Where Will Your Supply Chain Be in 5 Years?
If we were writing this post a year ago, it may have looked vastly different than it does in our global-pandemic world.
COVID-19 has created such a ripple effect of uncertainty that some companies are struggling to know how to plan for their supply chains over the next five months—let alone the next five years. Even in normal times, findings from one Gartner survey indicated that when it came to developing a vision for “digital supply chain roadmaps,” 70% of respondents didn’t look beyond three years.
However, quoted in a post on the topic, Gartner Distinguished VP Analyst Michael Burkett warns: “If supply chain leaders don’t prepare for the ecosystems in which future supply chains will operate, they are at risk to not foresee and prepare for the inevitable disruption. They have to have a forward view even when faced with unforeseen challenges, such as the new coronavirus.”
In this light, the good news is that although there’s a lot of uncertainly ahead, there’s a lot we do know—like how applying lessons learned, embracing new trends, and adopting cutting-edge technologies are expected to impact the supply chain over the next five years. Here, we’ll take a look at how you can integrate them into your supply chain management (SCM) planning.
Applying Lessons Learned
In an article for Harvard Business Review (HBR), three supply chain experts summarized the coronavirus “wake-up call” for SCM: “The majority of companies did not heed the lessons of the natural disasters of the last decade and, as a result, suffered severe supply disruptions when the Covid-19 pandemic struck.”
This failure to apply the lessons of the past was glaringly apparent for organizations who lacked visibility into their supply chains. As a result, although the impact of disruptions was acute, many supply chain managers couldn’t pinpoint breakdown specifics so they could be addressed. That’s why these experts recommend in-depth supply chain mapping, which should include:
Identifying sourcing alternatives.
Including revenue assurance when assessing procurement performance.
Integrating “disruption-related metrics” when evaluating suppliers.
As companies work to stabilize their disrupted supply chains, alternative sources may include those which are closer to home. In an article for Industry Today, Vishal Patel, VP of Product Marketing at Ivalua underscores this potential: “One of the issues that is likely to come up when looking into restoring growth will be the decision to keep supply chains at home or move abroad. Making this decision involves evaluating the reliability of your outsourced suppliers’ suppliers versus re-shoring your supply chain.”
Embracing New Trends
As Gartner notes, it can seem impossible to plan for the future with so many factors to consider and unknown variables ahead. That’s why the organization emphasizes how critical it is to “assess the known supply chain trends to prioritize inputs to the supply chain strategy, roadmap and innovation pipeline.” In this context, Gartner predicts four factors that will have a big impact moving forward:
A shifting labor supply. Rapid growth is expected in emerging economies, but more moderate growth in those which are developed. Additionally, it will be essential to have a supply chain workforce with “digital dexterity” that can adapt to new technologies with agility within a business environment that will continue to become more automated.
Intelligent machines. The full potential of AI for the supply chain will be increasingly realized in the next few years.
The connection of everything. “Digital sharing” will become even more common and have a “dramatic impact” on a variety of factors across the board.
A circular supply chain. The creation of avoidable waste will eventually be considered “unacceptable by society,” so supply chain managers will need to find a way to recycle and reuse.
Additionally, as customers increasingly expect more from the companies they deal with, the need to meet their escalating demands will have a ripple effect across industries. In an interview for RateLinx about the future of SCM, consultant Tamara McCleary underscores this as a critical driver for other evolving SCM trends:
“Every sector of every industry is facing the same pressures. Digital transformation, disruption, and globalization have changed what customers demand from us, and that’s changing how we do business.”
Echoing what Gartner says about workforce trends, McCleary says many companies will see changes as new technologies are implemented and some take over manual tasks. In this light, she emphasizes the importance of looking for critical attributes in new hires: “Look for adaptability, the ability to see the big picture, excellent problem-solving skills, and flexibility and resilience that lends itself to fostering a growth mindset.”
For some companies—like Kraft Heinz—that type of growth mindset means moving from siloed operations to those which are more collaborative and integrated. According to Supply Chain Dive, the company is “uniting its supply chain” within an “Ops Center” model that joins the procurement, production and distribution teams with marketing and R&D. Company executives say they expect the move to save the organization $2 billion over the next five years.
Quoted in the article, CEO Miguel Patricio touted the benefits of these efforts: “I truly cannot say enough about how Ops Center is transforming our operations and our mindset. We are creating a fast, adaptable, and integrated supply chain with greater end-to-end visibility to drive continuous improvement."
Adopting Cutting-Edge Technologies
Over the next five years, McCleary predicts supply chain evolution will include the growing adoption of cutting-edge technologies—like artificial intelligence (AI) and machine learning (ML). In fact, she says companies who haven’t embraced AI by the end of 2020 will have already fallen behind, citing the many ways it can be used to optimize SCM:
“From identifying new markets and tracking exchange rate volatility, to managing risks and identifying the best suppliers, AI can help us elevate spend management. It can also help us leverage big data to streamline processes and improve decision-making.”
Other technologies she predicts will become increasingly important over the next five years are 5G, blockchain, augmented reality (AR), virtual reality (VR), Internet of Things (IoT), and Robotic Process Automation (RPA).
Noting that AR, VR, IoT and blockchain will all help to increase visibility and transparency, she says the impact of 5G shouldn’t be underestimated, since it will “greatly increase the feasibility” of using these types of technologies in SCM.
McCleary also predicts that manual tasks will increasingly be handled by Robotic Process Automation (RPA) technology: “This tech will prove its ROI in the next five years by increasing efficiency, decreasing costs, and mitigating errors. Everything autonomous will also factor in the changes we see over the next five years.”
And although each technology will provide unique value, McCleary says they shouldn’t be viewed as isolated solutions. Instead, they can work together as a “technological amalgamation” that drives “the biggest changes and disruptions in the supply chain over the next half a decade.”
Another thing these combined technologies will enable is real-time decision making, which McCleary says will be the “future industry standard for all businesses.” That could be a game-changer for complex supply chains to help mitigate risks that arise when something like COVID-19 turns everything on its head. While it’s important to apply lessons learned, embrace new trends, and adopt cutting-edge technologies to optimize your company’s supply chain over the next five years—doing so can be difficult to achieve without the right partner to help you do it. CLN Worldwide is such a partner.
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