The supply chain functions as a complex link connecting various operational areas such as logistics, production, planning, sales, marketing, and procurement. When artificial intelligence (AI) is introduced into these areas, the supply chain gains increased agility, predictability, and stability throughout the entire value stream. For example, AI-driven autonomous planning enables real-time demand sensing and agile production planning, while AI in logistics allows dynamic optimization of routing, freight contracting, and vessel sharing, resulting in reduced costs and environmental impact.
As we examine the technology landscape of the supply chain in 2023, we see that foundational technologies like warehouse management systems and transport management systems have become standard, leading to a surge in the availability of increasingly sophisticated solutions in logistics, warehousing, and planning. The adoption of these innovative technologies and solutions has been rapidly gaining momentum, with the transition of digital command centers and micro apps from experimental stages to full deployment in 2023. This surge in adoption has been fueled by investments and a concerted effort to optimize supply chain ecosystems.
Looking ahead to 2024 and beyond, supply chain leaders will need to shift their focus not only towards the conventional objectives of cost, quality, and service, but also towards future-proofing the supply chain to ensure the business remains robust and relevant. This new normal must include the additional trinity of resilience, agility, and sustainability – attributes that are of paramount importance in light of the potentially devastating consequences of significant supply chain disruptions.
The crucial importance of embracing resilience, agility, and sustainability in the supply chain is highlighted by their potential to mitigate the risks inherent in vulnerability and exposure to unforeseen events. By gaining a clear understanding of organizational vulnerabilities, such as vulnerable suppliers, processes, manufacturing facilities, or critical inputs, the supply chain can be fortified against potential points of failure. The 2011 production loss suffered by Toyota following a devastating earthquake and tsunami is a telling example of the impact of supply chain vulnerability. However, through a strategic overhaul of its production strategy and the regionalization of its supply chains, Toyota was able to resume production within a mere two weeks following another major earthquake in 2016.
The management of supply chain risks is further exemplified by a McKinsey survey that revealed a shocking lack of awareness among senior supply chain leaders regarding the risks faced by their top-tier and third-tier suppliers. Given the escalating diversity and complexity of supply chains and technological ecosystems, it is imperative for supply chain leaders to possess expertise in identifying vulnerabilities and formulating comprehensive mitigation strategies.
Looking to the future, the supply chain must adapt to the demands of a fast-moving, consumer-centric world by adopting a more dynamic and predictive approach. Traditionally, supply chains aimed to achieve stability and cost reduction, whereas future supply chains will need to exhibit agility in predicting, preparing for, and responding to rapidly evolving demand and product/channel mix. A prime example of this agility is Nike’s utilization of RFID to track products and strategically reroute inventory during the pandemic, effectively optimizing its supply chain.
To meet the demands of this dynamic future, companies may need to reconsider make-versus-buy decisions, digitize production, invest in robotized co-packing, and explore 3PL solutions for logistics to enhance flexibility and proximity to customers. Furthermore, a workforce equipped with the necessary skills and agility will be crucial in managing the advanced technological systems and evolving landscapes of product, consumer, and technology.
As we enter the new era of supply chains, it is clear that agility, resilience, and risk management, along with technological solutions, will form the cornerstone of this transformative era. Rather than being mere add-ons to existing supply chain structures, these priorities must be integrated from the ground up and considered in every aspect of supply chain design, organization, and operation. Consequently, a fundamental redesign will be imperative to future-proof the supply chain across platforms and ecosystems.
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