its price image (Retail Customer Experience).	UK retailer Ocado is working with British startup Wayve and international customers such as the US grocery chain Kroger and Coles Group in Australia. Ocado provides autonomous last-mile operations to international retailers. It has put an investment of over $13 million into AI delivery (Reuters).	Shein leverages the combined scale of influencers and key opinion leaders on YouTube, Instagram, and TikTok to run marketing campaigns and drive sales. Shein benefits from the ability to predict consumer demands and identify emerging trends accurately with an AI-central engine (Jing Daily).

SCAAS IN RETAIL & WHOLESALE

Identify in-house and outsourced opportunities

Six SCaaS Logistics Models

Supply Chain Management	Manufacturing	Packing	Storage	Delivery	Optimizing	Planning	IT Integration	AI Automated	Services
First Party Logistics Model									Enterprise managing its own logistics operations. In-house solution with no external party involved.
2PL Model									Largely transport and warehouse management Outsource transportation processes to deliver goods. Asset-based solution – vehicles or trucks
3PL Model									An Integrated Supply Chain Processes (BPaaS) Eg, transportation, warehouse, cross-docking, inventory mgt., packaging, and freight forwarding.
4PL Model									Build & Liaises with one or more 3PL providers. E.g., Project mgt., negotiations; logistics & analytics. Solution Provider – E.g., Like an Agent
5PL Model									Integrate different types of technologies – RFID, robotics, blockchain etc. Digital business supporting a new supply chain business model with end-to-end visibility in ‘real-time.’
6 PL Model									AI automated system managers – trends, forecasts, automatically triggers goods production and delivery. AI-Driven Supply Chain Solution – Still in early stage.

Summarize = Business Dependent (Capabilities/ Maturity)