Supply chains have been severely impacted by COVID-19. A recent Statista survey found nearly 72% of businesses suffering detrimental effects related to the pandemic. Now, even as disruptions persist, supply chains the world round have begun picking up the pieces and charting new territory to recover.
According to Matthew Burton, supply chain and operations leader with EY EMEIA, leading organizations over the past 18 months “have developed the ability to rapidly adapt business models and supply chain ecosystems to live with a high degree of volatility and disruption. In many cases, driven by necessity, companies used this period to increase overall investment in digital supply chain technologies, and replace legacy platforms in order to gain end-to-end visibility and bring risks under control.”
Moving into 2022, EY expects to see companies transitioning from “survive” to “thrive,” as they shift from managing risk and disruption to exploiting future growth. “This will require digital technology to build new supply chain capabilities,” Burton says.
In the short term, don’t expect that list to include technologies like artificial intelligence, machine learning, blockchain and the internet of things. While these advances are growing more prevalent in the global supply chain, they’re still a long way off from becoming the standard.
Companies today need to focus on surviving the pandemic and its effects before looking into cutting-edge technology. Gartner’s Hype Cycle for Supply Chain Strategy 2021 lists capabilities like AI and control towers as peak trends, but with a time frame of 10 years to reach the “Plateau of Productivity.”
Here, then, are some top predictions for supply chain trends in 2022.
Supply Chain as a Service
The industry is evolving at a pace where anything and every is offered “as a service,” and the supply chain is no exception. Supply chain as a service (SCaaS) is an innovative approach that allows companies to generate a four-to-five-times return on investment by partnering with one service partner to support all or part of their supply chain needs, including procurement, production control, manufacturing, quality, warehousing and logistics. It offers a virtual supply chain team enabled by cloud software.
“Supply chain as a service provides a strategic opportunity to work with an organization whose sole focus is to make each component of the supply chain more efficient,” says Kelly Barner, managing director of Buyers Meeting Point. “When individual segments are able to focus their energy and attention on asset management and inventory rotation, innovation and competitive advantage become achievable.” Companies can realize lower and variable cost structures, drawing on proven technology and systems with the ability to instantly scale, she adds.
Up to now, the traditional, linear supply chain has been sufficient to keep economies churning, but a more profitable methodology is gaining in popularity: the circular supply chain. It encourages manufacturers and sellers to take discarded materials and remake them for resale.
The circular supply chain creates brand differentiation, while forging a closer connection between consumers and small growers. In the process, the model directly rewards small-scale suppliers for their commitment to sustainability. The ultimate goal is to mitigate environment impacts by aligning incentives toward the goal of an inclusive economy.
According to recent Gartner surveys, 70% of supply chain leaders plan to invest in the circular economy, while 51% expect their focus on “circular economy strategies” to increase over the next two years.
Elastic Supply Chains
The past year has shown more than ever that supply chains must be responsive and flexible in order to deal with market fluctuations and unforeseen outside influences. The days of reducing inventory to the furthest possible degree may be ending; instead, organizations will need to respond to growing volatility in consumer behavior with “elastic” strategies — the flexibility to expand and contract capabilities to meet demand within a given time frame.
The concept of elasticity is especially useful when companies come to recognize supply chain execution as an end-to-end process, starting with order entry and extending through procurement, manufacturing, inventory and warehouse management, and transportation and distribution. (Not forgetting, of course, financial aspects.)
When implemented successfully, an elastic supply chain can scale up or down, even with the most unanticipated patterns of demand. It can help to reduce costs, improve service, minimize risk and enhance a company’s competitive edge.
Sustainability awareness is springing up in countless industries. A growing number of consumers prefer businesses that are dedicated to environmentalism, and companies are striving to address their concerns while improving internal systems and scrutinizing energy use throughout the supply chain.
Green supply chain management refers to the concept of integrating sustainable environmental processes into the traditional supply chain. This can include processes such as product design, material sourcing and selection, manufacturing and production, operation, and end-of-life management.
A recent Nielsen survey found 90% of millennials, ages 21 to 34, willing to pay more for products that contain environmentally friendly or sustainable ingredients, while 48% of U.S. consumers said they are “definitely or probably” changing their consumption habits to reduce the impact on the environment.
The customer perception of sustainability has generated new demand for a niche customer segment. With green consumerism on the rise, more companies are expected to implement eco-friendly supply chain processes in the coming years. While the specific goal of green supply chain management is often the reduction of CO2 emissions, companies should also look to adopting the concept as a means of adding value to their client base.
Objectives and Key Results
Objectives and key results (OKR) can play important roles in operationalizing supply chain strategies. Measuring what matters is crucial to the success of any business, regardless of whether it’s embracing new trends and technologies. OKR allows companies to focus on measurements that matter, and eliminate those have no impact on supply chain performance.
The year 2021 saw OKR getting into the Gartner Hype Cycle for Digital Workplace and Human Capital Management. In the years ahead, expect virtually every industry to adopt OKR as the framework for global supply chain strategy execution.
As the pandemic unfolds, executives and supply chain leaders must ensure that corporate goals stay aligned with autonomous and connected supply chains, through the use of execution frameworks such as OKR. Companies will need to invest in capabilities to capitalize on the dynamic insights coming from their supply chains. They should also drive corporate ethics policies that define acceptable business practices and determine operational boundaries. At the same time, talent requirements must shift to those who can understand supply chain dynamics, adapt to changing environments, and decide the best way to make use of new technologies.
Bastin Gerald is founder and CEO of Profit.co.