Supply Chain Trends

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At the turn of the millennium, supply chain management (SCM) was as an operational function that offered cost-management solutions. However, changes in SCM are taking place from transportation and logistics, to warehousing, to data management. Recent research led by Ted Stank of Haslam College of Business and the Global Supply Chain Institute (GSCI) shows that by viewing the supply chain holistically, supply chain managers can do more than mitigate risk—they can drive revenue growth.

To support this paradigm shift, new trends for 2019 have emerged across the end-to-end supply chain, which offers a comprehensive view of the supply chain. The Global Supply Chain Institute defines the end-to-end supply chain as, “the integrated system of processes and activities required to deliver product and services from the supplier’s supplier to the consumer’s shelf.” Propelled by disruption and focused on sustainability, today’s trends cover every step of the supply chain from sourcing, to transportation, to final delivery

In simple terms, the supply chain is the path from resources to users. Changes in geopolitical forces, climate and technology can all disrupt that path. Over the last five years, strategic supply chain management systems have evolved to turn disruption into opportunity. Scott Shay, Executive Director of Supply Chain Operations Programs and Executive Director of the Global Supply Chain Institute, and his colleagues at the GSCI work with the top organizations in the world—including many Fortune 100 companies. According to Shay, there are five major supply chain trends to look out for in 2019:

1. Innovation: 2019 has been all about welcoming change and innovation driven by rapid technological growth. Gartner points to eight new technology trends in 2019, including blockchain, saying, blockchain “could be an answer” to address the three challenges of counterfeiting, visibility and efficiency play.

2. “Smart” technology: Artificial Intelligence, cognitive computing, big data, real-time data, blockchain, cloud computing, the Internet of Things (IoT), predictive analytics and prescriptive analytics—these are the new technologies powering supply chain digitalization. Digitalization should not be confused with automation. Automation replaces human labor; digitalization redefines the ways value can be created through technology. For example, digitalization is an emerging trend within logistics and transportation. By embedding tracking sensors along each post in the supply chain, a chef can now know when the fish he ordered for tonight’s menu was caught and exactly how long it took to get from the ocean to his skillet. With this information, a customer might be willing to pay more for fish when freshness is guaranteed.

3. Global optimization: The supply chain exists within global contexts. In the global supply chain, materials are often sourced from one country, manufactured in another and delivered to a third. This means the supply chain must react swiftly to the ever-changing geo-political forces behind global trade.

4. Risk management: Risk management has become, and continues to be, one of the most important supply trend functions. This is especially true of the global supply chain. Risk management is understood as an operational and financial function because of the constant changes to the global business environment. Terrorist attacks, extreme weather and new geopolitical forces all contribute to risk and must be managed to limit interruptions and delays in the supply chain.

5. Sustainability: Environmental and social concerns are now a big part of business strategy. Sustainability has become such a trend that a term—”greenwashing”—even exists for companies who try to capitalize on the marketability of being environmentally friendly without actually being so. Sustainability isn’t just about looking good. Truly sustainable companies are concerned with ethical sourcing, labor practices and clean energy. Sustainable practices save companies money and ensure the continued existence of supply sources.

Each of these trends is predicated on supply chain visibility. Innovation requires visibility—without visibility functions are siloed, and innovation thrives on collaboration. Similarly, insights derived from new technology make the most impact when they can be understood in the context of the end-to-end supply chain. Global optimization relies on having visibility into parts of the supply chain network around the world. Risk management, again, needs to account for all possible global, local and technological disruptions. Finally, to be truly sustainable, a company must know what’s happening at every stop on their supply chain.

While all of the trends are important, among supply chain professionals, the two most talked about trends of 2019 are technology and sustainability. The important outcomes these two trends can produce when paired together are clearly seen in transportation and logistics.

The EPA (Environmental Protection Agency) SmartWay program was created in 2004 and has since grown to include the participation of 3,700 companies. Recently, EPA SmartWay released its new vision, called SmartWay Vision 2020. This plan reduces pollution by sharing information, using sustainability reporting, encouraging greater global communication and making sure companies have end-to-end supply chain logistics visibility. Innovations in technology are enabling innovations in sustainability.

In the next sections, we’ll take a closer look at technology and sustainability. Both trends are wide in scope, and within these trends are sub-trends that the smartest companies are engaging with to create meaningful business outcomes.

Technological changes are fundamentally driving most supply chain trends. For example, increased supply chain visibility is possible because of innovations in chain management technology. So what are the new, disruptive trends in supply chain software and supply chain digitalization?

As part of a study on the digital supply chain, leading experts at the Global Supply Chain Institute interviewed senior supply chain and technology authorities across the automotive, heavy equipment, telecommunications and technology, healthcare, retail, fast-moving consumer goods, finance and education industries. In speaking with these experts, seven top trends to digitalize the supply chain emerged:

Digitalization trend What it promises Implementation challenges Key benefits
1. Rethinking data Technology desegregates information, which allows companies to manage it at the data level. By connecting existing systems and solutions, machine learning eliminates boundaries and silos across the supply chain network. This requires standardization. For connectivity to work, each system needs to speak the same language. New technology is more flexible, which cuts down on costly and restrictive IT practices. Visibility will improve across the end-to-end-supply chain as companies are able to share their data both safely and securely.
2. Technology stacking Stacking uses two or more technologies to achieve a capability. Essentially, it’s customization. Managers can take the most useful parts of different technologies to create new SCM software that addresses their specific needs. This is similar to the way warehouse management software combines existing technology—like RFID—with other systems to deliver custom results that reduce time, increase visibility and mitigate risk. Like warehouse management software, the cost depends on how big a company is and how customized their solutions are. Gartner differentiates between two modes of stacking. The first focuses on predictable and continuous improvement and will be fairly standardized. The second will leverage new capabilities and won’t be standardized—it will rely on experiments to solve problems. There are already stacking options available for existing and emerging technologies. For technologically savvy companies, the increased ability to customize unique capabilities will result in a significant competitive edge.
3. Digitalization of the supply chain: internal collaboration and realignment New technologies are being developed that offer critical improvements to supply chains and directly impact the bottom line. Traditionally, companies invest in new technology in marketing and sales. Digitalizing the supply chain gives supply chain managers a platform to enable internal collaboration, which will create new forms of value. Since new supply chain management software offers visible, revenue-driving results, supply chain managers have the opportunity to begin leading new-technology adoption.
4. Digitalization of the supply chain: external collaboration When combined with a better understanding of integrated supply chain management, advances in technology will transform how companies work with each other across the supply chain. For example, blockchain can be used to support contracts where all parties see digital records as they are updated. Cost. While collaborative SCM software exists, many supply chain managers are still using email and excel to manage short-term projects. There’s tremendous opportunity for innovation. Digitalization will benefit external collaboration across the supply chain by improving visibility and traceability with nearly real-time data.
5. New capabilities, businesses and processes Supply chain management software is continuing to move toward enabling automation and driving efficiency. Creativity and technical savvy are the only factors limiting new, transformative abilities. Competing on new mediums like data management, analysis and insight will drive new models, which will drive new innovation.
6. Sustaining human capital Supply chains need to understand how human capital adds value amidst changing technologies and automation. There’s fierce competition for top talent. Digitally savvy managers who can match the right talent with the right emerging technologies are needed. AI encourages strategic thinking by providing supply chain professionals with previously unavailable information.
7. The changing nature of work Work environments are different than they were twenty years ago, and twenty years from now, they’ll look different than they do today. This only presents opportunity. ManpowerGroup surveyed 18,000 employers across 43 countries about how technology is impacting their company and if their workforce has the right skills. The takeaway? Automation and digitalization will bring a net gain to employment. And supply chain functions are at the heart of leveraging both skilled and unskilled uniquely human abilities.

Just as new technology is changing the supply chain status-quo, so are trends in sustainability. In The Supply Chain Game-Changers, Ted Stank and his colleagues at the Global Supply Chain Institute explore the most impactful supply chain innovations. Stank et al. explain one facet of supply chain excellence is balancing social and environmental goals with economic objectives.

So why is sustainability so important in supply chain management? Two reasons: 1. The supply chain is uniquely positioned to reduce environmental and social damages, but the complexity of supply chains demands that changes are implemented carefully and thoughtfully by skilled supply chain managers. 2. According to Stank’s research, sustainable practices provide long-term paybacks, market benefits and positive financial returns.

The GSCI spoke with 16 of the world’s most eco-friendly companies across industries to find how they deal with sustainability issues and drive sustainable initiatives. The six latest sustainability trends in supply chain management to emerge are:

1. Embracing sustainability as a major business driver: Benchmark companies make sustainability part of their business plans. Not only does data show millennials prefer buying sustainable products, but they also want to work at sustainable companies.

2. Developing a culture of transparency: Top companies have a clear strategy and vision for everything, including sustainability. Supply chain transparency means employees should understand how their role contributes to sustainable efforts for combating climate change and promoting social welfare.

3. Partnering with sustainable suppliers: Companies are looking to partner with suppliers who are committed to the social and environmental impact of their products.

4. Ensuring traceability to enable transparency: A big part of transparency is knowing where materials come from and how they’re produced. To eliminate slave labor and environmentally damaging practices across your supply chain, you have to be able to trace the path your product travels from your supplier’s supply to your customer’s shelf.

5. Using data: Benchmark companies use a data-oriented approach to constantly measure and optimize their impact. By employing sustainable practices, supply chains can help their organizations reduce their carbon footprint, water usage, particle emissions and landfill tonnage.

6. Working with experts: Supply chains are complex and so is sustainability. Collaboration is necessary and provides a competitive advantage and innovative solutions. The top companies that implement sustainability initiatives work with supply chain organizations like the GSCI to do so. A supply chain institute helps companies by partnering on benchmark research, connecting firms to top talent and holding forums. Education is particularly important when it comes to sustainability. During the last Supply Chain Forum, Diane Mollenkopf presented a discussion on sustainability where she shared trends and best practices to impact the bottom line and the environment.

The sustainable supply chain creates positive outcomes for everyone involved. The SC Johnson Company was one of the benchmark companies studied by Diane Mollenkopf. After partnering with a local, sustainable supplier at one manufacturing plant in Indonesia and using rice husks as an innovative fuel source, the SC Johnson Company:

  • Recouped more than $10 million in savings
  • Reduced their greenhouse gas emissions by 15 percent
  • Created 60 new jobs in the local community

Yes, sustainable supply chains demand innovation. But innovation equals opportunity. The GSCI’s research suggests companies that improve efficiency, create green jobs and supply the demands of increasingly socially conscious customers will become the leaders of their industries.

Supply chain trendsetters to watch

The supply chain is no longer a set of disparate functions. Just as sustainability extends to each link in the supply chain, operational functions like manufacturing, warehousing and transportation are all connected to each other through supply chain visibility. With new technology, previously unusable dark data can be applied to tell meaningful stories. The supply chain is, as Scott Shay states, “an integrated amalgam.” Innovations in technology and analytics increase visibility, making it easier to optimize against the end-to-end supply chain. With this, the supply chain industry now has the potential to deliver value profitability—not simply mitigate loss—to companies, their customers and their shareholders.

Thanks to the explosion of big data, using spreadsheets to calculate risk and make network decisions is outmoded. But Shay suggests even 2019’s trends will soon need to be replaced. The supply chain trendsetters to watch are mission-critical trends.

Mission-critical trends were not initially recognized twenty-years ago. New ideas are the drivers of supply chain innovation, and mission-critical trends have the power to transform the supply chain into a major force for economic profit and environmental promise.

Looking back at 2019’s supply chain trends, Scott Shay and his colleagues at the GSCI predict the following evolutions will occur by 2025:

Supply chain trends of 2019 Emerging mission-critical trends What to look out for
Innovation → Value transformation Value transformation goes a step beyond innovation. Rather than simply welcoming technologies like blockchain, the supply chain will begin to proactively pursue new solutions to shape future outcomes.
“Smart” technology → Autonetic technology “Smart” technology is actually an acronym for “Self-Monitoring And Reporting Technology.” While smart tech monitors and reports, autonetic technology and the artificial intelligence of the future have the capability to anticipate a range of data and proactively suggest solutions. Using probability distributions, autonetic technology will alleviate supply chain breakdowns before they happen.
Global optimization → Glocal optimization Glocal optimization focuses on the principles of end-to-end supply chain excellence. It continues monitoring global environments, but it also looks at local parts of the supply chain to increase supply chain visibility and drive revenue.
Risk management → Risk prognosis To truly reduce risk, supply chains need to outsmart it. Risk management identifies a risk, but risk prognosis uses business intelligence and artificial intelligence to create processes that eliminate risk before it emerges. Supply chains will be engineered to exclude risk factors, which will save far more than reducing risk to positively impact the bottom line.
Sustainability → Prostainability The sustainable supply chain minimizes social and environmental costs, but the GSCI cautions that this soon won’t be enough. To get the greatest ROI—both economic and environmental—on sustainability, companies need to invest in prostainability. Prostainability focuses on not simply reducing social and environmental concerns like sweatshops and greenhouse gasses, but actually improving social and environmental conditions. Prostainability will determine leading companies within industries and generate strong economic growth

Just as supply chain visibility underpins 2019’s trends, a sense of urgency and action characterize the trends to watch. Acting is replacing 2019’s focus on swiftly reacting. While visibility remains crucial, to become strategic revenue drivers that impact a company’s market value and growth, supply chain management leaders need to start turning visibility into foresight.

Two companies trailblazing the way with chain management are Amazon and Kimberly-Clark. In the coming years, businesses need to begin investing in predictive technologies and artificial intelligence. Amazon and Kimberly-Clark, however, are already doing so. In his research, Ted Stank remarks that both organizations already rely on predictive digital technologies and machine learning to determine demand signals. They use this to ship products in the general direction of customers before specific orders are placed. This cuts down on shipping time and shortens the delivery window. With its focus on innovation, Amazon proves that supply chain excellence has a significant impact on the bottom line.

If you’re interested in staying on top of emerging supply chain trends, you may consider pursuing a graduate degree in supply chain management. A master’s degree from a top supply chain program will train you in hard and soft skills. You’ll learn to master existing trends, and throughout your career you will be prepared to think critically, adaptively and strategically.

The University of Tennessee, Knoxville’s Haslam College of Business is home to one of the oldest and most well-respected supply chain management programs in the country. Now, students who want to take their career to the next level—or even start a new career in supply chain management—can attend Haslam’s Master of Science in Supply Chain Management online. Online education provides flexible learning options for working students and students who are unable to relocate to pursue a graduate degree.

You can read more about what you can do with an MSSCM here. If you’re interested in learning more about Haslam’s new online MSSCM, you can explore the program here.