As we prepare to turn the calendar page to a new year, what emerging (and persisting) factors can we expect to influence our days in 2024? My team monitors trends driving supply chain all year long as part of our thought leadership function – we listen to supply chain practitioners, analysts, academics, influencers and others to curate the most relevant impacts. Here are the top trends grabbing our attention.
1) Resilience gets investment
Investment deepens in supply chain resilience in order to tackle endemic disruptions that aren’t going away and satisfy customer expectations that remain elevated. Supply chain disruptions, including labor strikes, cyber-attacks, and climate impacts all increased in 2023. In response, companies plan to build capabilities for greater resilience, which is why Capgemini found that on average organizations plan to increase investments in supply chain by 17% over the next three years. The trade-off of resilience versus cost continues, with sustainability emerging as a third factor increasingly weighed against the impact of decisions.
2) Cash is (re)crowned king
Interest rates show no signs of dropping, and the resulting increased cost of capital is squeezing cashflow and inventory. While one retired CSCO told me that for a while “cost didn’t matter,” once again cash is king. Renewed focus on maintaining working capital puts pressure on inventory as financial policy increases the cost of keeping it. In response, supply chains are shifting back toward just-in-time-style inventory practices and multi-echelon inventory optimization.
3) Acceleration of near and onshoring for sourcing and manufacturing
Supply chains are far too global to make complete reshoring viable, but the shifting sands of sourcing are changing. Mexico has overtaken China as the #1 exporter into the US, and even China is moving some manufacturing to the US. In the UK and Europe, onshoring or nearshoring is on the increase. Alternate sourcing for resilience is the main driver, but trade policy is having an impact as tariffs are back in the news.
4) Supply chain key to operationalizing sustainability
There is an increased recognition that supply chains are the best means to achieve sustainability goals, since for most companies 80% or more of their emissions are in their supply chains. At the same time, climate change is increasingly disrupting supply chains. While regulations are coming, the EU voted to delay the onset of previously-approved reporting requirements by 24 months, because 39% of organizations reportedly would have been unable to comply. There has been a backlash against ESG in some quarters, leading to some internal political battles to sort out these strategies.
5) Planning as a service gains momentum
Some large and mid-market companies are moving toward planning as a service (PaaS), where they outsource most of this function to a third party like a large systems integrator or smaller, boutique firm. Access to world-class planning techniques that can deliver business value and stay ahead of emerging trends and requirements is a draw for PaaS, while the labor shortages have also pushed companies to explore this approach. Since payment for these services shifts a significant line item from a fixed to a variable cost, it is also an easy “win” when pressure heats up to cut the budget.
6) Changing labor dynamics drive adoption and automation of new tech and business models
Talent is the number one concern for CEOs, COOs, and CSCOs because there are simply not enough people to run supply chains. In countries around the world, birth rates are down, labor force participation has not returned to pre-pandemic levels, and baby boomers are retiring in huge numbers, all of which shrinks the pool of available workers. Other factors impacting business models are digital native expectations for seamless workplace technology and cross-generational demands for flexible work arrangements and work/life balance.
Fewer workers who want to work differently means we must figure out how to do more with less, so increasing productivity is a major driver behind digital transformation and AI in particular. Leaders are interested in increasing automation from the front lines to planning. The labor shortage is also another compelling factor for companies evaluating a vendor to hire for planning as a service.
7) (Generative) artificial intelligence is top of mind
A year after the launch of ChatGPT, GenAI is still top of mind, with 75% of CEOs reporting in an IBM study that they believe competitive advantage will lie with those who have the most advanced GenAI strategy. It’s a bit of the Wild West, where rapidly evolving technology is still poorly understood, with both great opportunity and risk. Only a minority of firms have policies to address accuracy, the most-cited risk. Supply chain lags in AI adoption, with marketing and sales, product and service development, and service operations leading the way.
This gold rush has created a halo effect, yielding a greater push toward adoption of AI in general. Most have started their AI journey, but few projects are fully deployed. Meanwhile, regulation is starting to be drawn, with the new EU Artificial Intelligence Act the most comprehensive, but guidelines have also been issued by Canada, the US, China, and the UK, among others, with stricter regulation sure to follow.
We’ll be monitoring and responding to these trends, and any others that will arise as 2024 unfolds. It’s encouraging that supply chain management continues to gain momentum at the executive level across organizations and I look forward to a new year filled with opportunities for our profession.
Leave a Reply