The supply chain industry was rife with disruptions at the onset of the COVID-19 pandemic in 2020, as previously-existing vulnerabilities and oversights were exacerbated by the unpredictable effects of the pandemic on the economy, logistics, the labor market and the availability of materials.
Over the past four years since then, the industry has been slowly recovering, and industry leaders are feeling cautiously optimistic at the start of 2024.
Resilience is Key
As supply chains become less volatile, companies are able to assess risks and weaknesses and develop long-term strategies to avoid or neutralize them through diversifying suppliers and utilizing new technologies.
However, building resilient supply chains comes at a cost. Diversification requires establishing relationships with new suppliers, which involves investment in due diligence, quality control and logistics coordination.
Additionally, near-shoring or onshoring production can increase labor costs when compared to overseas labor markets. Companies will be continuing to seek out ways to balance the short-term costs of implementing risk-resilient processes with the long-term costs of neglecting to do so.
Sustainability Drives Decisions
Environmental sustainability has also been a key focus for supply chain business leaders for the past few years. Sustainability has become a central component of logistical decisions as a result of consumer expectations and regulatory demands.
Business leaders are increasingly considering sustainability and ESG (environmental, social and governance) in their vendor and supplier decisions. Additionally, companies will be required to disclose their carbon footprint and emissions and will be relying on their supply chain partners for that data.
Digitizing the Supply Chain
According to a recent survey, digital transformation is a top of mind for supply chain leaders, with 89% of respondents indicating that digital transformation of their supply chain and logistics operations is a priority for 2024.
Artificial Intelligence (AI) has been a hot topic over the past year, and it has made an impact on the supply chain industry alongside several other trends. AI-powered predictive analytics can analyze vast amounts of data to anticipate disruptions, optimize inventory levels and forecast demand fluctuations.
Digital twins, which are essentially digital models of the physical world, are able to assist with warehousing, long-term planning and execution horizons. Digital twins allow for rapid simulations of “what-if” scenarios that lead to better strategic decisions. Combined with the capabilities of AI, digital twins have the potential to significantly streamline certain parts of the supply chain, especially warehousing.
According to Forbes, digitization is the key to building resilient and sustainable supply chains, because it will lead to improvements in efficiency while lowering costs over time.
The Path Ahead
Supply chains have begun to overcome the challenges of the past four years, but new and continuing challenges for the industry lie ahead, such as adapting to the costs and processes associated with digitization and sustainable practices. By focusing on remaining risk-resilient and embracing emerging technologies, the industry can avoid the pitfalls of major disruptions in the future.