Global issues continue to have a strong bearing on supply chain trends

Digitalisation

Organisations with more digitalised supply chains are better equipped to deal with disruptions. Using artificial intelligence (AI) and the internet to digitalise processes improves visibility and resilience across the supply chain.

Writing in Forbes recently, SAP supply chain specialist Richard Howells pointed out that digitally networking all the trading partners in a chain puts companies in a much better position to anticipate disruptions and take appropriate actions needed to keep customers and regulatory bodies happy.

Of course, digitalisation must include generative AI. With its ability to learn and teach itself about the entirety of a company’s supply chain ecosystem, the technology can support procurement and regulatory compliance, as well as predict disruptions before they arise. In addition, by analysing weather, traffic and market trends, customer sentiment and other data, GenAI can forecast future demand changes, enabling supply chain professionals to anticipate events and take appropriate action.

Sustainability

Regulators, investors and consumers are all demanding greater standards of sustainability in products and services. Supply chains that incorporate low carbon transport and distribution, recyclable packaging, and circular models will become the norm over time.

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According to supply chain transformation specialist GEP, “sustainability must become integrated in supply chain strategy and design. Life cycle assessment tools can identify environmental hot spots to target. Packaging innovations, renewable energy in warehouses and carbon-neutral shipping are attainable, impactful goals. Transparent sustainability reporting will also grow necessary as ratings agencies and consumers request ESG disclosures. Supply chains that embrace and quantify sustainability in 2024 will boost brand reputation.”

Indeed, according to Howells, supply chains are a huge part of the problem when it comes to emissions (estimated to account for about 70 per cent for most companies), circularity and inequality, and are therefore a great area to focus on when looking for solutions.

Geopolitics

Not all supply chain decisions are made for purely commercial reasons. Geopolitics looms increasingly large. Governments are putting pressure on corporates to bring manufacturing home in order to increase employment and tax revenues as well as due to national security concerns.

“This is something that we are seeing specifically in relation to geopolitical tensions – particularly in relation to China,” says Mark McKeever, procurement and supply chain director with PwC Ireland. “For example, recent geopolitical tensions – coupled with trade tariffs – between US and China are factors. In 2018 two-thirds of American imports from a group of low-cost Asian countries came from China; last year just over half did.”

China isn’t the only country affected and Pauline O’Flanagan, director of Ibec industry association Engineering Industries Ireland, says there is some evidence of production going back to the United States from Ireland as a result of the funding available to US companies through the US Infrastructure Investment and Jobs Act and the Inflation Reduction Act.

The EU is also moving in a similar direction with the Chips Act, which seeks to reduce Europe’s reliance on external suppliers, mainly Asian, of semiconductors. The act aims to incentivise an increase in semiconductor production capacity in Europe to 20 per cent of the global supply, four times its current level, by 2030.

Automation

A historically tight labour market coupled with rising cost pressure will accelerate the adoption of robotics and other automation solutions in 2024, according to GEP. Intelligent robotics and other advanced technologies will enhance productivity but companies must take care to implement sensitive change management and upskilling programmes to help workers embrace them. While it may take decades for these technologies to become the norm, GEP recommends that companies begin piloting them in the short term in order to realise efficiency and cost advantages.

Regionalisation

Nearshoring, reshoring, friendshoring – call it what you like but supply chain regionalisation will continue due to the risk reduction and flexibility benefits in can bring. Wars, natural disasters and trade tensions have exposed the fragility of globalised and highly complex supply chains. The natural response is to regionalise through nearshoring and more localised production. This also brings the benefit of being able to reduce inventory by enabling just-in-time supply.

While it may have cost increasing implications, these can be outweighed by other benefits, according to UCD professor of sustainable supply chain management Mark Pagell.

“Not only does it enable shortened supply times, but it also offers access to higher skilled workers – and that’s a significant advantage,” he says.