David Strauss, AVP, Strategic Partner Development at e2open, takes us through his answers to a challenging year ahead for supply chain leaders
The 2020s have been a turbulent time for supply chains. Companies continue to face various challenges, from geo-political conflict to inflationary pressures to freak weather events. These disruptions are felt across global networks, making supply chains yet again more volatile.
And yet, our collective shift to online commerce in recent years sees customers expecting deliveries quicker than ever. Consumers expect to get anything from any retailer on our doorstep within 24 hours — all for a minimal cost – and so do businesses.
The reality is that companies are struggling to achieve supply chain resilience and speed as supply chain leaders juggle multiple priorities: reducing risk, improving sustainable practices, operating as lean as possible, responding quickly to customer needs, and improving on-time-in-full fulfillment rates at a manageable cost.
Moving into 2024 and beyond, there are five key supply chain issues they’ll need to take heed of, to make tough but smart decisions.
The shift from intra-enterprise to inter-enterprise
Supply chains are clearly a complex, ever-changing landscape. To manage these sprawling networks effectively, businesses will need to look outwards in their search for supply chain stability. Connecting your supply chain and gathering data from various suppliers, logistics partners, and customers – not just internal departments – in a single, unified platform will prove vital and enable you to shift from an intra-enterprise to an inter-enterprise supply chain.
For instance, in a connected supply chain platform, companies will have access to a single source of “truth,” and this data can show whether there are supply delays in a certain sector or region and enable mitigation against this disruption before it impacts customers by choosing a different source for materials. Equally, if businesses can see and understand trends in their supply chain data, such as demand spikes, weather events, economic fluctuations, transportation delays, and more, they can plan in advance. Even better, forecasting and redirection can be done automatically through the latest AI and machine learning technology, with human supervision needed only to review and approve the recommendations. As a result, enterprises can edge ahead of competitors while having more time to strategize their next move.
Visibility will be critical, and supply chains will be driven more and more by data insights. Think about it – perhaps a supermarket you supply with a celebrity drinks brand has used its own data insights and decided to withhold its supply to drive up demand. Without knowing this, you might think they’ve sold all their product and will need more to replenish it – and consequently, you’ll oversupply. A connected supply chain platform that aggregates and analyzes all supply chain data, however, will forge the necessary links to avoid these scenarios and instead optimize the huge benefits of inter-enterprise supply chain networks.
Supply chains diversify with nearshoring – but can’t put all their eggs in one basket
In the rush to reduce costs and increase efficiency, many organizations looked further afield and invested in offshore manufacturing, supplier networks, and supporting logistics infrastructure to produce and distribute goods. However, supply chain disruptions and increased regulations have left shelves empty and orders unfulfilled. And with protectionist policies on the rise, companies are now evaluating their options to re-architect their global supply chains to ensure supply and reduce single-country dependency.
Concepts such as nearshoring will continue to grow in popularity, with organizations creating supply chain networks within a smaller radius. In theory, this approach makes it easier to quickly fulfill orders and lowers the risks associated with global supply chains. However, companies must remain cautious. These models have limited short-term feasibility due to the cost and time associated with repositioning production facilities and supplier and logistics networks closer to home, and geo-political uncertainty makes it difficult to know who your friends are—or will be—in the long term. Last but not least, nearshoring will lead to higher costs, which cannot always be passed on to the consumers, lest they generate a backlash and decrease demand.
Nearshoring should be viewed as a long-term strategy that needs to include multiple backup supply routes and innovative sensing and routing technology to make the best decisions in real-time. But realistically, it’s important to recognize that supply chains will likely remain global because companies still need to source and distribute globally. While nearshoring may become a facet of complex supply chains, it will be one of many approaches.
Sustainability goes granular
Companies are striking a delicate balance between scalability and sustainability. For example, rushing inventory from hotspot to hotspot is not financially or environmentally viable. Ultimately, businesses recognize that unsustainable actions are unscalable, so incorporating sustainability into the long-term growth strategy is becoming the norm, and doing so can be a win for the bottom line and the environment. However, as with the example above, having the right stock in the right place at the right time first requires an investment in connected supply chain technology to provide visibility across the entire network down to a granular level. Next year, this will be a firm focus as companies look to reduce waste, such as overstocking inventory, and minimize emissions associated with supply chain movements like expedited deliveries.
As we move into 2024, reporting will also be a key consideration. Any company operating across Europe or trading with Europe will have to meet the strict reporting standards of the Corporate Sustainability Reporting Directive (CSRD). This means that organizations will need to report more effectively on their environmental impact, tying emissions to distinct materials, business processes, and suppliers. Increased transparency, data sharing, supply chain technology, and collaboration between every link in the supply chain will build the foundation for success.
The shifting role of retail stores and omnichannel experience
The role of retail stores is changing. As much as online shopping has boomed, people still like the experience of buying in person and want the flexibility to purchase through any channel they desire. This hybrid model makes fulfillment a challenge, and providing a truly omnichannel experience across online and brick-and-mortar retail requires end-to-end supply chain visibility. 2024 will signal the evolution of retail stores into fulfillment hubs. No longer reliant on offsite warehouses, stockrooms will increasingly be used as fulfillment locations, facilitating rapid orders, buy-online-pick-up-in-store (BOPIS), and click-and-collect.
We will also see a rise in the use of point-of-sale (POS) information in supply chain management. This will be a vital tool to monitor customers’ buying and anticipate their needs. Going one step further than simply forecasting the orders large retailers are likely to place, companies will analyze the customers to whom the retailers are selling. Companies need to think more end-to-end and holistically about their supply chains to reduce costs and forecast accurately. With high connectivity and collaboration, suppliers can respond to near-term supply and demand signals such as impending shortages or increased product demand. Moving to a cloud-based connected platform will allow retailers to move faster than their competitors, thanks to greater collaboration and insights to inform decisions.
Embedding AI into supply chain decision making
Currently, AI helps organizations analyze large pools of data and make recommendations, but people are still necessary. In many cases, the analyses and prescriptions are semi-autonomous, for example, helping employees make better predictions with demand-sensing technology and relieving the burden of administrative tasks to allow for more analytical work.
Moving forward, data and an embedded AI strategy will be vital to success. Ultimately, it doesn’t matter how good your AI is if you don’t have the right data — and lots of it. This includes data from your internal operations and along the entire value chain of multiple tiers of partners, suppliers, distribution networks, transportation providers, customs, and more. Access to this information relies on a connected supply chain network that lowers entry barriers and provides leaders and AI systems the data they need to make better decisions. The more data points you aggregate, the better any AI solution will perform.
The most significant win for supply chains will come from embedding AI in day-to-day decision-making, ensuring that the tools used to make, move, and sell goods have AI at their core. No longer an overlay or an afterthought, AI must be used to drive behavior at the time of decision.
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