Why Investors are Focusing on Digital Supply Chain Solutions
An Interview with Oliver Rupps, Sector Principal at Hampleton Partners
Recently joining Hampleton Partners as our Sector Principal for digital logistics solutions and tech-enabled supply chain management, Oliver Rupps brings years of experience as CEO of companies involved in the industrial, automotive and logistics sectors. Not to mention being a seasoned founder and investor in his own right.
In this interview, he provides his personal thoughts and insights into global supply chains delving into the significance of digital solutions for tech investors and M&A dealmakers right now.
Why has there been an increased interest in global supply chains among stakeholders?
It’s well known that the Covid-19 pandemic had a seismic effect on supply chains around the world, with lockdowns, labour shortages and economic constraints disrupting the manufacture and flow of materials. But, having emerged from that turbulent period, companies around the globe continue to face a barrage of fresh challenges.
Inflation, rising energy costs, conflict in Europe, political instability and the resurgence of trade barriers are among the most visible and dramatic factors that almost everybody is aware of.
But there are other important forces that are having ramifications for supply chains, such as volatile raw material prices and transportation rates. What’s more, government and stakeholder-led imperatives to diminish carbon footprints and tackle climate change have led to an unprecedented need for supply chain transparency and end-to-end monitoring.
This is the “new normal”, requiring supply managers to show resilience and agility, implement strict cost management, and work more seamlessly with suppliers and stakeholders.
In other words, managers must optimise all the processes that have become more and more “mission critical” for the competitiveness of their companies.
It could be said that one of the more positive repercussions of this era is that the value and significance of supply chain management has achieved greater prominence, leading to greater investment and innovation.
How has this been impacting tech firms?
The ever-increasing need for companies to improve the planning, forecasting and visibility of their supply chains has led to a global demand for tracking technologies which are sophisticated enough to handle the challenges of our age.
This has accelerated the digitalisation of companies all over the world, with widespread adoption of intelligent tools created by tech firms which have kept on top of global supply chain challenges.
Transparency, communication and collaboration are new key success factors which are being enabled by intelligent software, integrated cloud-based networks and AI-solutions being developed by these tech firms.
The internet of things is also playing a major role, with sensors providing accurate real-time data on every stage of the transportation process. IoT devices can be particularly important when it comes to things like temperature monitoring of medical supplies, foods and other perishables.
It’s also worth noting that the most successful tech firms in this subsector are mindful that future-proofing supply chains means ensuring their solutions are highly flexible. They allow for agile adjustments, decentralized decision making and are suited to the kind of virtual collaboration which has become so normalised in the post-lockdown era.
Are there any particular categories within digital supply chain solutions which have been on your radar?
I would say there are three clusters of supply chain solutions which have come into particular focus. First, we have Advanced Planning and Scheduling Solutions, which deploy advanced algorithms to allow companies to streamline their manufacturing processes.
These tools make it easier to efficiently allocate materials and minimise waste, set achievable production schedules with reduced lead times, more rapidly respond to unexpected production disruption, and meet customer targets, all with enhanced visibility.
Then, we have Supply Chain Execution Systems, which focus on operational scheduling, warehousing and fulfilment of transportation. Efficiently executing global supply chains is vital for allowing businesses to meet their targets and stay competitive and cost-effective.
A host of digital tools – such as automated product procurement systems that can interact with suppliers, and user-friendly warehouse management systems – allow transparent monitoring of every aspect of supply chain execution.
The third cluster of solutions are those that enable multi-dimensional monitoring for risk assessment, carbon emission tracking and ESG reporting, as requested by governments and shippers. These can be invaluable for allowing businesses to adhere to regulations and to present themselves in the best possible light for investors, who are keen as never before to put their money behind companies that take their responsibilities seriously.
Technological features we see within these clusters include SaaS solutions, robotics, blockchain-based platforms, VR/AR enabled systems, and digital twins which can visualise real-time data.
How have these considerations impacted M&A?
Well, the developments I’ve been talking about have undoubtedly placed considerable pressure on both logistics companies and tech firms to nurture the appropriate skills among their workforce. In many cases, the establishment of new competencies and resources simply takes too much time and may be dauntingly complex.
However, acquisition can be an effective “shortcut” to extending competencies and competitiveness, bringing together teams and synergising skillsets. Now, the logistics space was certainly not immune to the economic headwinds which drove down transactions across the tech world in the immediate aftermath of the pandemic.
However, we do expect to see high levels of M&A activity in the supply chains solutions sector going forwards – particularly when it comes to smaller, more agile firms developing smart software and AI solutions which offer a competitive advantage for logistics or software companies.
We expect that valuations will remain stable and primarily refer to Annual Recurring Revenues. However, the companies will have to offer robust and proven business models with considerable growth and profitability perspectives. Quality is key.
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