Andrew Butt, Co-founder & CEO, Enable
It’s difficult to think of a time in recent history when supply chains occupied a more prominent role in the headlines. The disruptions caused by COVID-19 are still delaying deliveries, driving up prices for consumers, and contributing to high levels of inflation. However, the long-term effects of this shock could be beneficial, as many companies in the supply chain sector are making long-overdue adjustments to increase efficiency and resilience.
For example, data and technology are rapidly becoming critical components of supply chains around the world. By migrating to the cloud, supply chains can increase visibility, process and analyze large quantities of data, improve workflow and communication, and adapt to changing circumstances more quickly. Data-driven supply chains allow companies to track critical performance metrics, respond to problems in real time, and develop accurate forecasts of future market and economic conditions which will help them plan their operations more rigorously.
There are many other ways supply chains will adapt to the post-COVID economy, from a renewed focus on streamlining relationships between manufacturers and suppliers to local sourcing that will improve efficiency and insulate companies from future crises and volatility. With 2022 quickly approaching, let’s take a closer look at a few of the supply chain trends that are shaping the future of the sector.
How cloud technology is transforming supply chains
The most important elements of successful supply chains are coordination, visibility, efficiency, and resilience. Cloud technology has become indispensable for all of the above. For example, an overwhelming proportion of supply chain companies say they lack end-to-end visibility, while 42 percent have made transitioning to the cloud a top priority in addressing this problem. By increasing visibility, supply chain leaders will be able to facilitate collaboration across departments and teams, identify problems more swiftly, and adapt to changing circumstances.
The cloud also gives supply chains unprecedented access to data collection and evaluation tools. The ability to gather information from many different links in the supply chain immediately and simultaneously provides a huge boon to efficiency. Companies can assess those data to spot vulnerabilities and inefficiencies, easily make adjustments across different scales and time horizons, and dramatically improve decision-making. When the time comes to implement new strategies or other changes, cloud-based communication and collaboration platforms consolidate interfaces across the company, automate data sharing, and circumvent the need for cumbersome manual processes like combing through information in spreadsheets.
These are all reasons why it’s no surprise that an industry report conducted by Deloitte and MHI found that “cloud computing and storage” is one of the largest areas of investment in the supply chain sector. The report found that 54 percent of companies are increasing their investments in the cloud, a trend that will only continue to gain momentum.
Rethinking supplier relationships and sourcing
While collaboration within a company is vital, effective supply chain management also requires companies to build stronger relationships with one another. This means breaking down barriers to communication, developing mechanisms for dispute resolution, cooperating to eliminate redundancies and other inefficiencies, and identifying which capacities complement one another. Collaboration can help suppliers and distributors improve their operations, mitigate risks, and optimize their supply chains.
According to a McKinsey survey, companies that “regularly collaborated with suppliers demonstrated higher growth, lower operating costs, and greater profitability than their industry peers.” Buyers and suppliers that prioritize collaboration unlock new sources of value, increase flexibility, and ensure that their partnerships are more sustainable. It’s essential for supply chain partners to constantly incentivize their relationship with one another, which can be accomplished through the implementation of mutually beneficial rebate structures, more interaction between workforces, data sharing, and a range of other mechanisms for cooperation.
Another trend in the reconsideration of supply chain partnerships is localization. The COVID-19 pandemic has convinced many companies in the sector that they can get higher quality materials and products more quickly if they forge relationships with local suppliers. While just 54 percent of manufacturers were planning to add North American suppliers to their supply chains in March 2020, this proportion has surged to 83 percent. No matter how companies arrange their supply chains geographically, the quality of their partner relationships will be a key driver of success in the coming years.
Building>It’s impossible to optimize a supply chain without reliable data from many different sources. However, with all the departments, systems, and processes that comprise a supply chain, it’s easy for data to become siloed. This creates gaps in the company’s understanding of its operations and makes it more difficult to bring all the moving parts into alignment. It’s crucial for supply chain leaders to be capable of narrowing their focus on the granular details of specific teams and processes, but they should also be able to zoom out and assess the big picture.
The days of clumsy and incomplete data collection and analysis tools like spreadsheets are swiftly coming to an end. Companies need data to be organized and synchronized, which will allow them to monitor operations, measure progress and setbacks against objective indicators, and track variables that could alter projections and agreements. All stakeholders should have access to the same data in a centralized hub, which will facilitate creative collaboration, prevent bottlenecks and redundancies, and help supply chain leaders identify opportunities.
Accurate forecasting is integral to the health of supply chains, and it’s entirely dependent on data. Consumer demands, markets, and economic variables are always fluctuating, and supply chains have to keep up with these changes to avoid waste, customer dissatisfaction, and lost revenue . Forecasting helps to bring supply chain partners into alignment on volume, prices, and many other variables, which ultimately leads to better decision-making and stronger relationships. It’s no wonder that a significant proportion of supply chain companies are investing in advanced analytics.
Although many weaknesses of modern supply chains have been exposed since early 2020, there are clear trends toward investments and practices that will address these weaknesses. From cloud-based tools that will make supply chain operations smoother than ever to a renewed focus on partnerships and sourcing to the emergence of data-driven supply chains, 2022 could be one of the most revolutionary years the sector has seen in a long time.