Supply Chain’s Next Decade of Dealing With the Unknown
LinkedIn published my 100th Influencer article last month. The inaugural post appeared on March 4, 2014, and was about the rising status of the supply chain profession. Reaching this milestone got me thinking about how the profession might change over the next decade.
Some events and trends driving the supply chain’s standing back in 2014 remain just as influential in 2023. What strikes me as different today is that the new challenges we face are turning points for supply chains — and, hence, the world.
Common interests
My 2014 post noted how the profession has evolved beyond its transportation/ warehousing roots to become a strategic resource.
“SCM’s journey from afterthought to core capability parallels the way in which the business landscape has changed over the last two to three decades,” I wrote.
The emergence of just-in-time manufacturing, other business models, and globalization were among the drivers reshaping the business landscape. Other drivers, such as the growth of e-commerce and the changing world order of nations, are still in evidence today.
Another challenge described in the 2014 post we are still grappling with is ensuring that the supply chain profession has the right talent to meet its changing needs. In my 2014 piece, I argued that educators need to play a role here and pointed to the planned launch in 2015 of the groundbreaking MITx MicroMasters® Program in Supply Chain Management online program as an example of what educators can contribute. My proposal was prescient — the program celebrated its one-millionth enrollment in September 2022 and is still growing.
Decisive phase
But some of the 2014 challenges we still witness today have become more urgent. One example is sustainability.
At the time, I started a research project on supply chain sustainability that culminated in my book “Balancing Green: When to Embrace Sustainability in Business (and When Not To)” (MIT Press, 2018). The research, the data, and my experiments led me to draw two main conclusions: first, environmental sustainability is all about supply chain operations, and second, most consumers are not ready to change their lifestyle to avoid additional atmospheric warming. As a result, despite all the conferences on the topic, modeling efforts, and media coverage, neither companies nor governments can take the decisive actions called for by sustainability advocates (in the book, I argued for technological solutions, first and foremost, nuclear power).
Nowadays, many firms are downplaying or even abandoning pledges to achieve net-zero carbon emissions levels within specified time frames. The 2023 State of Supply Chain Sustainability report, published by the MIT Center for Transportation & Logistics and the Council of Supply Chain Management Professionals, elicited responses from more than 2,300 professionals around the globe. Only 35% confirmed that their companies have net-zero goals. Almost half indicated that their organizations will not begin measuring or reducing Scope 3 emissions (those associated with assets not owned by the reporting organization) for five years or more. It has become apparent that accounting for Scope 3 emissions is a very tough nut to crack.
Meanwhile, despite copious media coverage of the continuous warming of the earth (the past eight years have reportedly been the warmest on record), global emissions are still increasing.
Another force for change in 2014 that looms large today is the aging of populations. The World Health Organization estimates that by 2030, 1 in 6 people in the world will be aged 60 years or more. By 2050, the world’s population of people aged 60 years and older will double (to 2.1 billion).
My colleagues at our center’s AgeLab have studied the impacts of this demographic timebomb in detail, including the implications for supply chains. For example, graying populations will create more demand for home-based services, requiring companies to develop supply chains that extend into the home. Aging trends are also likely to accelerate automation to compensate for the growing deficit in the number of workers in many jobs. The unevenness of global aging patterns (advanced economies are in much worse situations than developing countries) may also lead to more businesses moving to emerging economies and increased economic migration.
New challenges
In 2023, we faced challenges not on decision-makers agendas a decade ago. Chief among them is the fallout from the Covid-19 pandemic. The shortages, inflation, and dearth of workers caused by the crisis have brought supply chain issues from the board room to the living room. The pandemic raised public awareness of the supply chain profession to levels unimaginable in 2014.
Also, governments and companies are re-evaluating the structure of global supply chains in the aftermath of the pandemic.
Governments are taking steps to shore up national supplies of critical materials while companies are examining where they purchase materials and components. Increasingly, lowest cost considerations also require companies to look critically at Chinese suppliers, as one of my latest LinkedIn blogs describes. Often, these reviews lead to the establishment of new sources in other geographies, reshoring, and friend-shoring.
VUCA (volatility, uncertainty, complexity, ambiguity) forces preoccupied supply chain professionals in 2014 as they do today. However, the pandemic ratcheted up these disruptive forces, and the consequences are still profoundly changing how supply chains are designed, built, and managed. Moreover, new coronavirus variants continue to emerge, and we cannot dismiss the possibility of another pandemic.
Managing the many uncertainties described above requires companies to build resilience into their supply chains — a significant challenge in the future. Resilience was of vital importance in 2014, but today, the challenge is, in many ways, more demanding. For example, companies must perform trade-offs between costs and resilience by evaluating many factors, including cultural differences, workforce availability, and geopolitical considerations in reconfiguring their supply bases.
Another global challenge that had not reared its head 10 years ago is the rapid advance of artificial intelligence (AI) in the workplace. While “traditional” AI was in use a decade ago and even earlier, the emergence of generative AI has added significant momentum to the development and implementation of algorithms in workplace applications. These developments have also brought AI to consumers’ consciousness, creating fears of job losses on the one hand and increasing the pressure on businesses to demonstrate leadership on the other. From a supply chain perspective, AI is transformative as an agent of change in the workplace and an accelerator in the race to digitize and automate.
Be prepared
How will the challenges recalibrating the supply chain profession today pan out over the next decade?
We already know that to excel in today’s fast-changing, AI-infused world of supply chain management, practitioners need soft skills such as the ability to communicate as well as hard technical skills. This requirement is likely to gain in importance over the next decade. Flexibility is another capability that is at a premium today: the ability to flex with never-ending change. Operating in a VUCA world will require supply chain professionals to be supremely flexible and responsive.
Demographic shifts and geopolitics will likely lead to more regional supply networks, possibly closer to consumer locations. Some operations could move to developing regions that can supply workers. As supply chain operations move closer to consumers, the strategic contribution of the function is likely to increase as its role in revenue generation becomes even more apparent.
AI will open up a range of new workplace challenges, especially how individuals learn to work alongside machines. As I explain in a recent Harvard Business Review article: “Today’s workers need ongoing, incremental re-skilling or upskilling to maintain a stable or improving career path.” Frameworks for how humans and AI-driven systems will become co-workers are emerging, and I describe some of these in a recent post.
But AI is evolving so rapidly that it is impossible to plot its course over the next decade with certainty. Predicting our geopolitical future is also fraught with uncertainty. In addition, new technologies for energy generation may move from the lab to the field, changing current supply chain considerations and the balance of power among nations.
The only trend “baked in” is the aging of the world’s population, although we can’t be sure what its full ramifications will be over the next decade.
Being prepared for any eventuality — whether anticipated or unknown — has always been fundamental to the supply chain manager’s role. That will be true more than ever in the coming years.
