For many years, supply chain professionals focused on cost containment and operational efficiency.
Globalization was the name of the game, and raw materials and finished goods moved freely across international borders.
But then COVID-19 brought border closures, factory shutdowns, material shortages, shipping delays, and changing consumer habits.
The pandemic has laid bare the complexity—and fragility—of the global supply chain. It clearly showed that the system was ill-equipped to deal with massive disruptions in both supply and demand.
So, going forward, how will companies adapt? What does the future of global supply chain management look like?
Here’s how the next five to 10 years may shape up.
MOVING AWAY FROM JUST-IN-TIME
The pandemic exposed the vulnerability of just-in-time and lean manufacturing, which focused on having the minimum amount of materials and goods on hand to satisfy demand.
The idea was to keep inventory levels as low as possible by receiving goods only when they were needed.
But that meant companies had no stock of materials to draw on when factories across the world were forced to close.
In a Gartner survey of supply chain professionals in fall 2020, 60% conceded that their supply chains had been built around cost efficiency rather than resilience. And 87% said they intended to invest in resilience within the next couple of years.
But there’s a danger in going too far the other way, since stockpiling excess inventory is costly. The challenge for supply chain managers will be to create a system that can withstand disruptions without getting weighed down by overcapacity.
RETHINKING SINGLE-SOURCE SUPPLY AGREEMENTS
Pre-pandemic, many supply chains relied heavily on materials from China. Volume agreements with a single supplier maximized efficiency and minimized costs.
But shifting to an alternate supplier in Taiwan, Vietnam, or even closer to home is not the full solution. Reliance on a single source—in Asia or elsewhere—leads to disaster if that supplier suddenly can’t deliver.
Yossi Sheffi is the director of the MIT Center for Transportation and Logistics. He sums up the situation very well in his recent book, The New (AB)normal: Reshaping Business and Supply Chain Strategy Beyond COVID-19:
“In a whack-a-mole world where pandemics, nationalistic trade policies, and local disasters hit different locations at different times to impede the production, flow, or consumption of goods, no single source location can be safe.”
Instead, companies are increasingly looking to diversify their supplier base. Many are moving to a model of having one primary supplier (who handles, say, 70% of the order) along with one or two others.
That way, supply chain professionals will be better prepared to pivot as circumstances require.
The reliance on China also showed how vulnerable companies are when they depend on materials or goods that have to travel thousands of miles.
Supply chain managers can safeguard against future shocks by moving at least some production closer to the end consumer. Regionalizing the supply chain means shorter lead times and simpler logistics.
Many companies won’t choose to (or even be able to) pull away from China. But they may start assembling their products in areas closer to where the finished goods are needed, much like the auto industry does right now.
In the Gartner survey, 30% of supply chain professionals claimed they were moving from a global model to a more regional one.
In the future, we can expect more production and logistics hubs to emerge closer to the point of demand.
Automation and artificial intelligence is the way of the future in supply chain management.
Using automated systems and robots limits face-to-face contact. And IoT devices and sensors increasingly allow supply chain managers to see where items are in the chain and adjust production strategies quickly.
In one survey, 64% of supply chain executives said digital transformation will speed up thanks to the pandemic.
William Rapisarda has more than 25 years of industry experience and now teaches the supply chain course at Herzing College Winnipeg.
He says technology will definitely reshape supply chains over the next several years.
“Technology will play a major role with streamlining processes throughout the supply chain. AI (artificial intelligence) and robotics will be at the forefront of this change. We will have much more control with our inbound and outbound freight, knowing exactly where a shipment is and when it will get to your doorstep.”
PREPARE FOR A FUTURE IN SUPPLY CHAIN MANAGEMENT
Hoping to gain the knowledge and skills you’ll need to launch a career in supply chain management?
Have a look at the accelerated 12-month Supply Chain Management and Logistics diploma from Herzing College Winnipeg.
Training is delivered online, and all students get real work experience through an included 6-week internship.
Ours is the only private career college program in Manitoba to be endorsed by Supply Chain Canada (SCC). Graduates receive a diploma from Herzing as well as a Supply Chain Management Training diploma from the SCC.
Still have questions? An Admissions Advisor can take you through all the details of the training and help you determine if it’s right for you.
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