Earlier this year I met up with some of the best brains in the supply chain industry. From these discussions, we were able to identify some of the common trends, risks and opportunities facing today’s global supply chains.
Here are my top five:
1. Geopolitical unrest will require resilient and agile supply chains
World events and markets show no sign of calming down any time soon. This means we will continue to be affected by uncertainty which will require even more resilient and agile supply chain processes. From trade wars between the US and key suppliers located in China to Brexit, we’re still navigating uncertain waters.
When the US and China announced a preliminary trade agreement in December it was billed as a “phase one deal”. To date it is estimated that the US has imposed tariffs of $360B on Chinese goods, and China more than $110B on US products. When two of the world’s largest economies are immersed in a trade battle there’s a significant impact on how and where we source and manufacture products, not to mention what they cost.
Whether it’s trade wars, changes to tariffs or Brexit, supply chains will need to be resilient, agile and ready to respond to ever-changing conditions, regulations and opportunities.
More recently, the coronavirus outbreak has demonstrated the potential for global crises to cause massive disruption to international trade. Throughout history, international health risks have spawned a trend towards isolationism, and COVID-19 is yet another example of this.
The impact of the coronavirus continues to deepen each week with companies importing materials from major manufacturing hubs in Asia forced to find alternative supply routes as their suppliers become uncontactable due to the forced closure of factories.
2. Consumer demand for ethically sourced products will drive sustainable supply chains
When Greta Thunberg was named Time’s Person of the Year for 2019, it highlighted the influence and power that individuals in particular, and consumers in general, have on businesses today. Consumers are increasingly demanding ethically sourced products that are manufactured and delivered through sustainable processes from sustainable and ethical companies.
Australia is striving towards more ethical supply chains with the enactment of the Modern Slavery Act, requiring businesses to report each year on the risks of modern slavery in their operations and supply chains. The legislation is a great step towards not only clamping down on modern slave labour but ensuring businesses deliver on the growing desire for ethical products.
3. Balancing rising populations and limited natural resources, require circular economy
As the world’s population grows and natural resources decline, we are challenged to minimise waste and recycle products and materials.
There is a greater demand than ever before for businesses to create products that are biodegradable, environmentally sustainable, and ethically sourced, as well as generating minimal waste of natural resources and complying with fair trade policies.
With more and more businesses adopting a waste-free philosophy, supply chains will need to adapt to reflect this value. Behind the scenes, the invisible supply chain is also changing to accommodate demand for a more circular economy. Programs like SAP Ariba’s “Plastics Cloud” is one example, helping businesses easily connect with plastic-free suppliers for their procurement purposes.
4. The experience economy demands “as-a-service” supply chains
Examples of the “as-a-service” or subscription models are appearing across all industries. When was the last time you bought a CD or DVD? It is now the norm to pay a monthly subscription for unlimited access. Consumers can now buy everything from contact lenses to clothing, shaving supplies to sneakers through a monthly subscription.
And this is not only a B2C play. Usage-based or fixed subscription options are now offered in the B2B space, including for industrial machinery such as compressors, drills, diggers and more.
But to offer an “as-a-service” model means rethinking your business all the way from the design of the product or asset, to how it is used and operated by the customer. Delivering a service based on metrics like “hours of usage” requires not only knowing how long it ran for, but also how well it is performing. If it breaks down and the customer has a negative experience, you won’t be paid.
Whether you are delivering streaming, a subscription, or pay-for-use, these “as-a-service” models all have one thing in common: to keep customers coming back for more you need to offer a great customer experience and that’s directly linked to a great product experience.
5. Convergence of new technologies (AI, ML, IoT, 5G) will enable intelligent supply chains
In the 2020s, technology will evolve from simply capturing real-time data to enabling data-driven business decisions. An increasing number of intelligent products and assets are being designed, manufactured and implemented. Employees will be empowered to leverage the data from these intelligent products and assets to make predictive, prescriptive and automated decisions across the entire supply chain.
The availability of 5G networks will lead to an even greater push in the adoption of IoT solutions. This will accelerate the creation of a digital twin of the supply chain, which in turn will provide the opportunity and information for machine learning and AI across the supply chain, leading to more efficiencies.
We have seen this trend already take flight in forward-thinking businesses such as Accenture, which recently underwent a digital transformation journey to adopt SAP Ariba’s “Guided Buying” capability, helping the business move to a new generation of procurement. The intelligent solution enables Accenture’s procurement department to be faster, more cost-effective and more compliant in their purchasing activities. This move will open the door for more artificial intelligence (AI)-powered automation.
We are in exciting and challenging times. With shorter product cycles, more design variability, changing demand, shorter speed to delivery and greater calls for sustainability, the key is having the business processes and solutions that will help you adapt to whatever the future may bring.
This article first appeared on Procurement and Supply Australasia.