In 2024, implementing digital technologies such as advanced analytics to improve visibility and flexibility will be at the top of the priority list for supply chain professionals. Generative AI is also coming, but only for some use cases.
According to a report by the Society for Supply Chain Management (ASCM), sustainability and reshoring are not very high on the priority list.
Abe Eshkenazi, CEO of ASCM, a 70-year-old independent organization based in Chicago, said supply chains continue to face disruptions such as those evident during the COVID-19 pandemic and others. said that it is facing market conditions. As a result, there are three major gaps in the supply chain: lack of visibility, transparency, and traceability, which explains the top trends in supply chains.
Top 3 people [priorities] Digital supply chains, big data and analytics, AI and machine learning are all related to technology. Organizations are seeing significant interest in implementing these technologies to fill the gaps identified as part of the pandemic.
Abe EshkenaziRepresentative Director, Supply Chain Management Association
“The top three are all technology-related: digital supply chain, big data and analytics, and AI and machine learning,” he said. “Organizations are very interested in implementing these technologies to fill the gaps identified as part of the pandemic.”
ASCM is a global organization of 50,000 individual and business members that uses input from a variety of industry experts on the issues they face in their daily activities to produce Top Supply Chain Trends Reports. I am summarizing.
Greater supply chain visibility required
Eshkenazi said supply chains are becoming more digital as organizations face increasing pressure to be accountable for the actions of their partners and suppliers, including carbon reduction.
However, while digital technology provides visibility into what makes up the supply chain, organizations are currently unable to meet the requirements to make their data accessible to many of these suppliers, especially those in Tier 2 and below. He also said that he understood that. Most of the disruption from the pandemic has affected tier 2 and 3 suppliers, making the adoption of digital technology a top priority.
“The focus is on enabling these extended supply chain partners to participate in a high-tech environment,” Eshkenazi said. “Area where technology implementation or upgrades are primarily focused [include] Planning, visibility and transportation management. ”
Simon Ellis, practice director at IDC, agreed: The consensus around supply chains is that people expect disruption to be continuous and difficult to predict. This means businesses will need the ability to respond quickly to disruptions.
“Speed, agility, and agility are real capabilities that companies need to develop, whether it’s through visibility through multiple layers of suppliers or greater collaboration with key suppliers,” Ellis said. he said.
To achieve this, companies will consider various strategies, including investing in multi-company supply chain networks such as SAP Business Network, E2open’s E2net and Infor Nexus, he said.
Ellis said generative AI could start to play more of a role in supply chain processes, as it focuses on querying systems and returning answers in an intuitive way, but only when it’s willing to do so. He said it would only be possible if the data supporting the decision was reliable.
“We have generative AI capabilities that tell us why this is happening because of these things, and if we know these things are fundamentally flawed, we can start over or reject them. [the recommended actions]”If you knew they weren’t flawed, you’d say, ‘That makes sense, let’s go with it,'” he said.
Generative AI may be further integrated into supply chains. The big question is where, Ellis said.
“The discussion will focus on whether generative AI will be embedded into applications at the edge level, centralized, or a mix of both,” he said.
This graphic shows the top 10 priorities for supply chain professionals in 2024, according to the Supply Chain Management Association.
Sustainability will be a lower priority in 2024
Some supply chain issues that emerged in 2023 have been removed from ASCM’s annual priority list. Trends that combine sustainability with trends including circular supply chains, which aim to reduce waste by minimizing the use of raw materials and reusing discarded waste, will continue to grow in 2022. It was ranked 7th in the previous year, but this year it was ranked 9th.
Eshkenazi says that while awareness of sustainability is growing, actual movement on the issue has not kept pace.
“Every organization says it’s one of their top priorities,” he says. “But unfortunately, this investment does not match the rhetoric. Current investment is much lower than in other technologies.”
There are several reasons why investments in sustainability are declining, but primarily due to a lack of metrics standards for organizations to report on. Mr. Eshkenazi said that although regulatory regimes around reporting requirements are increasing, they have not yet had a widespread impact.
“In the EU, there is a lot more focus on the origin of raw materials and the impact of those raw materials,” he said. “Unfortunately, we know that while awareness is high, impact is low.”
Forrester Research analyst Paul Miller said manufacturers have sustainability in mind, but real progress is likely still years away.
For example, the BMW Group’s I Vision Circular is a prototype electric car that will be unveiled in 2021 and will be made from 100% recycled materials and is fully recyclable, but production will not begin until 2040, Miller said.
“It’s a worthy vision,” he said. “But that is a long way off, because we need to change our own processes and work with our suppliers and supply chain to ensure materials are cost-effectively recycled at the point of need.”
But if energy reliability and cost become a concern, it could lead to increased sustainability as companies strive to reduce their energy consumption, Miller said. For example, when Russia began its invasion of Ukraine in 2022, energy prices rose up to 10 times in Germany, making reducing energy bills an operational challenge.
“We’re seeing IoT investments on the factory floor shift from things like predictive maintenance to energy tracking,” Miller said. “Specifically, it’s about finding energy-hungry machines and seeing if they’re doing anything useful when they’re consuming power.”
He said more software companies are getting into providing energy monitoring tools. For example, C3 AI has sustainability tools that track the energy usage of machines and processes.
“We can pinpoint with a fair degree of accuracy which machines, parts and processes are consuming the most energy,” Miller said. “For example, you can let someone know that a machine is consuming a lot of power but isn’t currently producing anything and needs to be switched off.”
Reshoring is a long-term strategy
Supplier reshoring and nearshoring have also received attention in recent years, particularly due to COVID-19 and manufacturing disruptions in China, but are also low priorities, according to the ASCM report. Deglobalizing supply chains ranked 10th on the 2024 priority list, but was not included at all on the 2023 list.
One of the benefits of nearshoring (bringing manufacturing closer to the U.S.) or reshoring (bringing manufacturing back to the U.S.) is that it reduces logistics costs due to shorter distances to market and faster time to market. Eshkenazi said it would be reduced. There are also incentives, such as the Chip Act, that make it more attractive to bring manufacturing back to the United States.
However, he said there are challenges to overcome, including a shortage of labor in both manufacturing and logistics and a lack of facilities such as warehouses. Nearshoring and reshoring will happen, but it won’t happen overnight.
“We need to make long-term investments and long-term strategies,” Eshkenazi said. “It will take some time to reallocate raw material supplies from other locations to the new manufacturing facility.”
Forrester’s Miller agreed that reshoring and nearshoring are a priority, but a long-term strategy is needed. For now, he said, companies are considering a “Goldilocks” strategy of trying to find the right balance in their supply chains.
“We’re not abandoning low-cost manufacturing in Southeast Asia or moving everything back to higher-priced markets, but we’re rebalancing where we do our work,” Miller said. “Automation, machine learning, robotics, etc. can play a role in lowering the cost of bringing manufacturing back into expensive markets, but there is always a balance.”
Over-reliance on Chinese suppliers has its own risks, Miller said, and manufacturers were deploying “China plus one” diversification strategies even before the coronavirus disruption. The goal is to spread suppliers elsewhere to reduce geopolitical risk and take advantage of funding incentives from countries such as India.
“The situation has changed, [traditional] “Manufacturers need to transform their long, fragile, single-point-of-failure supply chains towards more adaptive and resilient supply networks that can better cope with these shocks,” he said. “We need to think about ways to reroute materials.”
Jim O’Donnell is a senior news writer covering ERP and other enterprise applications for TechTarget Editorial.
