While 2020 was a year of big disruption and mass confusion, 2021 was a year of transformation, when many companies evolved digitally and strategy-wise. Last year, a key focus of supply chain executives was resilience: every industry media was pushing the topic.
As the supply chain industry heads into 2022, there remains a question: what’s next? Obviously, there are very few things at the moment that can produce a wow-effect on the leaders and their businesses which survived the turbulence of the last couple of years.
Even though the challenges are adding up (read: worsening port congestion, energy disruption, economic pressures, shifting work environment, etc.), firms are surely more prepared, learning to adapt to uncertainty more readily than ever before.
With the year pretty much at an end, 2022 will be 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 avoid potential disruptions.
Unfortunately, those risks are coming from many directions: transformation, environmental concerns, cybersecurity, global delays, product shortages, the “great resignation,” and many other factors.
In its Chief Supply Chain Officer Leadership Vision 2022 report, Gartner identified three focus areas for the supply chain leaders: risk management, future of work, and essentially, digital transformation.
Key supply chain challenges for 2022
Let’s take a closer look at these sectors to understand where the challenge is and how leaders should respond to it.
Challenge: More than 68% of businesses reported constantly responding to high-impact events for which they were unprepared. In addition, seismic shifts are happening throughout supply chains: lack of suppliers and materials, talent shortages, global delays, rapid digitalization, and climate emergencies all pose risks to the supply chain.
Risks are nothing new, but the only way to stay ahead over the next year is by not reacting, but preventing and being proactive with risk management.
Solution: Implementing a long-term risk management strategy to foster flexibility and resilience.
Future of work
Challenge: The work environment has changed on many levels. Flexible working policies, both company-driven and government-enforced, mean that more and more people are choosing to work in a setting and timeframe that suits them (within reason). In fact, 40% of governments worldwide will promote flexible working policies in 2022.
Whether businesses want it or not, the change is already here, and the question is no more whether a company should try it, but how to do it most efficiently and conveniently that benefits both sides.
Solution: Outlining work experience strategy with flexible policies and ensuring tech infrastructure for the hybrid work environment.
Challenge: Digital infrastructure was and will remain a significant area for investment in the nearest future. Around 45% of manufacturing companies recognize the supply chain as one of the top three digital business investment sectors. Leaders will need to demonstrate the expected ROI from existing ventures and focus on accelerating innovative solutions down the line.
Solution: Conduct thorough research on digital solutions and get accurate ROI estimates.
Many companies have maximized their capabilities despite the challenges and are ready to enter the following year with capacity and enthusiasm. To better understand the upcoming supply chain environment, the need to explore key industry trends to better prepare is evident.
Staying ahead: 5 supply chain trends for success in 2022
Because nothing is permanent in this contemporary climate, methodologies to anticipating supply and demand, and recognizing and managing risk are continuously altering. Here are a few technology and strategy suggestions to keep in mind for 2022 and beyond.
Reshoring & localization
Traditionally, businesses were aiming at globalization when it came to supplying, manufacturing, and distribution. However, over the past few years, more and more companies are changing this strategy and have moved their facilities closer to home.
Considering recent events like the Suez Canal blockade, the US-China trade war, and the Chinese energy crisis, such a tendency is hardly a surprise. According to BofA Global Research conducted in August 2020, 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.
Sourcing from local suppliers might seem a costly strategy. Still, it provides many 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
There’s another interesting driver behind this trend apart from the business need: customers and industrial partners express their willingness 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 new supply chain environment, 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 now have to assess the results of several scenarios at the same time. They must devise execution strategies for various scenarios while being flexible 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.
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 an August 2020 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 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 chains 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 seek solutions that enable safe, dependable portal-based access that encourages collaboration and protects competitive advantages.
Investing in data infrastructure
Supply chains require visibility 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 becoming 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.
Supply chain visibility platforms, or so-called control towers, can provide end-to-end 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, such as 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 2022 with an end-to-end supply chain visibility 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.
Learn more about Agistix supply chain solutions here.