From political instability, to international trade wars, cyber-attacks, fluctuating prices, and a need to respond to rapidly changing consumer demand and preferences, organisations need to be able to make changes to their supply chain based on market insight and data almost instantaneously.
Technology will play a critical role in shaping the supply chain planning landscape in 2020, providing greater business intelligence and ultimately agility in the year ahead. Here are four key examples:
- Greater supply chain disruption from Brexit through to Global Trade Wars
Research[i] earlier this year has shown that uncertainty over Brexit is said to have caused more disruption to supply chains in the last five years than natural disasters and cyber-attacks combined. And with an ever-changing Brexit deadline, this uncertainty looks set to continue into 2020. Moreover, it has also been reported that international trade tensions between the US and China will force companies to adapt their supply chains accordingly. For example, we only need to look back to June 2018, when US motorcycle manufacturer, Harley Davidson, announced that the manufacturing of products destined for the EU markets would move away from the US to facilities in Thailand and Brazil. This is but one example of how rapidly businesses must change and adapt.
Many organisations have developed highly complex supply chains within the EU, enabling the sharing of ideas, products, skills and labour while benefiting from the ease, speed and low cost of movement across this region. However, an exit from the EU will create huge changes to financial, logistical, legal and supply chain operations. This can range from additional VAT and the associated cash flow and administration costs, through to new customs and tariff costs and changes in preferred suppliers. For example, a key organisation within a supply chain may decide to relocate its operations to remain within the EU which could result in changes in lead times.
Effective planning will be critical in reducing the impact of economical and political disruption and future proofing supply chains against these potential changes. Integrated technology, common data across the supply chain, shared processes, and cross-team collaboration will form the foundation on which a successful planning strategy is built in an era of huge disruption.
This includes being able to continuously model and test what-if scenarios, from changes in tariffs, to the flow of products, based on multiple scenarios. For example, what if I move my manufacturing operations to a different country, what if we have to change suppliers, what if we need to renegotiate contracts, what if it takes a week longer to get a particular product through customs… the list is endless.
Organisations need to fully connect their supply chain planning as we head into 2020, giving themselves the ability to test all of these what ifs and much more. No matter how big it is – if your supply chain is not connected, you can’t keep pace.
- A new focus on international expansion
We can expect to see moves towards greater international expansion in 2020. In fact, research earlier this year revealed that 75% of global businesses were looking to expand into new markets. While this will open further revenue opportunities, it will make supply chains more complex.
Complete visibility of data and operations across these new markets will be critical to effective supply chain operations, which is where integrated, scalable, cloud-based solutions will be key. Organisations will also need good legal and financial advisors, who have the expertise to set up local entities using their knowledge of the new region organisations are expanding into.
- Connected planning will continue to evolve into intelligent planning
Traditional planning techniques involve historic trend analysis and human judgement, largely based on manual, legacy systems. However, with supply chains facing more complexity and disruption than ever before, more sophisticated, agile and connected supply chain planning is becoming critical to stay profitable and ahead in the market.
Connected planning joins together people, plans and data, including sales, finance, the supply chain, workforce, marketing and IT, so that organisations can harness the true power of their data and move forward with speed and agility. Organisations should already be well into their connected planning journey as we enter 2020, moving away from legacy technologies towards an integrated, dynamic view of data across all business functions.
Intelligent planning – the application of Artificial Intelligence (AI) to business forecasting and planning processes – is the next exciting step which some organisations are already taking, to enable businesses to exploit much more advanced analytics. Intelligent planning also provides the opportunity to consume, exploit and create actions based upon much larger volumes of data and identify patterns within it that would otherwise be impossible. Based on data from both within and the outside the business, intelligent planning can be used by organisations to automate, predict and prescribe the right course of action for any business process, from forecasting and scoring, to optimisation and categorisation.
For instance, AI could detect that a certain product is doing well because the weather is cooler in the north at the same time another is selling out in the south due to a heatwave – therefore requiring an inventory realignment. AI can also speed up and improve the quality of decisions around pricing, procurement and replenishment to name just a few.
- Supply chain agility will be a key differentiator
The demand for preconfigured applications, which can be deployed rapidly into supply chain operations, will increase dramatically in 2020.
Taking this approach will deliver almost immediate results within supply chain operations. This will range from revenue and margin optimisation, lower inventory levels, better visibility across the entire supply chain, through to the ability to accurately forecast product demand and the impact that has on each layer of the supply network. Industry expertise will be essential in building these applications, to ensure that technology is tailored to the challenges that each business faces.
Organisations will still need to be mindful in balancing the rapid deployment of supply chain applications against longer term, digital transformation strategies. This will include focusing on what business problems technology can help address and the appropriate technology to use. To try and overcome these challenges, 2020 will see more technology vendors and partners taking on a long-term consultancy role alongside helping to deliver short-term wins.
No matter what 2020 holds, those businesses that survive and thrive will be those that closely align their supply chain planning to the wider business digital transformation strategy. With intelligent planning and by embracing new technologies, businesses can stay one step ahead of uncertainty in 2020 and beyond.
[i] Censuswide, on behalf of Vuealta, surveyed 500 business decision makers at UK companies with over 250 employees that have a supply chain in June 2019