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The challenges keep coming, but companies have more options than ever for dealing with them. Joe Bellini offers eight of the best strategies.
Macroeconomic challenges, geopolitical risk, network resiliency, ESG, sustainability, safety, and overall variability and disruption, are motivating supply chain network trading partners to evolve as they move into 2023.
The following are the insights I have gathered by listening to company executives, interacting with hundreds of companies and consulting firms, across a diverse range of industries and geographies.
1. Cost Containment a Key Supply Chain Trend in 2023
Inflation and interest rates have slowed growth spending plans coming out of the C-suite. While companies recognize there is a decent probability of a soft landing given recent jobs data, tech sector notwithstanding, they are planning for a hard landing until there is more evidence. The supply chain network will be a key focal point to streamline processes resulting in cost improvements in labor, inventory, logistics, procurement, and materials. An agile and resilient network will be required to pivot from a hard to soft landing or vice versa."An agile and resilient network will be required to pivot from a hard to soft landing or vice versa." -Joe Bellini | 8 Actionable Supply Chain Trends for 2023 Click To Tweet
Weakening demand will open opportunity for savings across retailers, distributors, producers, logistics service providers, and suppliers, but only as long as companies and their trading partners have the ability to be agile and resilient. For example, shippers will be looking at the combination of carriers, customers, and the customer’s service policies, which combined drive transportation cost improvement opportunities.
2. Control Towers for Global and Local Optimization
Control towers are now viewed as a corporate operating strategy by the C-suite. Companies recognize the need to commit to both process and organizational change to leverage supply chain network digitization and effectively generate value for their enterprise, their customers, and their suppliers.
Control towers of various types have been deployed by many corporations with mixed results. Most companies have experienced serious limitations in their ability to identify problems across business functions in their own enterprise as well as across supply chain tiers. Executing resolutions to problems across the network, along with predicting and resolving for various types of trading partner risks have been promised but never delivered. Optimized planning and execution through an intelligent control tower, both locally and globally, is a necessary corporate strategy for all companies in today’s marketplace.
3. Value-Based Use Cases are Key in 2023
Supply chain network use cases that drive differentiated value are the most important and highest value trend in the market. Network-level use cases that cut across multi-party and multi-tier, and include some combination of demand, supply, and logistics are the new frontier."A digitized supply chain network platform accelerates value-driven decision making ten to a hundred-fold, as compared to today." -Joe Bellini | 8 Actionable Supply Chain Trends for 2023 Click To Tweet
Existing systems have provided some capability around visibility with more limited capability around actionability. Agility and resiliency goals are driving companies to select a digitized supply chain network platform that has the ability to increase value-driven decision making ten to a hundred-fold, as compared to today. Selecting the right use cases and serving those up to the enterprise and their trading partners through an intelligent control tower will be a 2023 focal point for most companies.
4. Autonomous Processes Will Expand
Informed decision making based on access to more data enables autonomous process deployment. Prescriptions and process orchestration run across a dynamic workflow that spans functions and enterprises, until the entire execution stream is complete. It addresses all problems in the network affecting customer service and delivery. Preset KPI guardrails for automated decision-making, enable continuous and incremental planning across the network, without creating “nervousness” in the network. This will generate the largest labor benefits, because the work will shift from gap closure and KPI reviews, to setting business rules and policies, along with better addressing risks and opportunities.
Decisions outside the guardrails will be made interactively with an AI assistant, such as doing a 2-day order pull ahead, rather than a 1-day pull ahead, which is an automated decision. As companies become more comfortable with automated decision making, they will gradually widen the guardrails, such as automating a 2-day pull ahead decision in certain situations.
Over time, automated process decision making should be targeted to reach 90+%, with real time execution and data scaled across millions of item stocking locations.
5. Journey Map to Digitization and Value in 2023
Resilience and agility are the goal, but where and how do you begin? It can be overwhelming given that today’s technology now provides visibility and control over the end-to-end supply chain network. In addition to new capabilities, there is a strong focus on the “tolerance for rate of change” within organizations and supply partners, so that deployments are efficient and effective for the long term.
Companies are looking for a “templatized” journey map with value-based use cases that harness new capabilities in a consumable way across customers, suppliers, logistics providers, carriers, and especially department heads across enterprise business functions."With a common data model, and onboard-once platforms, the journey to value is much easier and faster." -Joe Bellini | 8 Actionable Supply Chain Trends for 2023 Click To Tweet
The primary use case selected will then pull the network platform with it, which will provide a common data model across trading partners as part of the “plumbing”. As other use cases are deployed as part of the template journey map, the platform plumbing will already be in place, accelerating benefits for the enterprise with each new use case deployment.
Inbound supply across all nodes in the supply chain network, from retail upstream through raw material suppliers, will continue to be a problem. Rethinking the on-shoring or near-shoring of products with higher variability in demand or supply will continue as companies respond to demand changes while simultaneously looking to optimize inventories.
However, more choice in both sourcing strategies and constrained supply management will require advanced analytics and automation to execute a higher volume of decisions that, while complex to manage, are better able to respond to continuing market volatility.
7. Sustainability and the Circular Economy
Many consumers are beginning to buy based on brand and retailer sustainability efforts. What started as product or packaging sustainability, has evolved to include sourcing and logistics sustainability metrics.
Expanded decision making across a digitized supply chain network provides a level of actionable choice where sustainable logistics options will be lower from a landed cost perspective than less sustainable options.
8. Digitization of Supply Chain Networks
Digitization is a much broader strategy than automation. Digitization ultimately means having a real-time multi-party, multi-tier network running on a fully integrated data model across all trading partners.
To digitize a supply chain network, companies are realizing they need to represent both master and transactional data from all trading partners in the ecosystem along with onboarding their supplier and carrier ecosystem.8 Actionable Supply Chain Trends for 2023: Joe Bellini explains 8 key strategies for meeting the supply chain challenges of 2023… Click To Tweet
Digitization is a fundamental transformation that engages customers, suppliers, and entire markets, with network density growing over time. Digitization will drive the customer experience through service levels and least landed cost.
Processes run in seconds as opposed to days. Through increasing network density, value will be generated across all brands and suppliers as they are better able to serve existing customers while simultaneously having access to both new customers and suppliers.
Taking on the Supply Chain Challenges of 2023
In summary, companies will need to pivot once again in 2023. Rather than the rebound growth which drove high levels of demand in 2022, cost and service will be the priority in 2023. Brand owners and OEM’s have learned during the last couple years that their supply chain, sourcing, and logistics strategies were not delivering the agility or resilience required to effectively compete. And sustainability will be a permanent consideration moving forward and must be integrated into any future strategies.
I would be happy to hear your thoughts and ideas around these trends. Please share your thoughts with me at [email protected]