It’s a new era, and modern businesses must adjust their supply chain accordingly. But what exactly does that mean? Thanks to modern technology, decentralizing your supply chain is a viable option. But what are the pros and cons of decentralized solutions?
1. Pros of decentralized supply chain solutions
Lowering costs at the local level is a possibility
One of the primary advantages of a decentralized supply chain is that it can significantly reduce local logistical costs. Because the operations are close to the end user, shipping costs are kept to a minimum. Nodes with access to local suppliers may reduce inbound costs as well.
Decentralized nodes can act more flexibly where centralized hubs cannot. If in a local market, they can enter that space and potentially test new products. Suppose a company is already well-versed in managing its supply chain from afar. In that case, it may find it easier to expand its reach into new markets where it has no existing node – especially if it takes advantage of outsourcing opportunities, to begin with.
Better customer service
Decentralized businesses can attempt to improve customer service in two areas: shipping times and trust. Of course, by locating their operations close to the end customer, companies can better provide the faster shipping times that customers expect. They can also advertise that they are a local business or have local customer service representatives, which may contribute to community trust.
Test new products on a smaller scale
Nodes are ideal for putting new products through their paces. Decentralized facilities can test new products on a captive test audience, analyze the data, and report back to HQ on the success or failure with a limited audience that the local owners understand very well.
Ability to stock more significant inventory amounts
A network warehouse is frequently smaller than it would have been if the supply chain had been centralized. However, suppose the company has enough warehouses spread across the region (or the world). In that case, chances are it can make and/or stock a more significant amount of inventory than if it was confined to fewer premises. This could improve its ability to deliver products to customers even if one warehouse, for example, experiences a stock-out because of unexpected demand. If one warehouse runs out, there are others nearby.
Reduced disaster risk
Aside from the benefits mentioned above, companies that stock their products across multiple locations can help mitigate some of the disaster risks. If one node is damaged or rendered inoperable, its peers can step in to limit the impact on customers and, thus, profitability.
2. Cons of decentralized supply chain solutions
Increased operational costs
More facilities imply higher building costs, staff, and insurance premiums. Even outsourcing to partners has a price; this additional financial burden can be too much for some businesses.
Potential to increase inbound costs
Suppliers aren’t always eager to split shipments across locations. Companies that cannot locate local suppliers may not negotiate the best rates or be required to pay the additional shipping fees associated with LTL shipments distributed across a network.
Potentially less control
The agility of running semi-autonomous nodes is fresh air for some organizations, allowing them to respond quickly to new opportunities and changing conditions. Companies that want robust central control may find it more complex, and new initiatives may be implemented more slowly (such as standardization), which can frustrate, slow, or costly.
That’s all information about the pros and cons of decentralized solutions. If you seek a blockchain development partner, contact SmartOSC. We offer complete blockchain development services for the enterprise.
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