Supply Chain Challenges
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A couple of years ago we conducted an extensive survey to gain insight into the major topics in the supply chain and business environment.[1,2] The question was what are the top ten challenges for supply chain leadership? Now some three years later we have been monitoring these developments closely. Next to the excellent publications by Gartner, Supply Chain Magazine [3], The Hackett Group and SCM World Future [4,5] we have been tracking the key challenges in supply chain management and, more importantly, how to tackle these issues. To cut a long story short: the three top issues in 2020 were: Cost & Performance Pressure, Adaptation of new technology, and Business Continuity.
If we look with today’s knowledge of what happened between 2020 en 2023 it is not surprising that there is an increased emphasis on resilience. The focus on building resilient supply chains has certainly intensified, driven by the recognition of the need to withstand unexpected disruptions like the COVID-19 pandemic. In addition we have seen a rising importance of sustainability. While sustainability was a consideration in 2019, there has been a notable shift with a stronger emphasis on eco-friendly practices and environmental responsibility. Last but not least there is the absolute acceleration of digital Transformation: The pace of this transformation has certainly accelerated, with a more widespread adoption of advanced technologies like AI, IoT, and blockchain for end-to-end supply chain visibility and efficiency.
Definition of terms
The Digital Supply Chain, This is about digital transformation and the integration of technologies like IoT, AI, and blockchain for enhanced visibility and efficiency. Adoption of digital platforms for end-to-end supply chain management.
Adoptation of New Technology, This specifically is about Machine Learning, Artificial Intelligence, Natural Language Programming and Big Data.
Business continuity and Resilience: Emphasis on building resilient supply chains to withstand disruptions. Diversification of suppliers and geographies to mitigate risks. Think: War, terrorism, Geopolitics, Covid, Trade barriers.
Costs & Service Pressure: Shifting focus towards providing a better customer experience. Personalization and customization of products and services in response to customer demands. Constant pressure on costs and service.
Sustainability and Environmental Concerns: Growing importance of sustainable practices and environmentally friendly supply chain operations. Implementation of eco-friendly packaging, transportation, and waste reduction strategies.
E-commerce and Omnichannel Logistics: Evolution of supply chains to meet the demands of e-commerce and omnichannel retail. Optimization of last-mile delivery and fulfillment processes.
Advanced Analytics and Predictive Modeling: Increased use of data analytics for predictive demand forecasting. Leveraging AI for data-driven decision-making in supply chain management.
Regulatory Compliance and Trade Uncertainties: Navigating complex global trade regulations and uncertainties. Adapting to changes in tariffs, trade agreements, and geopolitical dynamics.
Talent availability and Labor Shortages: Addressing challenges related to skilled labor shortages and workforce management. Integration of automation and robotics to alleviate labor-intensive tasks.
Cybersecurity in the Supply Chain: Protection of sensitive data and prevention of cyber threats. Implementation of robust cybersecurity measures to safeguard supply chain information.
Collaborative Supply Chain Networks: Collaboration among supply chain partners for improved communication and coordination. Development of interconnected ecosystems for seamless information sharing.
What needs to be done?
In one of our posts about the proces of digitization of the supply chain we already discussed the pressure to make the transition. For supply chain leadership this should be an absolute priority. as it will fundamentally change supply chains, and enable the new technologies on the horizon. So before even talking about harvesting the value of data, big or small, companies need to speed their investments in the digital supply chain. It is absolutely fundamental.
So supply chain leadership, if they haven’t doen so, should prioritize their technology investment in supply chain planning capabilities and end-to-end visibility enabled by real-time analytics. As these can help to maintain operational stability. Theu should fast-track data management policies and capabilities, and upskill their teams to make the most of the technology capability for insights led decision making. They need to consider how they can invest in automation to replace redundant manual supply chain activities and drive productivity gains to protect against margin squeeze and cost increases.
What is on the horizon?
One of the main challenges is the adoption of sustainability. More and more supply chain leaders are confronted with an increased focus on renewable bio-based materials, energy consumption efficiency, climate change & global warming, and life cycle thinking in value chain. From isolated sustainability initiatives to programs on organizational level that monitor emissions from all activities across the organization, including buildings’ energy use, industrial processes and company vehicles.
If the pandemic taught us anything, it demonstrated that to succeed, maximize resilience, and ensure business continuity, companies need to maximize every available channel – ecommerce, direct-to-consumer, retail, distributors, and Amazon. That way, if one channel is disrupted, whether by natural or man-made causes, the show will go on. Companies need to consolidate demand across every channel, and have a view into every point of supply (even containers on ships!) to be able to maximize service levels, grow revenues, and minimize costs.
Sources
1) Groothedde, B., (2019), Challenges voor supply chain analysts in 2020 in Data Analytics, Publicatie, Research.
2) Groothedde, B., (2019), De Supply Chain Technology Top 10, Insights.
3) Gartner Top 8 Supply Chain Technology Trends for 2018, February 27, 2018
4) Gartner top 10 Data analytics and Gartner’s Supply Chain Top 25
5) SCM World Future of Supply Chain surveys 2017, 2018
6) Supply Chain Digital Transformation Study. The Hackett Group (2018)
7) The Most Important Boardroom Discussions, Supply Chain Magazine no.29 Q2, 2018
8) Deloitte’s Global Chief Supply Chain Officer Survey, 2023
9) MIT Sloan Management Review, 2023
10) The World Economic Forum (WEF): WEF addresses global challenges, including those related to the supply chain, and offers insights into future trends.
11) Supply chains: To build resilience, manage proactively, McKinsey. May 23, 2022 | Knut Alicke, Cengiz Bayazit, Tim Beckhoff, Tacy Foster, and Mihir Mysore
12) Top 10 Supply Chain Trends 2023 2 , ASCM (2023)
13) ORLANDO, Fla., May 10, 2023, Gartner Reveals the Top Supply Chain Technology Trends for 2023. Justin Lavelle
14) Top 10 2024 Supply Chain Trends: Beware of the Analytics Rabbit Hole. Last Published: Sep 21, 2023
