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Supply Chain Management: Trends and Outlook 2023

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Supply Chain Management has gained great momentum in the last two years. Organizations have defined it as the administration of the pipeline of goods and services that allows for transforming raw materials into finished goods. With the advent of the pandemic, the world was trusted into a new generation of supply chain management that re-defined how the system worked overnight.

With globalization, modern supply chains have improved living standards and consumers can buy goods at a lower cost. The importance of supply chain management can be noted as:

  • With supply chain management, necessities, as well as life-saving goods like medicine, can reach a consumer on time.
  • Energy in various forms, used for powering homes and offices involved the intricate process of infrastructure building and raw materials that are processed through supply chain management.
  • Supply chain management is key in sectors like transportation, warehouse, inventory, packaging, and logistics which help create multiple jobs and contributes to building a nation’s economy.

COVID-19 impact:

In 2020 when the world was hit COVID pandemic, the immediate impact was felt on the supply chain system. With restrictions placed on the movement of people, transportation of goods and services was affected, making it more challenging to produce and deliver goods. The many vulnerabilities already present in the supply chain management system were exposed during the pandemic. The supply shock started in China and spread worldwide. Along with the pandemic, the U.S-China trade war put nations under immense pressure to strengthen their supply chain processes. This led to an increase in the cost of production which would finally be paid by the consumers at a higher price for final goods.

Statistics show that the price of basic goods like meat, egg and fish rose by 10% in 2021 in the U.S.
Even after two years as the world is recovering from the pandemic, consumer demand for goods is increasing but production has still not paced up to the increasing demand.

According to Neelam Singh, Practise Director, Quadrant Knowledge Solutions, “It’s no news that over the past two and a half years Covid-19 pandemic and other geopolitical issues have severely affected the global supply chain and led to several serious disruptions – be it sudden demand changes on one side, massive plant shutdowns – leading to supply changes on the other. Though the pandemic has passed, supply chain leaders are not at all relaxed… they are planning and preparing for the next set of unexpected changes. So now the new normal is adapting to uncertainties.”

For the readers, Quadrant Knowledge solutions have identified some trends and have looked at them from three angles.

  • The trends for Supply Chain leaders in 2023
  •  What are the software vendors aiming at providing the leader with this year and, 
  • How is the public getting impacted by the supply chain in 2023.

Top Supply Chain Trends 2023:

First, let us look at what are the trends driving the supply chain owners or leaders and how are they trying to understand and gain back control of their supply chain business. 

  • Making the supply chain Agile and Resilient: Agility can be of two types – vertical – across the network and agility across the organization – horizontal. The supply chain should have enough buffer to recover from any disruption without being subjected to it for long enough for anyone to feel the impact. Important that the supply chain is resistant to disruption and can adapt and recover fast.
  • Identifying the weakest link in the supply chain:  Recently there was a chip shortage in the whole world –that was primarily because the organizations have not identified the weakest link in the supply chain and had no backup plans to cover the foundries that were in Asia. Not only auto and semiconductor industries, but banks also could not issue chip-enabled debit and credit cards. Organizations are gravitating towards identifying their reliance on single suppliers or countries and trying to set up the next nearest supplier base. Companies are trying to identify alternative materials and going beyond traditional partnerships. Since China is no more a reliable source, organizations are following China’s plus-one strategy for their production and other supply chain needs.
  • Being Aligned: Supply chain systems, processes, and any communications (human or data) should be aligned throughout the network. Everyone who is part of the network needs to be cognizant of the impact of each other’s decisions in the network. 
  • SC should be Futuristic: And one way of doing it is by making the supply chain digital.

Top Technology Trends 2023:

After going through the supply chain trends, let us look at the Technologies that are trending from the software provider’s point of view.

  • Digitization of Supply Chain: Digital supply chains are expected to be normal, and this would solve most of the issues of the supply chain leaders like making them resilient, aligned and futuristic and help in identifying the weakest link in the chain. Though digitizing supply chains is not a small task at hand and may require large-scale sensor implementation of IoT tracking; Digital twins; shared APIs, adoption of cloud technology, process automation and adopting security measures to tackle all the IT developments. But in the present context, the only way an organization can be either left behind or be competitive is this and in most cases is the differentiating factor.
  • Importance of IoT: Visibility is the key to understanding issues and thereafter fixing issues in any supply chain. By deploying IoT devices across different parts of the supply chain — from manufacturing plant floors to transportation and distribution centres, inventory systems offer visibility and data collection. Organizations are using this technology to deliver real-time insights where they’re needed most. Thereafter they use the data gathered to develop smart supply chain IoT that maximizes the efficiency and effectiveness of a supply chain.
  • Data collection capacity through IoT: In manufacturing, big data and analytics can help improve manufacturing by providing data on manufacturing parameters, assembly operations or root-cause analysis of defects, creating energy-efficient production possible.

In warehousing, companies have heavily invested in technologies that provide a competitive advantage. Travel distance by the labour can be optimized, pallets can be efficiently reshuffled, and the picker’s performance can be efficiently enhanced. Fleet companies already make use of analytics to improve their operations. For example, they use fuel consumption analytics to improve driving efficiency; and they use GPS technologies to reduce waiting times by allocating warehouse bays in real-time.

  • Robotics and Automation– Labour shortages, supply disruptions and demand surges are compelling organizations to tap into robotics — and, as a result, intelligent robotics is transforming supply chains. Both mobile and stationary robots are used in warehousing, transportation and last-mile delivery tasks for increasing efficiency. AMRs (autonomous mobile robots) used in warehouses are a classic example of this technology being used. 

Impact of Supply Chain Disruption:

We are all as human beings a part of some supply chain and any disruption affects us. One classic example was the toilet paper shortage during the Covid 19 phase. It not only proved that every human gets impacted by disruptions in supply chain, but also exposed the supply chain bottlenecks. Not only through shortages, but it impacts everyone via economic, social, and environmental aspects.

  • Environmental – The traditional linear business model of get, create, use, and throw away is a deterrent to the environment. The wastages raise raw material costs, and increases the likelihood of shortages and volatility. In addition, there are many conflicts and wars that is facilitated due to rare minerals, energy, and commodities. As supply chains touch every part of our global ecosystem, circular economies that prioritize responsible, and regenerative aspects are trending. In addition, reduction in carbon footprint is also a very critical trend that supply chains are gravitating towards.
  • Social – Sense of ethics and humanity need to run deep in businesses. Consumers like us have become aware and are searching for more sustainable products and the supply chains that bring them. Sustainable business practices are integral at every supply chain step, from raw materials to production to delivery. Thus, a big part of running an efficient supply chain is the human aspect where the supply chain leaders should look out for practices of fraud, corruption, slavery, human trafficking, and broader issues like child labour affecting any part of their supply chain. This awareness is coming up to be a big trend.
  • Economic – Interest rates, taxes, fines and inflation – all composed the economic impact of supply chains. In the US the rapid rise in the inflation rate is a major concern for businesses, consumers, and investors. According to US bank, for the 12 months that ended in June 2022, living costs in the U.S., as measured by the Consumer Price Index, rose by more than 9%. Recent inflation spikes are a global phenomenon and we have witnessed that in jobs being lost, and countries that are dependent on the US for business getting, impacted.

Conclusion:

Supply chain trends were looked at from three aspects – what is trending for leaders, owners, or supply chain, what is trending for the tech providers and for the common human. We just hope, that with all this awareness, acknowledgement of the new normal and readiness, the supply chain may get closer to sustaining the disruption without blinking its eyelid.

Author

Neelam Singh, Practice Director, Quadrant Knowledge Solutions

Shinjini Sarkar, Senior Content Specialist, Quadrant Knowledge Solutions