While 2022 was a year of massive disruption and confusion, 2023 was a year of transformation, with many companies evolving in both digitalization and strategy. Last year, a key focus of supply chain executives was resilience and every media outlet was pushing the topic.
But as the supply chain industry heads into 2024, there remains a question: what’s next? Even though the challenges affecting the supply chain process are adding up (global conflicts, energy disruption, economic pressures, shifting work environment), companies are surely more prepared, learning to adapt to uncertainty more readily than ever before.
2023 was all about a proactive approach to supply chain management. First, executives tried to find ways to be resilient and survive the risk; now, the task is shifting to predicting risk and taking preventive measures to mitigate the impacts of potential disruptions.
Unfortunately, those risks are coming from many directions: transformation, environmental concerns, cybersecurity, global delays, product shortages, and many other factors.
In its latest report, KPMG highlighted the importance of advanced digital technologies and identified six focus areas targeting the supply chain process: AI, data, visibility, low-code, ESG, and electric vehicles.
Key Supply Chain Challenges for 2024
Let’s take a closer look at these sectors to understand where the challenge is and how leaders should respond to it.
AI
Challenge: Incumbent machine learning (ML) models are incapable of processing enormously vast amounts of data and variables contained within. Adding to the complexity is firms’ inability to set up proactive, adequate supply chain planning that would zero out the impact of economic and political instability.
Solution: With 50% of supply chain organizations intending to adopt it this year, generative artificial intelligence (GenAI) has the capacity to solve the computational puzzle, since it can be trained and fine-tuned to a company’s internal processes. GenAI is also poised to supercharge sales and operational planning (S&OP) and integrated business planning (IBP) by eliminating manual errors with the help of advanced analytics (AA), adding 1–3% to gross margins.
Data
Challenge: Data remains one of the most pressing issues for supply chain departments. The arrival of numerous technologies that collect data has had a significant downside for the supply chain process—unable to blend and standardize data efficiently, companies end up with siloed data that is often duplicated or misinterpreted.
Solution: KPMG suggests a case-by-case approach for tackling the data quality issue, meaning companies should focus on gradual dataset enhancement or seek out solutions that can effectively collect, manage, and standardize data to enhance its usability.
Visibility
Challenge: Almost half of organizations suffer from insufficient or non-existent visibility into the performance of tier-one suppliers. This hinders their ability to meet evolving regulatory standards, develop and execute robust risk mitigation strategies, and gain actionable insight into the root cause of inefficiencies.
Solution: Control towers, digital twins, and end-to-end supply chain visibility software can help companies explore the level of cooperation with sub-tier suppliers and boost resilience at scale.
Low-Code
Challenge: Multi-source data availability presents another challenge for supply chain processes. The hindrance lies in the implementation and tracking of change in strategic supply chain software across numerous disparate systems. In most cases, this process is cumbersome and prone to human error.
Solution: The majority of supply chains can significantly benefit from low-code solutions that automate corresponding tasks—either partially or in full—via APIs and built-in integrations. More than 66% of enterprises have already automated some portion of supply chain operations as of early 2024.
ESG
Challenge: While only 5% of greenhouse gasses are released upon manufacturing, the emission generated from goods moving further down the supply chain can reach up to 5–10x that volume. Gathering and disclosing Scope 3 emissions data is quickly becoming madatory across various jurisdictions.
Solution: Supply chain data centralization can help organizations measure all scopes of emissions across the value chain by providing suppliers with an opportunity to input data and allowing organizations to audit that data in an attempt to make their supply chain processes more eco-friendly.
Electric Vehicles
Challenge: Charges associated with air freight and last-minute delivery are often expensive and, in many instances, these types of transportation remain overly manual. At the same time, autonomous vehicles, which are set to bring a higher degree of cost-effectiveness, are still reliant on human control.
Solution: As R&D progresses in the batteries domain, electric trucks will achieve greater durability and be better suited for transportation activities as part of a broader automotive supply chain process. AI, IoT, and AA will continue to disrupt traditional route optimization as unmanned vehicles evolve in design and increasingly enter public roads.
Many companies have maximized their capabilities despite the challenges and are ready to enter the following year with capacity and enthusiasm.
Staying Ahead: 5 Supply Chain Trends for Success in 2024
Because nothing is permanent in this contemporary climate, supply chain process methodologies to anticipate supply and demand and recognize and manage risk are continuously changing. Here are a few technology and strategy suggestions to keep in mind for 2024 and beyond.
Reshoring & Localization
Traditionally, businesses targeted globalization for cheaper supply, manufacturing, and distribution. However, in recent years, more companies changed this strategy and have moved their facilities closer to home.
Considering recent events like the Red Sea blockade, the US-China trade war, and the Chinese energy crisis, such a tendency is hardly a surprise. According to BofA Global Research, the pandemic disrupted supply chains in more than 80% of all sectors. As a result, around 75% of enterprises expect to accelerate their reshoring operations by creating intelligent factories closer to either their home locations or their customers’ points of need.
A locally dependent supply chain sourcing strategy might seem costly. Still, it can provide valuable benefits in the long term, such as supply chain agility, time zone alignment, shorter lead times, better service delivery, and enhanced visibility.
The need for reshoring and localization pushes the evolution of other supply chain trends in facility management, including micro warehousing, automation, and smart factories. After all, localization also demonstrates cost-efficiency perks. According to a Deloitte global study, companies who practice smart factory initiatives experience the following:
10% gain in production output
11% increase in capacity utilization
12% jump in labor productivity
Another driver behind this trend is customers and industrial partners expressing their willingness and desire to buy local products. In fact, 65% of global customers (including B2C and B2B segments) stated they would favor products manufactured in their country.
Reassessing TCO (Total Cost of Ownership) Model
TCO, or Total Cost of Ownership, is being recalculated in a significant way. Today, manufacturing costs may rise, but they must be balanced against newer and more complex parts of the cost model, such as the costs of volatility, unavailability, and brand reputation and quality harm, to mention a few.
In this modified supply chain process, finance and supply chain leaders must collaborate and have real-time access to operational and financial data throughout the ecosystem to make and execute decisions at the same time.
Businesses have to assess the results of several scenarios at the same time. They must devise execution strategies for various scenarios while being agile enough to pivot as necessary.
Companies will have to develop new demand-sensing models for scenario planning that consider elements such as their distribution routes, partners, and consumers, as well as multi-enterprise scenario planning capabilities. In addition, management must plan for surge capacity among critical partners based on teamwork and clear visibility throughout the ecosystem’s different layers.
Green Logistics
Sustainability has come a long way from an industry buzzword to a government-mandated part of every business’s strategy. Incorporating ESG (Environmental, Social, and Governance) measures with typical KPI measurements are not essential for global players’ social responsibility. It’s also good for business, in many ways.
More than 80% of respondents in a Deloitte MAPI survey said that they have invested in advanced technologies for energy management in the last two years.
According to McKinsey, 65% of the 2,000 companies analyzed had positive ESG implications on corporate equity returns, while 8% had negative outcomes. As a result, supply chain directors must evaluate how sustainable each product component is, from how it is created to how it is packed, and what happens when it reaches the end of its useful life. All of this is in the service of achieving environmental goals.
Circular supply networks give verifiable insights into supply chain carbon footprints, enabling companies to meet net-zero targets and create motivating campaigns to attain them.
Multi-Tier Supply Chain Collaboration
Just-in-time planning and relying solely on tier-1 suppliers are no longer viable options. Instead, supply chain executives are preparing for multi-tier supply chain processes by establishing, monitoring, and developing collaborative partnerships.
To develop confidence in multi-tier supply chains, stakeholders must share information in a way that conforms with legislation, data privacy, and security considerations.
With end-to-end encryption, blockchain-based trust, and intuitive, easy-to-use portals, leaders should carefully select supply chain software, opting for solutions that enable safe, dependable portal-based access that encourages collaboration and protects competitive advantages.
Investing in Data Infrastructure
Supply chain visibility tools are required at every level to allow for agility and calibrated risk management. So what is the best way to get there? Data centralization is the solution. Using a centralized data infrastructure helps improve visibility at all levels of the global supply chain, reduce manual touches in operations, and reduce risks.
A well-developed data infrastructure is a top priority for supply chain executives because of better connectivity and diversity. Due to many different technological platforms, comprehensive supply chain data management is no longer a choice, since stakeholders must now handle huge amounts of data. The requirement for enhanced visibility is driving the need for data aggregation to enable information analytics.
Visibility platforms can provide end-to-end supply chain visibility and even add coordination and collaboration while working in tandem with the numerous enterprise and legacy systems in place.
Companies will need to develop new demand-sensing models for scenario planning that take into account the factors that impact them, like distribution channels, partners, and customers, as well as multi-enterprise scenario planning skills. Supply chain cooperation will enable intelligent supply chain analytics to decrease risks, improve procurement performance, and accelerate forecasting.
Step into 2024 with End-to-End Supply Chain Management by Agistix
Despite the extensive use of contemporary technology, many supply chain activities are controlled manually, with a heavy dependence on outdated equipment and systems.
Consolidating these separate systems into one integrated environment to effectively maintain contemporary supply chain demands is a new issue for the industry.
At Agistix, we strongly support any IoT, autonomous car, and algorithm-based technology breakthroughs. All of these technologies assist in improving data quality and timeliness, but there is a catch: the expanding number of diverse data sources.
To learn more about Agistix supply chain solutions, contact us for a consultation and demo.
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Author
Trevor Read
President at Agistix based in San Francisco. I am an entrepreneur with a passion for data, and technology. I am results-oriented and committed to developing fast-deployment solutions to help customers seize the new opportunity coming from big data in the global supply chain.
