Supply Chain Management - Transformation Outlook

The global supply chain continues to evolve rapidly, keeping pace with the breakneck technological advancements of the modern era. Though it can be difficult for supply chain managers and business leaders to stay on top of these changes, it’s crucial to do so to maintain supply chain resilience and increase the success of your business. Rather than treading on the heels of change, it’s better to stay ahead of the supply chain management (SCM) trends that are shaping the future of SCM. Read on to learn about the latest supply chain innovations. 

1. Artificial Intelligence and Automation

The use of artificial intelligence (AI) and automation is on the rise in many industries. Automation, which has been around for decades, utilizes technology to minimize human inputs and is simply a machine performing a series of tasks. Automation isn’t intelligent, which means the tech only performs tasks that it has been explicitly programmed to perform. 

Artificial intelligence (AI) on the other hand, attempts to mimic aspects of human intelligence and can “learn” on its own to assist with more complex, challenging tasks. AI still requires some human input, but also leverages machine learning to determine the next steps on its own, without explicit human direction. 

In a world where speed and precision are crucial for success, both AI and automation are valuable tools that can speed up your supply chain and remain competitive in your niche. If you don’t use them, your competitors will, and leave you behind as they enjoy greater levels of success. And whether or not you use AI – you should be streamlining your supply chain for the good of the business– as Deloitte put it (link) “79% of companies with high-performing supply chains achieve revenue growth greater than the average within their industries whereas businesses with optimized supply chains have 15% lower supply chain costs, less than 50% of inventory holdings and 3X faster cash to cash cycles.”

From making improvements to your assembly line to powering digital twin technology and everything in between, there are many ways to incorporate AI and automation into your organization’s workflow. For supply chain management processes, consider utilizing AI-based software for intelligent sourcing, inventory management, and even logistical routes. You can also use AI to perform future supply chain tracking or supply chain automation. 

The key is finding tasks and processes that will help you save time or energy; often, the most suitable tasks are time-consuming or complicated. By automating these kinds of tasks, you can spend more time on projects that only a human can do, and get an even greater return on this investment.

2. Increased Focus on Sustainability

As a growing number of consumers prioritize the environment, more businesses have increased their sustainability efforts, and this includes supply chains. Because there are so many different ways to improve sustainability, you’ll need to tailor your efforts to suit the unique needs of your organization. 

One may argue that sustainability needs to start at the beginning of manufacturing, or with the supply chain itself. Here are some small changes that your company can start with to chart a path towards a more sustainable supply chain: 

1. Determine the biggest risk to sustainability within your product line or industry sector. The Sustainability Consortium, for example, has done the heavy lifting for over 90% of consumer products; they have organized the data to that companies can easily locate the biggest impacts on sustainability for a given product with their THESIS Product Finder tool. 
2. Revamp packaging designs to more sustainable alternatives. 
3. Switch to alternative energy sources (like hydrogen, electric or hybrids) for your logistical vehicles whenever possible, and choose suppliers that use green transportation methods for your raw goods.
4. Create an action plan with resources like WWF’s Supply Risk Towards Sustainable Sourcing Initiative. 

3. Customization

You can expect to see an increasing level of customization in different parts of the supply chain — which may require segmenting your supply chain, and building a customized strategy and approach for each segment. 

Your customers, in particular, will likely continue to expect a personalized experience with your business. It can be challenging to keep up with mass customization demands, and you’ll have to consider different ways you can keep up. One solution is customizing your manufacturing services like CNC machining, and injection molding as you work to build prototypes and accelerate production without sacrificing quality or precision. 

Increasing customization becomes more realistic as you work on improving other aspects of your supply chain. For instance, you may find it easier to manage personalized customer orders if you can automate your order processing system by putting standard orders in one area and customized ones in another. Essentially, if you look for ways to simplify other areas of your business, you can devote more time and attention to product customization.

4. The Internet of Things

The Internet of Things (IoT) is a network of physical objects that, powered by a wireless network, are digitally connected and accessible from anywhere. The IoT already plays a significant role in the supply chain — particularly when it comes to logistics — but with increasingly diverse applications, IoT will likely continue to grow in importance. Research indicates that there will be more than 25.4 billion IoT devices by the year 2030.

In addition to providing more oversight in operations and transportation, IoT can be used to improve warehouse management, fleet tracking, inventory control, and even technological and mechanical maintenance. IoT technology can even be used to create smart warehouses and fleets that increase the efficiency and data accuracy in multiple areas of your supply chain. The value of the IoT cannot be overstated and it’s not going away — according to McKinsey Digital, every second, 127 devices connect to the internet for the first time. 

Depending on what kinds of IoT devices you have, you can use them in conjunction with other pieces of technology for even greater benefit. For instance, the information collected by a sensor in one of your warehouses could provide valuable data that helps you automate other processes, such as forecasting and asset tracking. This high level of integration is essential as supply chains become increasingly digital. 

5. Digitization

Digitization refers to the practice of putting information into a digital format. When it comes to securing the future of the supply chain, digitization is non-negotiable. Experts believe that effective supply chain digitization can make your entire supply chain more streamlined, mobile, and resilient — all of which are highly beneficial for your organization’s bottom line. This is also a major trend in e-SCM or Electronic Supply Chain Management. 

If you haven’t gone fully digital, keep in mind that the transition can be challenging. You have to find the right kind of technology to meet your organization’s needs, implement it correctly, and work out any internal difficulties. However, you can’t afford to not digitize. It’s already the present, and it’ll only become more integral to the supply chain in the future. If you are unwilling or unable to digitize your supply chain, you’ll likely struggle to succeed going forward. 

6. Strengthened Relationships

Technology is a significant force in supply chain management, but so are the humans wielding it. Maintaining good human relationships should be a high priority for every company, if not the highest priority in doing business. It’s always a good idea to focus on fortifying your relationships with your team members, vendors, and suppliers to increase collaboration and cooperation at each step in the supply chain.

Thorough, accurate, and quick communication should be your priority. Not only is good communication the first step to building any relationship, but it can also provide you with valuable operational data and insight. You can use this additional information to improve your external and internal processes, and help them become more streamlined and efficient.

Also, look for mutually beneficial ways to support both your and others’ goals. Share information, proactively solve problems to avoid creating more work, and address unexpected issues as they arise. Consider hosting a communication workshop for your employees so they may learn effective communication strategies. The stronger your communications skills, the more your business stands to gain. 

7. Risk Management and Resiliency

In an increasingly volatile and unpredictable world, the supply chain is constantly at risk of disruption. You cannot control the weather, predict political events, or foresee the effects of an unprecedented pandemic — but you can control how your supply chain prepares for and responds to these threats. 

It’s your responsibility to mitigate risk as much as possible so your supply chain remains stable during uncertain times. For example, if you source raw materials from a politically volatile area, look into sourcing that material from another geographic area that is more stable. Should anything change, you can pivot quickly and minimize the impact of that disruption. Simply put, thinking about the disruption and your planned response in advance will help you thrive amid these shifts and uncertainties.

8. Increased Visibility

Few things are as important for supply chain management as transparency and visibility, aka the ability to track components or products from the manufacturer to the next processing locations or the end user. Increased visibility will help you understand the state of your supply chain at a high level, as well as at individual links, to strengthen your supply chain as a whole. Visibility also ensures data is readily available to all stakeholders, such as customers and internal parties.

Thanks to the digitization of the supply chain, increasing visibility is a highly achievable goal for many organizations. With the right technological solutions, you and your team can access information on every link in your chain at a moment’s notice. One of the most common tools to utilize for supply chain visibility is supply chain management technology, which includes IoT, 5G and Starlink networks, AI, machine learning, robotics, and PLM (Product Lifecycle Management) software. 

With more visibility in your supply chain, you can prevent minor issues, such as order errors or delivery delays, and respond to problems more quickly. Being able to access that kind of information quickly and easily is imperative to boost the efficiency, reliability, and resiliency of your entire supply chain and organization.

9. Circular Supply Chain

Traditionally, supply chains have been thought of as linear: starting as raw materials, goods flow in a straight line through the supply chain until they are a finished, disposable product. Now, more people subscribe to the idea of a circular supply chain process, wherein raw materials, and even discarded products, are recycled and re-introduced into the manufacturing process.

The circular supply chain model certainly helps with sustainability efforts, but it also has economic benefits for your organization. The earth has a finite amount of raw materials, and as they become more scarce, they will increase in price. Further, if you’ve already paid for materials or a product, but you aren’t able to use it for its intended purpose, you won’t waste money on something you’ve already purchased that’s still useful. You stand to save more money on reduced storage, transportation, and administrative costs, too.

Strengthened professional relationships and increased reliance on technology (including AI and IoT) can also help your efforts to operate a circular supply chain. If you and the companies you work with are willing to share information and resources, you can further decrease waste and keep more materials in production. Additionally, with the right technological solutions, you can stay updated on the current state of your materials and products in real-time.

10. Cloud-Based Solutions

Similar to digitization, cloud-based software solutions are the way of the future in supply chain management. Traditional and localized supply chain management solutions won’t cut it. To stay competitive, you need accurate, agile, and accessible solutions for your organization.

Software-as-a-Service (SaaS) models are beneficial for supply chain management. Not only is SaaS reliable and secure, but it’s highly efficient and convenient. All of your organization’s data is stored in the cloud, and you and your team can get the information you need at any time, from any place. With a global and digital supply chain, the efficiency provided by SaaS solutions is crucial to support your organization as you move into an increasingly fast-paced future.

As these trends continue to evolve, so too will the art of supply chain management. New developments will lead to unforeseen consequences, both positive and negative. To stay up-to-date and position your organization for success, you need to anticipate and continue to adapt to unforeseen changes in the future.

Evolving capabilities

Successful supply chain management will continue to include emerging technologies that drive efficiency and automation.

• Distributed inventory: Distributed inventory flow forecasting (DIFF) predicts the flow of materials, helping businesses maximize order fill rate and maintain inventory levels.
• Autonomous mobile robots (AMR): While warehouse management systems continue to manage tasks such as scheduling loading/unloading, AMRs might start emerging as a method of improving picking processes.
• Driverless vehicles and drone delivery: Especially important in times of labor shortages, driverless and drone delivery options are powerful solutions. This is also great for cost management across when delivering into remote and hard-to-reach locations. 
• Blockchain: Moving across borders can create transparency issues. Invoicing, planning, shipment authorization, contracts, volume management and more could be transformed with the use of blockchain. 
• 3D printing: Replicate and produce replacement parts, eliminating the need to hold stock in warehouses waiting for orders. An agreement with a local 3D printing business could print and deliver the part fast.

In today's changing world, building supply chain resilience is more important than ever. Having the ability to stand up to disruptions, continue business as usual activities and continue growing will be underpinned by wise technology selection and implementation decisions.

Wrapping It Up 

These current trends in supply chain management can also be useful tools to strengthen your supply chain and make it more agile and resilient. Technology integration is the key to future supply chain success which is why so many firms are digitally transforming their operations. Here are the core concepts to keep in mind as you do the same: 

• Supply chain management will continue to face disruptions in 2022 and beyond. The repercussions of the pandemic continue, which makes supply chain innovation and evolution more important than ever. 
• One of the biggest challenges threatening the integrity of SCM is the cost of goods and the cost of shipping. In some instances, shipping costs have skyrocketed by as much as 600%, a non-sustainable amount. 
• The current economic recession is impacting the supply chain, even after some relief from the impact of COVID-19. There is now too much inventory compared to consumer demand, which threatens freight demand. SCM experts are calling this the ‘bullwhip effect’ where manufacturers and retailers have more inventory than they can sell. 
• However, SCM experts predict that the supply chain will recover, even if it happens at a slower than desired pace. If the pandemic and global recession have taught us anything, it’s the importance of building in sustainability and intelligent sourcing for our supply chains.