The turbulent 2020 finally came to an end, with the new year bringing new hope in the form of vaccines with 95% efficacy and some routine activities returning to normal.
Even so, the COVID-19 pandemic will have a lasting impact on nearly every industry — furthering the already rapid boom of global eCommerce and re-emphasizing the importance of staying on top of the latest and greatest in supply chain management.
Supply chains are indeed the lifeblood of most businesses today:
- 57% of companies believe that supply chain management gives them a competitive edge that enables them to further develop their business, as per a GEODIS survey.
- 70% of industry professionals predict that the supply chain will be a key driver of better customer service before the end of 2020, according to Accenture.
So as we dive deeper into 2021, there are some exciting supply chain trends that deserve your attention, with technology in the vanguard of it all. Here are seven of the most crucial supply chain trends that’ll shape the future of supply chain management in 2021 and beyond.
Trend #1: Stronger AI and ML
Artificial intelligence (AI) and machine learning (ML) already are and will continue to play a key role in making supply chains more efficient, reducing human error, and automating repetitive tasks.
As such, AI is a tech trend that’s fast becoming mainstream in a wide variety of industries, from automotive, banking, and healthcare to education, entertainment, and eCommerce. In 2021, the technology will become more accessible and have more use cases than ever before.
In the supply chain and logistics domain, predictive analytics and machine learning algorithms are being used to improve planning and decision support systems, identify purchasing patterns, manage inventory, and forecast demand. In fact, the average expenditure of top organizations on AI for their SCM operations is $17 million, as per a Reuters study.
And by 2024, more than 60% of G2000 manufacturing organizations will rely on AI platforms to drive digital transformation across the supply chain, leading to over 20% productivity gain.
Specifically, in consumer goods, supply-chain management is the key function that could benefit from AI deployment, according to McKinsey. Forecasting based on underlying causal drivers of demand rather than prior outcomes can improve forecasting accuracy by 10-20% in SCM, which translates to a potential 5% reduction in inventory costs and a 2-3% increase in revenue.
By crunching data from the past, AI and ML algorithms can perform many of the basic day-to-day operations automatically. Not only does this save a considerable amount of time but it also decreases the odds of human blunders, ultimately making the supply chain operations more efficient.
And with many tedious processes automated, AI allows organizations to redirect their human capital to focus on more complex tasks. This means better workforce productivity.
What’s more, AI can be used to identify patterns in data that can translate into valuable insights for inventory management, supplier selection, planning, and even customer experience.
For example, eCommerce brands can leverage AI on their websites to provide personalized product recommendations and content tailored to their visitors’ individual preferences. AI allows predictive personalization wherein the algorithm analyzes past behaviors, purchase history, and several other data points to automatically render dynamic on-site experiences.
AI-powered chatbots improve customer service by providing instant and accurate answers to customers’ commonly asked questions, thus reducing support times. Chatbots can also route customers to the appropriate customer service agent for the best support and can sync a customer’s shipment with real-time delivery updates.
In addition, with AI-powered semantic search, an eCommerce search engine can determine the searcher’s intent and contextual meaning behind the search query, improving the relevancy of the results delivered and thus, improving the customer experience.
Simply put, artificial intelligence has an increasingly stronger role to play in end-to-end supply chain management, from procurement and warehousing to fulfillment and customer service.
Trend #2: More Agility
Besides tariff wars, climate concerns, and various other disruptions, the COVID-19 pandemic has reaffirmed the importance of agility in supply chain management.
It has served as an eye-opener for organizations to be more agile to tackle unforeseen spikes in demand while simultaneously dealing with shortages in supply. In fact, 45% of supply chain executives believe that improving the supply chain’s business agility is their top priority.
Modern supply chains need to be flexible and quick to respond to changes on short notice. The rapid changes and abrupt demands of the COVID-19 economy have made dynamic responsiveness even more pivotal. Manufacturers without high levels of supply chain agility are the most susceptible to disruption from sudden supply and demand variations.
And so, you can expect to see increasing adoption of elastic logistics — an approach that allows businesses to easily expand or shrink their supply chain capabilities to react to ever-changing demands.
19.7% of respondents to a global supply chain executive survey say that fluctuating consumer demand is one of the biggest challenges in SCM. This means that in order to survive and thrive in the so-called “now economy” where consumer demands fluctuate fast, modern supply chains must be on their toes to expand or shrink operational capacity according to the market demands, and with minimal downtime.
Elastic logistics allows greater flexibility to many variables in logistics, such as sailing schedules, carrier space, container usage, and route choice. The agility helps businesses to better handle potential hiccups of overstocking and unoptimized space in vessels. Simply put, elastic logistics improves overall stability and empowers companies to stay competitive regardless of the market fluctuations.
Another, often overlooked, facet of agility in the supply chain is the personalization of shipments. Typically, shipments are designed in bulk, depending on pre-orders. Any modifications to the shipment in the middle of the supply chain are a tall order. But as the economy shifts towards giving more power to the end consumers, easy customizations will soon become a necessity. Supply chains would need to devise an infrastructure that lets customization of orders without adding to the cost — and an elastic supply chain would facilitate that.
Also, using AI and ML modeling, a trend discussed earlier, supply chain managers can build models to predict future events and be prepared for them.
Trend #3: Focus on Sustainability
Over 90% of companies’ impacts on the environment come from supply chains, according to McKinsey. With green consumerism on the rise, more companies are expected to implement eco-friendly supply chain processes in 2021.
Climate change advocacy groups and consumers’ growing efforts to be more environmentally responsible are continually pushing the supply chain to become more sustainable.
In fact, 70% of consumers say they are willing to pay a 5% price premium for products produced by more sustainable means, in a study conducted by the Boston Consulting Group.
Moreover, Harvard Business Review’s research suggests brands that advocate for sustainability grow 5.6 times faster than brands that don't.
And so, green logistics is a notable trend in SCM as in a nutshell, it’s cost-effective, improves brand goodwill, and boosts customer loyalty. Traditionally, bulky multi-layered packaging with several boxes during shipping was the norm. But in 2021, the packaging is shrinking and switching from plastic to cardboard.
Minimal packaging is not only more eco-friendly, but shippers can also reduce their costs and carbon footprint.
Green logistics plays a major role in the evolution of sustainable warehousing. For example, environmentally-friendly warehouses leverage advanced energy management systems with timers and gauges to track the usage of electricity, water, and other resources all over facilities.
Such systems help minimize wastage of resources. Furthermore, electric and solar-powered vehicles are also becoming more mainstream in warehousing as they help reduce the overall carbon footprint of supply chains.
Long story short, you can expect climate-smart supply chain planning to take the limelight in SCM in 2021 and beyond. Not to mention how climate change impacts the availability of materials and resources, threatening disruptions to supply chains. Organizations will have to take these factors into account and opt for renewable resources as much as possible.
Besides, with new national and international regulations relating to shipping emissions and other potential environmental risks associated with distribution, going green is sure to be a primary concern in 2021 and beyond.
Trend #4: Adoption of Blockchain
Research suggests that blockchain can save $31 billion by 2024 for the food and beverage industry alone. Blockchain has been a steadily increasing industry-reshaping global supply chain trend in the last handful of years, and its growth shows no signs of slowing down.
The primary use of blockchain technology has been to enhance transparency. Obscurity in data sharing usually hurts the performance of the supply chain. Blockchain allows data to be shared across the supply chain, end-to-end, with all relevant parties.
Compared to sharing data over the cloud, blockchain is much more secure as it is immutable and incorruptible. Blockchain renders unparalleled information security because the technology’s decentralization methodology protects data from being edited.
This means a wider adoption of blockchain will enable the supply chains to become more transparent and secure. In 2017, the global blockchain supply chain market size was valued at $93.16 million and is projected to reach $9,852.91 million by 2025, growing at a CAGR of 80.2% from 2018 to 2025.
With blockchain, all aspects of the supply chain can be integrated into a single, paperless platform. Every added piece of data is in the form of blocks stored in a single location. And it’s kept secure using encryption and a time-stamp ledger that links new data to the existing chain.
Carriers, shipping lines, vendors, and so on can use a single platform to update companies and customers on the product journey. Payments and invoicing are all securely possible from the same system as well. This integration streamlines the entire supply chain and helps executives pinpoint issues before they occur.
As such, cryptocurrencies are becoming mainstream and more governments now recognize cryptocurrencies as legal tenders. For international trade, cryptocurrencies could soon become the primary mode of payment due to better transparency, speed of transfer, and security in comparison to legacy financial systems.
Long story short, blockchain can greatly improve supply chains by enabling faster and more cost-efficient delivery of products, enhancing products’ traceability, improving coordination between partners, and aiding access to financing.
Trend #5: Integration of IoT
21.1% of respondents to a global supply chain executive survey say that visibility is one of the biggest challenges in SCM, something that can be solved with IoT devices.
That is, besides blockchain, the Internet of things aka IoT technology also works in the direction of boosting transparency across the supply chain.
In a nutshell, IoT refers to a system of interconnected computing devices that allow the transfer of data over networks without human input. It also enables complete control of those devices from a single system.
In the same GEODIS survey cited earlier, 39% of respondents to a supply chain worldwide survey say IoT is a priority technology.
What’s more, DHL and Cisco estimate that IoT technologies such as asset tracking solutions could have an impact of more than $1.9 trillion in the supply chain and logistics sector.
There are many great reasons behind those estimates — IoT allows organizations to monitor inventory, automate stock reordering, optimize fleet routes, and reduce dead mileage, and keep track of deliveries, all in real-time.
GPS sensors can be fitted into vehicles to get live tracking updates on shipping and delivery. In warehouses and outlets, sensors can provide data to improve visibility in production, inventory management, and predictive maintenance.
Businesses can use the real-time information gained from IoT devices to stay on top of changing customer demands, reduce downtime, and boost the supply chain’s overall efficiency.
By improving visibility across the supply chain, IoT technology can also help companies optimize their assets and ROI.
Trend #6: Robotic Automation
As you know, robotics already plays a notable role in supply chain management. But there’s still a lot of scope for automation in robotics.
The global logistics robots market size is predicted to reach $14.95 billion by the end of 2027. In particular, the warehouse robotics market is also expected to grow almost 12% between 2017 and 2022, reaching a value of $4.44 billion by 2022.
In fact, the same Reuters study cited earlier suggests that 50.6% of organizations already use warehouse robotics for SCM. In warehouses, autonomous mobile robots will serve to speed up manual labor-intensive tasks.
When combined with an intuitive warehouse management software, robots can drastically improve the supply chain’s productivity.
That being said, the increasing use of robotic processes and automation software does not mean that humans will be replaced. The technology is designed to assist human efforts by accelerating basic and tedious tasks.
By delegating such tasks to machines, humans can concentrate their efforts on higher-value work that have a more direct impact on the business bottom line and customer experience.
And slowly but surely, more and more companies will leverage drones and driverless vehicles to streamline logistics operations. You can also expect drones to become fully capable of delivering small, light-weight goods to end consumers.
Trend #7: Rise of SCaaS
While many organizations manage their supply chain activities in-house, executives predict that more and more businesses will adopt the supply chain as a service (SCaaS) model, outsourcing activities like sourcing, packing, logistics, quality control, and inventory management to an expert partner.
These services are customizable based on a company’s unique requirements, as there is never a one-size-fits-all scenario in supply chain management. So, SCaaS is a flexible model that lets companies manage their supply chains without the risk of huge upfront investment in facilities or technology.
In terms of revenue, the global Supply Chain as a Service (SCaaS) market is anticipated to reach US$ 12.21 billion by 2027.
The SCaaS method enables businesses to decrease overheads by avoiding fixed costs in infrastructure, maintenance, and upgrades. All of that is taken care of by the third-party service provider.
In other words, supply chain technologies and several operations will soon be available on an “on-demand” basis. This model is typically observed in the software domain — in the form of software as a service (SaaS) businesses (think Salesforce, Dropbox, Shopify, etc.) wherein you can subscribe to their services and scale up or down the pricing plans based on your needs.
The result of this would be that companies’ supply chain teams will slowly shrink in size to become a smaller group of experienced individuals focused on making strategic decisions to optimize the supply chain.
As in-house supply chain teams shrink in size, control towers are likely to become more popular. An advanced and centralized digital control tower provides supply chain managers a complete picture of the supply chain. Furthermore, cloud technology enables supply chain managers to access the data they need on the go.
So, in 2021, you can expect more companies to adopt the SCaaS model wherein:
- Non-core supply chain management requirements will be outsourced to a trusted SCaaS partner who serves as an extended wing of the company’s SCM division.
- From the company’s perspective, the core focus will be on setting clear requirements for their SCaaS partners, managing expectations, and leveraging the partners’ expertise to operate extremely efficient supply chains.
- SCaaS providers will use a cloud-based plug-and-play platform that allows them to address their clients’ supply chain needs, and ensure transparency and satisfaction.
From the SCaaS partner’s side, agility and cost-effectiveness would be key. Costs can be saved by sharing loads and storage facilities between multiple clients and by being able to stay flexible as an individual client’s requirements change.
To Sum Up
Clearly, technology will be at the forefront of all new advancements in supply chain management. There will also be a growing focus on going green, and the COVID-19 pandemic would serve as an eye-opener for companies to become more agile in their operations to better cope with unforeseen events.
Not to mention the bigger role of artificial intelligence and machine learning in making supply chains more efficient, minimizing human error, and automating tedious processes.
Furthermore, blockchain technology will serve to improve transparency and traceability. IoT tech would enhance visibility in production, streamline inventory management, and enable predictive maintenance.
Finally, the supply chain as a service (SCaaS) model will allow supply chain teams to become a tighter-knit group of skilled workers focused on creating optimization strategies, with routine activities like packing and logistics being outsourced.
So what according to you would be the biggest supply chain trend of 2021? Do let us know in the comments below!
Oh, and if you found this post useful and wish to share these trends with your colleagues, friends, or social network, here is a neat infographic summarizing all the talking points with powerful statistics: