January 9, 2020

Top 10 Supply Chain Trends for 2020

January 1st not only the start of a new year, but a new decade. It’s the decade we’ve decided to call the “Decade of Supply Chain”, because we truly feel that the next ten years will see supply chain take its rightful place at the heart of business organizations and at the heart of discussions about business optimization world wide.

But in order for that to happen, supply chain needs much more visibility than it currently has. In order for that visibility to happen, organizations need data. In most cases, supply chain managers are weighed down by outmoded manual processes and siloed, inefficient tools.

The irony of supply chain is that supply chain digitization is something that everyone talks about, but few B2B organizations have really achieved.

There are understandable challenges that supply chain managers face to adopting new systems, but unfortunately the clock is ticking. More and more enterprises are overcoming barriers and are moving on digitization projects. The pressure is on to make it happen or risk being outmaneuvered by competitors.

It’s no secret that B to C organizations are the leaders in supply chain innovation, and B2B is playing catch up. Here are the supply chain trends that we see shaping the conversation, and the actual evolution, of B2B in 2020.

abstract image for supply chain trends 2020

1. Digital Twins

In most of the supply chain trends articles you’ll read this month, there’s a lot of excitement about technologies like AI, IoT, blockchain, and in some sectors, BIM (building information modelling).

But to enable these higher level technologies to work, the physical supply chain in the field has to be replicated digitally. This is what’s known as a digital twin.

A digital twin is an end-to-end virtual model of the physical processes and/or objects that make up your supply chain. Digital twins can stretch across multiple companies to include suppliers, resellers, and any other external providers. Ideally, digital twins update in real time from automated information inputs, and can be used for process experimentation before changes are tried in the real world.

While the concept is considered by many to be overly hyped at this time, digital twins are the foundation for so many of the disruptive technologies that we’ll see in the coming decade.

Let’s zoom in on some potential examples so you can see why people are so excited about the potential of digital twins.

Imagine a production line in which every piece of equipment transmits information about its current status. If anything starts to overheat, technicians can plan a repair before the part fails and the entire production run is forced into an expensive unscheduled shutdown. This example could apply to any collection of physical equipment, like a drilling rig or a refinery.

Another example from fulfillment might involve things like faster alternate transportation route planning in case of the unexpected, or monitoring cargo temperature for shipments of perishable food or medicines.

Digital twins promise more accurate and effective KPI reporting and have the potential to dramatically alter how businesses plan and adapt to change.

2. Executives— and Investors— Will Be Paying More Attention to Supply Chain

In the era of Big Data, enterprise executives are clamouring for more numbers, and are asking questions about the reliability of those numbers. They’re running out of patience for operations divisions that float in a netherworld of spreadsheets and paper records. The call for more data makes total sense for companies that allocate large percentage of expenditures to supply chain.

In the past few years we’ve seen the rise of new leadership roles in the C-suite, including the chief procurement officer and chief supply chain officer. Some organizations, like GM and Apple, have tapped CSCOs to lead the enterprise.

Venture capital firms have been paying more attention to supply chain as well. According to CBInsights, investment in supply chain and logistics startups has been rising since 2014, and enjoyed a 70% increase in 2016 vs 2015 alone.

3. Increased Importance of Disposition of Surplus Assets

Disruptions of all kinds are becoming the new normal. Trade wars, tech disruptions, climate change, regulatory oversight, and changing cultural norms are all creating a highly interesting business landscape. Financial market volatility and slow economic growth are helping to turn the screws even tighter.

In response, smart leaders are scouring every corner of the business for cost savings. Asset disposition is ripe to take a step up from the “garage sale” mentality that has hampered it for so long. Heavy industry pays a lot of money to warehouse unused assets that could be sold to other enterprises dealing with similar projects, smaller players, or even back to original OEMs. The need to sell straight to scrap dealers and recyclers as a first step is sometimes premature.

Collectively, the Global 2000 are sitting on over $189 trillion in assets. If they sold off just 5% per year, that would create 9.45% in free cash, not including the savings on warehousing costs.

4. Increased Focus on Attracting Talent to Supply Chain

Attracting qualified talent with the right skillset is a challenge for any businesses. As the Baby Boom generation retires and the pace of technology change increases, connecting with the right hires becomes increasingly important.

Supply chain management, however, historically has a talent for invisibility that makes the problem worse (it doesn’t help that that it wasn’t even a term until the early 1980s). Successful companies are starting to find more recruiting avenues, including looking for the right basic skills and training internally for specifics.

5. More Success Stories for Real B2B Supply Chain Digitization

We’ve attended a lot of supply chain conferences in 2019, and seen a lot of talks and panel discussions about the economic potential of digitization. Almost all of those talks have included a component of “but how do we actually do it?”.

Supply chain managers who are terrified of any tinkering with their processes will be relieved to know that supply chain digitization is absolutely achievable. In 2020, we’ll start to see more success stories about enterprises achieving full digitization with improvement stats proudly highlighted.

6. More Conversations About “Value Chain” Instead of “Supply Chain”

Effectively, the supply chain is the business; it connects everything from customer demand through raw materials and manufacturing to fulfillment. But thinking has been shifting from seeing supply chain from a linear process (for example, raw materials -> manufacturing -> inventory -> customer order -> fulfillment) to a web of relationships between the customer, multiple internal departments, and even any external companies.

The value chain (or value web, or value network) is a concept that’s been gaining more traction every year since 1985, when the term was coined by Michael Porter. The key idea is that the value chain includes functions like sales and marketing, which aren’t traditionally associated with supply chain. But if you think about it, sales and marketing are listening to real customers, and play a vital role in shaping the product. Even support services like HR all play a role in getting the customer what they need.

Currently the term “supply chain” still holds sway because people find it familiar, but part of the problem with that term is that often people use it simply to refer to logistics. We think “value chain” will become a larger part of the conversation.

7. Greening the Supply Chain/Circular Economy

In business to consumer markets, there has been a rising trend towards sustainable and ethical sourcing. Concerns over issues like climate change, conflict minerals, and slave labour are forcing businesses to rethink their supply chains.

As we have learned, consumers are leading the charge, but regulators are often not far behind. What starts in consumer supply chain may take time to effect B B, but it will likely make an impact.

Luckily, improving asset disposition dovetails nicely into the circular economy.

8. Increased Transparency Across the Supply Chain

Related to the sustainability and sourcing concerns just mentioned are concerns over product and asset counterfeiting.

In consumer goods, there is currently a $1.2 trillion counterfeit market ($2.3 trillion counterfeit market by 2022) according to a report by the International Trademark Association and the International Chamber of Commerce. This goes way beyond knock-off clothing to potentially deadly impacts from counterfeit pharmaceuticals and spirits.

As law enforcement officials and regulators do everything they can to provide proof of origin for everything from raw materials to completed products, there will be an inevitable spillover into B2B. In fact, B2B manufacturing sectors like aerospace, fibre optics and other high tech verticals are already subject to intensive regulatory compliance processes.

Businesses selling to the European Union will be familiar with RoHS and REACH, and energy and resources in the US are often subject to Proposition 65. Some advanced tech is subject to destination control statement regulations so that sensitive equipment doesn’t end up in the hands of unfriendly nations.

Managing all of these requirements— let alone at scale— will absolutely require digitization.

9. The Call for Increased Supply Chain Agility

As mentioned above, the current uncertain business landscape is putting pressure on supply chain managers to have alternate plans in place for almost any situation.

In order to develop the relationships an agile supply chain requires, supply chains will have to be digitized. This will free up time spent on things like time consuming manual processes so that more time can be spent on forecasting and analysis, ideally of real-time data.

10. Increased Proven ROI Cases for Leading Edge Tech like Blockchain, IoT, AI

These technologies have been subject to a lot of (understandable) hype, but adoption in the real world has been slow so far. In 2020, we believe we’ll start to see more numbers from businesses taking these technologies out of the prototype stage and putting them to work.

Further Out…

11. Central certification for SCM— while many universities and college programs teach supply chain, there’s no central governing body that manages accreditations. We think an organization will form, perhaps something like the Project Management Institute that manages the PMP certification.

12. Impact of 5G network and quantum computing. We’ll be processing more info, faster— even in real-time— thanks to 5G and eventually quantum computing.

Welcome to the Decade of Supply Chain

In the last two years we’ve been seeing signs that enterprises are ready to give supply chain the seat at the table that they’ve long deserved.

But the flipside of that is that supply chain management will have to operate at a much more sophisticated level. In a future article, we’ll share a sample roadmap so that enterprises can make the Decade of Supply Chain work for them.