What are the top supply chain trends of 2020? 4 experts weigh in
Originally published on Supply Chain Dive
Faster logistics and operations, technology integration and supply chain shifts due to global trade wars were some of the trends that dominated supply chains in 2019.
This year, experts anticipate many of those trends will carry over and even intensify. Fast shipping could get faster. Technology integration may accelerate and become more strategic. Global changes will result in supply chain disruptions.
We posed the following question to four consultants: What are the top supply chain trends of 2020?
The answers below have been edited for clarity and length.
Global Co-leader of the Operational Performance Improvement Practice at AlixPartners
Finley: 2020 may prove to be the year when several topics that have been discussed in the supply chain for a while come to the fore. Here are five we at AlixPartners continue to monitor:
- Increasing warehouse worker wages. As e-commerce demands intensify alongside growing warehouse automation, the fight to find and retain warehouse workers could intensify ever further.
- Ever-shorter consumer deliveries. Next-day delivery of items in local DCs is already typical in many major metropolitan areas, occasionally at a modest premium and often at no premium. The next hurdle will be same-day delivery (as we’re already seeing with prepared foods), which will necessitate alternative stocking strategies and intra-day runs to accommodate orders as they are received.
- IMO 2020’s ripple effects. The new low-sulfur fuel regulations aimed at maritime shipping companies may be a harbinger for broader fuel and efficiency programs across the supply chain: rail, trucking, parcel, etc.
- Ethical supply chains. Look for them to continue to grow in prevalence, where participant members from origin to delivery will be held to requirements like no child labor, a “living” wage, adequate working conditions, employees with no federal convictions or substance-abuse records, trackable product chains of custody, etc. And, look for pressure not just from politicians and the public, but also from retailers, importers, etc.
- Autonomous vehicles. Though it will probably be several more years before we’ll see any unmanned trucks operating on open roads, truly astounding progress is being made in this space, to the point that we’re even seeing a Democratic presidential candidate, Andrew Yang, on the stump predicting that truck-driving jobs may be all but totally eliminated in the future.
Vice President, Analyst at Gartner
Griswold: In 2020, supply chains must support global and sustainable operations while at the same time providing responsiveness to a diverse set of customers. To accomplish this daunting task, supply chain leaders will keep their eye on several trends:
- Pragmatic use of automation across the end to end supply chain to drive scalable efficiencies.
- Increased use of machine learning and AI to accelerate and improve decision making.
- Use of the cloud to increase speed of implementation and lower upgrade costs.
- Re-design of supply chain competency models and approaches to finding, acquiring and retaining talent.
We can also expect 2020 to be defined by a series of “turns,” which can be economic, geopolitical, environmental, social or competitive. Supply chain executives must prepare and lead by building agility into systems, processes and decision making across three pillars:
- Strategy: The nature and timing of decisions such as investments and acquisitions made during turns matter greatly. Gartner data from the last recession shows executives regretted acting too slowly and investing too little.
- Cost: Implement a cost management discipline to allocate and execute resources while spurring innovation.
- Talent: Position talent to sustain progress on transformation.
Managing Director at PwC
Hermans: Operating supply chains in 2020 will not be for the faint of heart. Geopolitical tensions, global trade agreement changes, extreme weather, Brexit, economic outlook uncertainty, in combination with the never-ending push for cost and cash productivity improvements, will drive increased volatility, uncertainty and performance pressure. In order to survive in this environment, supply chains need to be agile, smarter and faster — more than ever before.
With this backdrop, the digital transformation of supply chains will only accelerate. We foresee increased use of advanced analytics, machine learning and AI to proactively detect trends and insights on a path to a self-learning supply chain. Increased use of IoT and smart sensors enabling “in the moment” visibility and decision-support will drive further convergence of planning and execution across sales, procurement, manufacturing and logistics.
Automation will continue to increase. Labor shortages are accelerating the adoption of robots and cobots in factories and warehouses. Robotic Process Automation (RPA) will increasingly be used to automate repetitive tasks and support “no regret” actions and decisions. There will be continued experimentation with autonomous vehicles and drones.
Workforce management innovation and engagement is critical. As technologies and tools become more sophisticated and ubiquitous, digitally upskilling the existing workforce will be pivotal to effectively operate in this environment and stay competitive. This involves training on digital enablers and fostering an environment of “grass roots,” citizen-led innovation that is smartly directed toward business-led imperatives.
2020 will be about digitizing, automating and upskilling while rethinking supply chain structures and flows as businesses navigate a burgeoning storm of macro forces.
Partner, Leader of the Americas Supply Chain Practice at Bain
- Advancing digital applications but with more practicality. In 2020, we expect to see a bigger push on more short-term payback. For example, infusion of AI in decision-making, automation and improvements in workforce training. The challenge for supply chain leaders will be to balance delivering short-term value while not losing sight of the longer-term innovations that can create bigger, step-function improvements down the road.
- Investing in supply chain capabilities to drive commercial growth. Cost will always be an important factor for supply chains, but today’s commercial organizations need new capabilities from their supply chain to support their growth strategies: things like quicker response times, higher service levels and the ability to effectively serve new channels, such as e-commerce, while delivering a more diverse product portfolio. The traditional supply chain is not ready for these new requirements and organizations will be pushing hard to adapt.
- Shortening the overall supply chain. For decades, many supply chains have pushed toward consolidation in order to optimize efficiency and scale, but the economics have been changing. Rising taxes and duties that come from operating globally are causing uncertainty, and managing an increasingly complex portfolio with long supply chains is getting too difficult and costly. Furthermore, digital innovations and rising labor costs in traditionally low cost countries, like China, are changing the economic equation. Executives will revisit their models with many shifting production locations closer to demand.
- Increasing the use of outsourcing and the shared economy. More and more companies realize they don’t have to do everything themselves. Companies that have traditionally been hesitant to outsource because of higher unit costs are realizing that the “system cost” benefits by outsourcing non-differentiated activities, and the freed capital can be better allocated to things like innovation. We anticipate companies will build stronger partnership ecosystems to more effectively access supply chain capabilities.
By Shefali Kapadia, Jan. 13, 2020