By Stephen DeAngelis
Seldom, if ever, has the global supply chain received so much attention as it did in 2021. Unfortunately, most of that attention resulted from what went wrong instead of what went right. Some critics have called for a complete overhaul of the global supply chain, insisting current operations can’t be fixed. Change, however, takes both time and money — especially when that change needs to be global in nature. Despite what critics perceive as a slow pace, change has always been a characteristic of supply chain operations. Although many of the trends discussed below involve technology, supply chain professionals need to give equal attention to people, processes, and technology. According to Antony Francis, a consultant at Endava, high on the list of things to which supply chain managers need to pay attention is supply chain visibility. He explains, “In 2022, it’s going to be important that supply chain technology companies can really provide solutions that enhance connectivity and visibility.”[1] Improved visibility and connectivity are involved in many of the supply chain trends discussed below.
Supply Chain Trends
Digital Supply Chain Transformation. Knut Alicke (@nutalikee), a partner at McKinsey & Company, observes that, even before the pandemic created global supply chain headaches, companies were accelerating the digital transformation of their customer journeys and value chains. In 2022, he “expects digital technologies to be at the core of the next normal, enabling organizations to better meet the needs of their customers, and improving the agility and responsiveness of operations without increasing their costs.”[2] Steve Davenport, Global Technology Lead for Supply Chain & Operations at Accenture, insists the pace of digital transformation is accelerating. He states, “Technology is more strategically important than ever before for businesses. In fact, our research shows that 64% of supply chain executives report the pace of digital transformation for their organization is accelerating. As a result of the rapid digital transformation, we’ve seen growing investments in data, AI, and digital twin technologies to power supply chains.”[3] He adds, “In the coming months, businesses will be able to prioritize the idea of learning from the future. New sources of data and AI driven models can be applied across companies’ product development, supply chain, and sales lifecycles to give them greater confidence, knowing they are on the right path to growth. Ultimately, learning from the future can help companies prepare for risks.”
Resilience. The staff at Flat World Global Solutions notes, “The biggest of all supply chain trends [is improving] resiliency. When it comes to your supply chain, agility and resiliency is the name of the game.”[4] The staff at Trax Technologies agrees. They write, “The pandemic has shown that a resilient supply chain can be the deciding factor between a company’s failure and success.”[5] Matthew Burton, Supply Chain & Operations Leader at EY EMEIA, adds, “Supply chain has become a boardroom priority for many companies. This has triggered a new wave of technology investment focusing on building supply chain intelligence, resilience and agility to better respond to events, risks and opportunities.”[6]
Inflation. According to the Flat World Global Solutions staff, “Labor deficits, raw material shortages and e-commerce businesses driving up demand are all leading to increased shipping and transportation prices.” Some pundits predict inflation will ease as supply chain snarls untangle; nevertheless, inflation is likely to be a concern through much, if not all, of 2022.
Logistics. One of the inflationary trends driving up 2021 end-of-year prices was the cost of logistics. For example, the price to ship a container skyrocketed. It’s little wonder shipping companies tried to capitalize on increased demand. Journalist Tim Robinson reports, “The logistics industry which was valued at $7,641.2 billion in 2017 plummeted to $5,200 billion in 2020. The COVID-19 pandemic was mainly responsible for this massive slowing of logistics activities across the world.”[7] He predicts, however, that the outlook will improve in the coming year as logistics providers try to recoup losses. “With the COVID situation easing gradually and the world getting back on track, the logistics industry is projected to reach $12,975.64 billion by 2027. In the year 2022, the logistics industry is predicted a bright outlook.”
Increased Demand for Third- and Fourth-Party Logistics. Robinson predicts, “Due to the phenomenal rise of e-commerce, increased demands for 3PL and 4PL services are expected. … 3PL companies that provide warehouses in multiple locations will be more in demand as that would result in efficient last-mile logistics. 3PL and 4PL offer numerous advantages such as being a cost-effective, faster and responsive model. It does have a few disadvantages too, such as lack of direct control and increased dependency of the manufacturer on the logistics provider. In case of any discrepancy, the blame will be on the company and not the logistics provider. But the advantages outweigh the disadvantages.
Technology Investment. As noted above, digital transformation is accelerating as organizations better understand how technologies can be leveraged to improve operations. Chris Andrews, Supply Chain Transformation Leader at EY UK, predicts, “In 2022, we expect businesses to continue investing in building the ‘intelligent foundation’, improve end-to-end visibility and better enable risk management and decision making when it comes to their supply chains.”[8] That intelligent foundation involves some type of cognitive technology (aka artificial intelligence), like the Enterra Global Insights and Decision Superiority System™. Andrews expects to see significant “investment in (a) advanced planning solutions to better sense changes in demand and supply and accelerate the ability to respond, (b) end-to-end control tower to enable real-time visibility of supply chain performance, risks, opportunities and events and allow leadership teams to make better informed end-to-end decisions, and (c) cognitive automation platforms to make real-time recommendations, predict outcomes and make supply chain decisions autonomously within the context of agreed boundaries and business rules, creating the self-driving supply chain.” I agree with Andrews, which is why Enterra Solutions® continues to focus on advancing Autonomous Decision Science™. Alicke adds, “The next generation of supply chains is based on advanced technologies, like AI, Internet of Things (IoT), and robot process automation (RPA), and has the potential to transform manual repetitive tasks into highly automated processes with superior performance.”
Micro Warehouses and Last Mile Logistics. Moving warehouses closer to consumers is a growing trend. Nevertheless, finding warehouse space in urban areas can be problematic. As a result, Robinson observes, “More micro warehouses are likely to be the trend in 2022. Micro warehouses are dedicated small warehouse spaces focused on moving inventory closer to the customer, especially in densely populated urban areas. It results in faster and efficient last-mile logistics to cater to the increasing demand for same-day and next-day deliveries.”
Storage. On the other end of the spectrum, some organizations are increasing their interest in large storage capacities. The Flat World Global Solutions staff explains, “In the last two years, countless companies have had to halt their manufacturing processes or wait helplessly while their goods got stuck in ports. Not having access to products and raw materials isn’t good for business, and now companies are looking into ways to prevent it from happening again. The alternative? Over-buying materials or products and storing them on domestic soil in case of another surge in demand or backlog of shipments.” Until supply chains are revamped, just-in-case is replacing just-in-time for many organizations.
Sustainability. According to Robinson, “Environmentally responsible practices are the need of the hour for all industries including logistics. Green logistics is one such trend that will be increasingly adopted by the industry.” The Flat World Global Solutions staff adds, “As consumer demands shift, more companies are focusing on decreasing their environmental footprint — including that of their supply chains. Luckily, focusing on sustainability can have secondary benefits. Newer technology, like using automation for invoicing and quality control, often decreases how much paper a business uses while also streamlining business operations. Incorporating reverse logistics processes into a company’s supply chain can also help lower its carbon footprint.” As principles and practices of a circular economy come into play, reverse logistics will become even more important of most supply chains.
Talent Shortage. Everyone is aware that labor shortages are adding to supply chain woes. Every part of the supply chain is feeling the personnel pinch and there are no signs of letup. Labor shortages will inevitably lead to greater automation in supply chain operations.
Concluding Thoughts
According to journalist Deborah Laloum, “The main goal for supply chains in the near future is to increase supply chain resilience in the face of the unexpected. While the global and local supply chains are going through some challenges in the aftermath of the pandemic, Brexit, and more, many organizations will pivot to a digital supply chain that will keep supply chain operations running smoothly.” Although I agree that digital supply chains in some form will become the norm, exactly how global supply chains will transform to become more resilient remains an open question — and the topic for a separate article. Laloum concludes, “The industry is changing and will continue to change in 2022 and beyond. As eCommerce continues to explode in popularity and the number of deliveries increases, brands need to stay on top of the global supply chain trends to stay relevant.” With that sentiment, I can agree.
Footnotes
[1] Antony Francis, “2022 Supply Chain Predictions,” IT in the Supply Chain, 23 November 2021.
[2] Georgia Wilson, “2022: Future Tech in Supply Chains,” Supply Chain Digital, 10 October 2021.
[3] Ibid.
[4] Staff, “2022 Trends in Supply Chain Management,” Flat World Global Solutions, 27 September 2021.
[5] Staff, “Future of Supply Chain Management into 2022 and Beyond,” Trax Technologies Blog, 15 July 2021.
[6] Wilson, op. cit.
[7] Tim Robinson, “What Does 2022 Have in Store for the Shipping & Logistics Industry?” Global Trade, 7 October 2021.
[8] Wilson, op. cit.
[9] Deborah Laloum, “8 Logistics and Supply Chain Trends to Expect in 2022,” Bringg Blog, November 2021.
