With 2016 coming to a close, we can reflect on a year dominated by anti-trade political movements, from Brexit to Trump, with protectionism dominating the agenda and gaining a huge groundswell of public support that leaves supply chain managers operating in a period of real uncertainty.
The next year will see many challenges for supply chains, and new ways of working and business imperatives that professionals will have to adjust to. There will, however, also be new and advancing technologies entering the market to confront them. We’ve outlined some of the changes that supply chain managers are going to be dealing with, and the tools they will have.
Clean Label Increasingly Important
The ‘clean label’ movement has really gained momentum over the past few years, with social media in particular providing a platform to share stories and pressure companies into ensuring they have a sustainable supply chain. Millennials especially have gained a new impetus, looking for fewer processed and artificial inputs in their products. In a global survey of Gen Yers earlier this year, 87% said they believe ‘the success of a business should be measured in terms of more than just its financial performance,’ and as the most desirable consumer group, their voice means something.
As a result, companies are being forced to better understand their supply chains and be transparent with environmental and social issues. Levi Strauss & Co. for example, recently announced that it will push its suppliers to avoid petroleum-based materials, joining others such as Timberland in their attempts to achieve zero hazardous chemical waste in their supply chain by 2020. Next year, we will likely see many companies join them, with more Millennials joining the workforce and increasing their spending power.
The Rise And Rise Of Blockchain
The hype around blockchain this year has been meteoric, and this will only increase in 2017. Blockchain is the technology behind Bitcoin. It is a cryptographically secure public register of transactions operated by a decentralized peer-to-peer network that has implications for every industry, and its implications for transparency will help few areas more than supply chain. Indeed, Jerry Cuomo, IBM’s vice president for blockchain, has argued that, ‘Supply chain is the most likely application for the technology after financial services.’
We have already seen blockchain technology adopted by a number of supply chains, who have recognized that it can provide added level of trust that it provides - particularly important in establishing provenance of products so that you can best verify their quality and sustainability.
Provenance ensures transparency in supply chains by providing all physical products with a record authenticating its origins and is vital to the quality and value of many products. IBM’s new Everledger service uses the company’s LinuxOne system to allow supply chain customers to build and test blockchains in a secure cloud. This protects everyone involved against theft, counterfeiting, and other forms of corruption. Everledger Chief Executive Officer and Founder Leanne Kemp noted in a statement that, ‘When you are in the business of provenance, secured records, access and transparency are everything. There is no compromise when it comes to security and one cannot underestimate the expertise required to enable this. Having the opportunity to build, test, scale and refine Everledger on IBM Blockchain, underpinned by a security-rich infrastructure, is a game changer. It has accelerated our ability to move fast and deliver the most innovative solutions to our partners internationally and confidentially.’
Move To 3PL
In a world of growing risk, there are numerous problems that can delay or reroute shipments, from natural disasters to product shortage. To cope with this, many are turning to 3PL, with growth in the next year expected to continue further. According to Evan Armstrong, president of supply chain consultant Armstrong & Associates, ‘We have seen over the past year a shift in Technology risk has been shifting from shippers to 3PL providers in 2016, and the trend may gather speed in the coming years.’ This is reinforced by The 2017 21st Annual Third-Party Logistics Study, to which 91% of 3PL users and 97% of 3PL providers reported that their relationships are successful and that their work is yielding positive results.
Globally-focused 3PL providers are able to able their significant software tools and knowledge to design a lean and responsive logistics network, which will be necessary to meet many of the challenges of the next, and we expect that more will look to them in the coming year.
With Trump threatening to increase tariffs on imported goods from certain countries in a effort to return manufacturing to the US, it is likely that we will see more companies look to near-shoring - the transfer of production facilities to a territory closer to the final market - as a way forward. Near-shoring has been a growing trend for a number of years, with 32% of respondents to an AlixPartners survey of manufacturing and distribution companies serving North America and Western Europe saying that they have already near-shored or are in the process of doing so to meet end-market demand, and 48% that near-shoring activities are likely within the next one to three years.
In 2014 study by LNS Research, 43% of manufacturing executives claimed to not understand or know about the IoT. This, presumably, means that they also didn’t knowing how the IoT could impact the supply chain. This is changing, however, and it needs to. Gartner predicts that the number of connected devices will increase thirty-fold by 2020 to 29 billion, while WEF predicts that, by 2022, 1 trillion sensors will be connected to the internet.
This will unleash a tidal wave of data, providing supply chain professionals with even greater visibility and accuracy so they can pinpoint potential issues throughout the supply chain process in real time. In a recent interview with us, Dwight Critchley, Director of Global Supply Chain Planning at BlackBerry argued that IoT would be the most important technology in the near future, noting: ‘IoT… the internet of things and splitting of the information atom will have a profound effect on the world of S&OP. The planning 'bucket' is getting smaller. Once upon a time we talked about the 'quarter', then 'month ends'... now we talk about days and weeks – some are into 'in-line' sequencing. IoT will drive the conversation towards minutes and hours as real-time data become more and more connected.’
In Gartner’s recent ‘Predicts 2016: Reimagine SCP Capabilities to Survive,’ the research firm said supply chain organizations expected the level of machine automation in their supply chain processes to double in the next five years, with applications in everywhere from factories to logistics. It is already a significant presence in many supply chains, with roughly 80% of the work in manufacturing a car, for example, already allocated to robots, but next year we are likely to see it grow on a smaller scale. Perhaps the most important application next year in AI for supply chain managers will be in the ability of machine learning algorithms to analyze the wealth of data coming in from IoT and other sources, allowing them to know the state of their supply chain in real time and recommend or automatically execute action that can cut costs, prevent accidents, and ensure customer requirements are fulfilled.