What a year! While it was far from the year that anyone had planned, 2020 saw the supply chain industry tackle some new challenges head-on and emerge with new solutions, improved technologies, and more robust processes.
So, what does 2021 have in store for us when it comes to our supply chain challenges?
Whilst the challenges may not be brand new, this year of a pandemic has certainly shed some light and drawn attention to a number of issues and operational hurdles.
In 2021, here are the top 5 supply chain challenges to keep an eye on:
1. Sustainability and Circularity in The Supply Chain
In this ‘COVID normal’ period, business leaders may perceive sustainability and profitability as conflicting goals. Nonetheless, McKinsey research indicates that when companies optimize their operations, better environmental performance is the natural result.
The same applies to the supply chain. Better run supply chains cost less, consume less energy, use fewer resources, and produce less waste. Aligned to this, you find sustainable initiatives to reduce CO2 emissions.
Supply Chain Digital also highlights the relevance of sustainability. Being transportation a large contributor to greenhouse gas emissions, there has been an increase in electric and solar-powered vehicles to reduce carbon footprint. Read more about the impact of reducing carbon in the supply chain here.
This approach is driven by stricter and increasing government regulations as well as customers’ demand. In addition to protecting the environment, sustainable solutions lead to greater profits and customer loyalty, with 60% of customers willing to pay a premium for sustainable products.
Together with sustainability, circularity in supply chains is becoming more and more relevant. As opposed to the traditional linear supply chain where product flows from raw material to finished product, a circular supply chain focuses on reusing and thus creating value streams from waste.
2. Full End-to-End Visibility
During COVID-19, shortages of products including disinfecting wipes, hand sanitisers, soaps, and toilet paper make it unarguably the critical role that visibility from end-to-end in supply chain plays. Indeed, in the Global Manufacturing & Supply Chain Pulse Survey conducted by McKinsey, a third of companies reported facing material and other supply-chain shortages.
Visibility starts with forecasting demand. Considering the high risks of disruption, 60% of the respondents are planning to build three or more forecast scenarios for 2021. Steve Steutermann, Managing Vice President at Gartner, states the following:
“To achieve the desired outcome, improving the forecast is only the first step on the path to creating an end-to-end (E2E) supply chain capability.”
Gartner’s research indicates that forecast accuracy depends on their inputs. Insights into what the customer will order, when they will order, and when they will require it into their network are critical factors. Gartner’s experts add that besides having good demand visibility, it is important to deliver it in the right frequency to enable an agile response.
To achieve full end-to-end supply chain visibility, demand management capabilities need to be in sync with supply management as well as customer service capabilities.
Considering the next normal, McKinsey suggests the following to foster end-to-end visibility approach:
- Create transparency on multi-tier supply chain
- Optimize production and distribution capacity
- Assess realistic final-customer demand
- Estimate available inventory
- Identify and secure logistics capacity
- Manage cash and networking capital
Other publications concur by emphasizing that it is fundamental to choose the right technology to access real-time data, which in turn, allows for agile and responsive supply chains.
3. Adopting AI Solutions
It’s not just hype. Artificial intelligence is getting traction and disrupting logistics and supply chain.
“Most of AI’s business uses will be in two areas”, AI’s impact is likely to be most substantial in marketing and sales as well as supply-chain management and manufacturing, based on their use cases.
There is a wide range of applications, from predictive analytics to autonomous vehicles and robotics. Supplychaingamechanger shows five key ways in which artificial intelligence is revolutionizing logistics:
1. Predictive Analytics
Your company can benefit from AI in predictive analytics by enabling more accurate demand forecasting and capacity planning. This improves the responsiveness and flexibility of the supply chain.
By having a reliable prediction, companies can anticipate. For example, they can decrease the number of total vehicles and direct them to the locations where the demand is expected. This leads to lower operational cost. DHL has a machine learning model to predict air freight. UPS also is taking advantage of predictive analytics.
Although robots are not among the most applied digital technologies, their use is increasing. Tractica Research estimates that the worldwide sales of warehousing and logistics robots will reach $22.4 billion by the end of 2021. Robots locate, track, and move inventory inside warehouses. They also convey and sort oversized packages at ground distribution hubs.
3. Big Data
Big data, in particular when generated by AI, can improve various areas of supply chain including route optimization and supply chain transparency.
Supplychaingamechanger indicates that a third-party logistics study reveals that 81% of shippers and 86% of third-party logistics companies think that using Big Data will become a “core competency of their supply chain organizations.
Data cleansing also plays an important role. An example is when the data of shipments is not complete. AI can analyze past data systematically to deduct the values missing.
4. Computer Vision
Computer vision introduces a new dimension of visibility in the supply chain. Visual inspection powered by AI enables us to identify the damage, classify the damage type, and determine the appropriate corrective action faster than ever before.
Amazon utilizes computer vision systems that enable users to upload a trailer of inventory in only 30 minutes while without such systems, it takes various hours.
5. Autonomous Vehicles
Autonomous vehicles are on the horizon. Even though for driverless vehicles it will take some time, high tech driving assistance is already in the logistics industry to increase safety and efficiency.
There is also a method called platooning that consists of formations of multiple trucks to lower fuel consumption. It is important to note that many of these autonomous vehicles are going electric. Read more about the full spectrum of autonomous vehicles and their impact in logistics.
Despite the advantages offered, 93% of automation technologists feel unprepared or only partially prepared to face the challenges associated with smart machine technologies (Forrester, 2020). Know more about the digital technologies in logistics.
4. Meeting and Exceeding Customer Demand (Short Product Life cycle, elastics logistics)
Customers want their goods quickly and expect full visibility and transparency.
In a customer-centric market – greatly due to the rise of the digital era and eCommerce – companies need to adapt to the customer requirements, which may be unpredictable.
A way to do so is through elastics logistics.
This flexible approach or elastics logistics refers to how organisations can easily expand or shrink to accommodate demand.
From the logistics standpoint, the lean model is not a good fit. Although such lean models may work well for manufacturing (first mile) and the shelf stock (last mile) industries; they are not appropriate for logistics (middle mile).
Elastics logistics fills the gap together with the middle miles and warehousing. In elastics logistics, different variables including sailing schedules, container usage, and carrier space, are adjusted to make the supply chain more effective and function with a minimal amount of waste.
Below are some of the challenges that elastic logistics overcome:
- Half-full vessels
- Price volatility
Short Product Life Cycle
Supply Chain Digital highlights this trend that is more pronounced due to the rise of personalisation and next day delivery. This makes product life cycles become shorter and shorter. In turn, supply chains need to become faster and more efficient.
Speed is a key element to drive success in the supply chain.
The article suggests that even though many organisations have one single supply chain for all their products, they will have to pivot or adapt by having multiple supply chains to accommodate the different product life cycles to keep profit.
5. The Power of Data and Analytics
In its research, Effective Use of Supply Chain Analytics to Mitigate Business Disruptions, Gartner indicates that more than 70% of business leaders say their supply chain is facing disruptions, including COVID-19 and natural disasters.
The article also states that supply chain leaders looking to build a holistic analytics competency can support their organization in mitigation, recovery, and longer-term planning goals. Data and analytics are thus fundamental in achieving a more resilient supply chain.
Gartner’s key recommendations are as follows:
- Track disruptive events and acquire relevant data and invest in real-time analytics
- Identify the effectiveness of analytics techniques in terms of sensing, responding, recovering, and mitigating a disruptive event.
- Build a strong data foundation, secure the technical and business skills, and adopt advanced technologies
As well as leveraging data and analytics to gain greater supply chain resilience, Ernst & Young highlights the power of data to optimize your supply chain by cutting cost and gaining flexibility.
The six areas to focus are as follows:
- Portfolio complexity
- Footprint/ Network strategy
- Planning Synchronization
- Operating model design
To master these top 5 trends in 2021, have a consultation with our team at Yojee. We can highlight how our innovative platform can help add visibility to your logistics function so you can strengthen and optimise your supply chain.