Supply Chain Transformation: Key Trends and Predictions for 2023
Supply
Chain Management has gained great momentum in the last two years.
Organizations have defined it as the administration of the pipeline of goods
and services that allows for transforming raw materials into finished goods.
With the advent of the pandemic, the world was trusted into a new generation of
supply chain management that re-defined how the system worked overnight.
With globalization, modern supply chains have
improved living standards and consumers can buy goods at a lower cost. The
importance of supply chain management can be noted as:
·
With supply chain management, necessities, as
well as life-saving goods like medicine, can reach a consumer on time.
·
Energy in various forms, used for powering homes
and offices involved the intricate process of infrastructure building and raw
materials that are processed through supply chain management.
·
Supply chain management is key in sectors like
transportation, warehouse, inventory, packaging, and logistics which help
create multiple jobs and contributes to building a nation’s economy.
COVID-19
impact:
In 2020 when
the world was hit COVID pandemic, the immediate impact was felt on the supply
chain system. With restrictions placed on the movement of people,
transportation of goods and services was affected, making it more challenging
to produce and deliver goods. The many vulnerabilities already present in the
supply chain management system were exposed during the pandemic. The supply
shock started in China and spread worldwide. Along with the pandemic, the U.S-China
trade war put nations under immense pressure to strengthen their supply chain
processes. This led to an increase in the cost of production which would
finally be paid by the consumers at a higher price for final goods.
Statistics
show that the price of basic goods like meat, egg and fish rose by 10% in 2021
in the U.S.
Even after
two years as the world is recovering from the pandemic, consumer demand for
goods is increasing but production has still not paced up to the increasing
demand.
According to Neelam Singh, Practise
Director, Quadrant Knowledge Solutions, “It’s no news that over the past two
and a half years Covid-19 pandemic and other geopolitical issues have severely
affected the global supply chain and led to several serious disruptions – be it
sudden demand changes on one side, massive plant shutdowns – leading to supply
changes on the other. Though the pandemic has passed, supply chain leaders are
not at all relaxed… they are planning and preparing for the next set of
unexpected changes. So now the new normal is adapting to uncertainties.”
For the readers, Quadrant Knowledge
solutions have identified some trends and have looked at them from three
angles.
·
The trends for Supply Chain leaders in 2023
·
What are the software vendors aiming at
providing the leader with this year and,
·
How is the public getting impacted by the supply
chain in 2023.
First,
let us look at what are the trends driving the supply chain owners or leaders
and how are they trying to understand and gain back control of their supply
chain business.
·
Making the supply chain Agile and Resilient:
Agility can be of two types – vertical – across the network and agility across
the organization – horizontal. The supply chain should have enough buffer to
recover from any disruption without being subjected to it for long enough for
anyone to feel the impact. Important that the supply chain is resistant to
disruption and can adapt and recover fast.
·
Identifying the weakest link in the supply
chain: Recently there was a chip
shortage in the whole world –that was primarily because the organizations have
not identified the weakest link in the supply chain and had no backup plans to
cover the foundries that were in Asia. Not only auto and semiconductor industries,
but banks also could not issue chip-enabled debit and credit cards.
Organizations are gravitating towards identifying their reliance on
single suppliers or countries and trying to set up the next nearest supplier
base. Companies are trying to identify alternative materials and going beyond
traditional partnerships. Since China is no more a reliable source,
organizations are following China’s plus-one strategy for their production and
other supply chain needs.
·
Being Aligned: Supply chain systems, processes,
and any communications (human or data) should be aligned throughout the
network. Everyone who is part of the network needs to be cognizant of the
impact of each other’s decisions in the network.
·
SC should be Futuristic: And one way of
doing it is by making the supply chain digital.
Top Technology Trends 2023:
After
going through the supply chain trends, let us look at the Technologies that are
trending from the software provider’s point of view.
·
Digitization of Supply Chain: Digital
supply chains are expected to be normal, and this would solve most of the
issues of the supply chain leaders like making them resilient, aligned and
futuristic and help in identifying the weakest link in the chain. Though
digitizing supply chains is not a small task at hand and may require
large-scale sensor implementation of IoT tracking; Digital twins; shared APIs,
adoption of cloud technology, process automation and adopting security measures
to tackle all the IT developments. But in the present context, the only way an
organization can be either left behind or be competitive is this and in most
cases is the differentiating factor.
·
Importance of IoT: Visibility is the key
to understanding issues and thereafter fixing issues in any supply chain. By
deploying IoT devices across different parts of the supply chain — from
manufacturing plant floors to transportation and distribution centres,
inventory systems offer visibility and data collection. Organizations are using
this technology to deliver real-time insights where they’re needed most.
Thereafter they use the data gathered to develop smart supply chain IoT that
maximizes the efficiency and effectiveness of a supply chain.
·
Data collection capacity through IoT: In
manufacturing, big data and analytics can help improve manufacturing by
providing data on manufacturing parameters, assembly operations or root-cause
analysis of defects, creating energy-efficient production possible.
In warehousing, companies have heavily
invested in technologies that provide a competitive advantage. Travel distance
by the labour can be optimized, pallets can be efficiently reshuffled, and the
picker’s performance can be efficiently enhanced. Fleet companies already make
use of analytics to improve their operations. For example, they use fuel
consumption analytics to improve driving efficiency; and they use GPS
technologies to reduce waiting times by allocating warehouse bays in real-time.
·
Robotics and Automation– Labour
shortages, supply disruptions and demand surges are compelling organizations to
tap into robotics — and, as a result, intelligent robotics is transforming
supply chains. Both mobile and stationary robots are used in warehousing,
transportation and last-mile delivery tasks for increasing efficiency. AMRs
(autonomous mobile robots) used in warehouses are a classic example of this
technology being used.
Impact of Supply
Chain Disruption:
We are all as human beings a part of
some supply chain and any disruption affects us. One classic example was the
toilet paper shortage during the Covid 19 phase. It not only proved that every
human gets impacted by disruptions in supply chain, but also exposed the supply
chain bottlenecks. Not only through shortages, but it impacts everyone via economic,
social, and environmental aspects.
·
Environmental – The traditional linear
business model of get, create, use, and throw away is a deterrent to the
environment. The wastages raise raw material costs, and increases the
likelihood of shortages and volatility. In addition, there are many conflicts
and wars that is facilitated due to rare minerals, energy, and commodities. As
supply chains touch every part of our global ecosystem, circular economies that
prioritize responsible, and regenerative aspects are trending. In addition,
reduction in carbon footprint is also a very critical trend that supply chains
are gravitating towards.
·
Social – Sense of ethics and humanity
need to run deep in businesses. Consumers like us have become aware and are
searching for more sustainable products and the supply chains that bring them.
Sustainable business practices are integral at every supply chain step, from
raw materials to production to delivery. Thus, a big part of running an
efficient supply chain is the human aspect where the supply chain leaders
should look out for practices of fraud, corruption, slavery, human trafficking,
and broader issues like child labour affecting any part of their supply chain.
This awareness is coming up to be a big trend.
·
Economic – Interest rates, taxes, fines
and inflation – all composed the economic impact of supply chains. In the US
the rapid rise in the inflation rate is a major concern for businesses,
consumers, and investors. According to US bank, for the 12 months that ended in
June 2022, living costs in the U.S., as measured by the Consumer Price Index,
rose by more than 9%. Recent inflation spikes are a global phenomenon and we
have witnessed that in jobs being lost, and countries that are dependent on the
US for business getting, impacted.
Conclusion:
Supply chain trends were looked at
from three aspects – what is trending for leaders, owners, or supply chain,
what is trending for the tech providers and for the common human. We just hope,
that with all this awareness, acknowledgement of the new normal and readiness,
the supply chain may get closer to sustaining the disruption without blinking
its eyelid.
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