Just when things couldn’t possibly get any crazier, 2020 finally came to a close. Over the year, COVID-19 introduced even greater complexity into the already difficult work of supply chain planning–and changed supply chain from a practitioner-focused topic to everyday dinner table conversation. We’ve found our customers are urgently seeking ways to better plan around supply chain demand volatility and improve how they source materials and products from suppliers.
Our predictions also include crucial and groundbreaking developments in the supply chain that extend far beyond pandemic response. We hope you enjoy the blog, which represents predictions and observations from across our global ToolsGroup community. Here’s to a healthy and prosperous year ahead!
1. Digital supply chain transformation will accelerate
We expect digital supply chain transformation to accelerate and those companies that have been putting it off will now make it a priority. Sixty-eight percent of companies in a recent Gartner study are investing in digital supply chain planning, which is the highest priority function for digital investment as supply chain resilience and agility take center stage.2
This is in large part driven by the COVID pandemic which left many supply chains ill prepared to react to significant and large disruptions. Demand uncertainty coupled with supply volatility will continue to challenge them in delivering service level targets and achieving business results. There is now a keen awareness that disruptions can happen suddenly and that supply chains need technology to make them agile and resilient while providing visibility.
2. Planning capabilities supporting supply chain resilience will grow in adoption
According to Gartner, “when disruptions…occur, winning companies demonstrate both the preparedness and resilience they built before the turn.”1 As companies continue to recover from the pandemic and adapt to many permanent changes in demand and supply, we expect companies to build more resilience into their supply chains by establishing or expanding multi-echelon distribution networks, centralized planning, and simulation capabilities and scenario planning. Among other uses, companies can use this to assess the impact of changes in supply parameters (e.g. extended lead times, changes in supplier constraints and ordering frequencies) on stock targets.
3. Supply chains will get more regional and focus more on alternate sourcing/ substitution options
In the vein of resilience, ramping up optimization of the use of available supply to achieve service level using digital models will be critical. This will include the use of volume commitments to obtain supplier focus mandates even more on forward planning.
Companies will also look to shorten and localize supply chains. Of course trade-offs of higher manufacturing costs are balanced against reduced inventory costs, lower freight/logistics costs, lower duties and taxes, etc. In particular the benefits of far greater resiliency, certainty and faster response times means far less buffering to respond to all sorts of disruptions.
4. Cloud platforms for collaborative supply chains will emerge
Cloud has evolved to provide the ideal infrastructure and platform for hosting multiple supply chain partners to collaboratively offer optimized services including planning, logistics, sourcing, procurement and spare parts management. Big cloud providers like Google and Microsoft will host these platforms because they alone have the architecture, the scale and the interest in making this model work for multiple software providers. These cloud architectures are already evolving to support easy application integration, along with analytics capabilities, security and other services.
With one open cloud platform, planning/ managing logistics will go hand-in-hand with material handling, leading to better optimized transportation in sync with the rest of supply chain planning. Read our blog on open supply chain platforms
5. Best-of-breed solutions will be at the forefront
With the rise of open cloud platforms, industry analysts and consultancies will recommend single platform solutions like SAP less frequently and recommend best-of-breed (BoB) solutions–a trend we’ve already seen gaining momentum. As a consequence, systems integrators will move from doing big bang SAP/IBP rollouts to building integrated BoB solutions within open clouds. For example, you could have an Oracle database and ToolsGroup inventory optimization, all integrated in a Google data lake.
6. The 5G tsunami will require a new distribution model
As 5G is rolled out in different countries, there will be a tsunami of distribution of 5g devices and equipment. 5G promises many possibilities for horizontal and vertical networks in the Industry 4.0 applications of the future. It also promises high reliability and low latency for industrial applications in industry 4.0 environments. And 5G is very suitable for the Industrial Internet of Things (lloT) with a high density of devices. However, at the supply chain and logistics side, nobody’s really prepared for the 5G tsunami. This new open supply chain model is what’s needed in order to effectively distribute and absorb a 5g tsunami that is expected.
Crucially, these trends point to a larger supply chain evolution is in progress. Now is the time to strategize to ensure future competitive advantage. It’s a great time for supply chain practitioners to highlight just how much they can do when they invest in the right digital technology. We are in an exciting position of helping shape the future of supply chain–and planners are a critical factor in how their companies will thrive, no matter what tomorrow brings.