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Five Trends Set To Disrupt Global Supply Chains In 2020

Richard Howells tries to identify some of the common trends, risks, and opportunities that will come to the forefront in the next 12 months and beyond.

Here are the top emerging trends that came up during those conversations I had with leading supply chain experts.

 The 2020 trends you need to know

1. Geopolitical unrest will require resilient and agile supply chains more than ever

World events and markets show no sign of calming down anytime soon. This means we will continue to be affected by uncertainty, which will require even more resilient and agile supply chain processes. From the US election, trade wars, and of course the (seemingly) never-ending Brexit discussions and negotiations, we’re still in for “bumpy” times, as the Queen said in her Christmas address.

When the US and China announced a preliminary trade agreement in December, it was billed as a “phase one deal.” To date, it is estimated that the US has imposed tariffs of $360 billion on Chinese goods, and China more than $110 billion on US products. When two of the world’s largest economies are immersed in a trade battle, the impact on how and where we source and manufacture products, not to mention what they cost, is significantly affected.

With the British election giving Boris Johnson a Conservative majority, we now know Brexit will happen. But will it be a “soft Brexit,” where the UK remains in a single market within the EU, or a “hard Brexit” in which Britain leaves the single market and is no longer bound by EU regulations and tariffs?

These are just two examples, but whether we are talking about tariffs, Brexit, or other geopolitical events, supply chains will need to be resilient, agile, and ready to respond to ever-changing conditions, regulations, and opportunities.

2. The reality of climate change and consumer demand for ethically sourced products will drive sustainable supply chains

When Greta Thunberg was named Time’s Person of the Year for 2019, it highlighted the influence and power that individuals in particular, and consumers in general, have on businesses today. We are increasingly demanding sustainably sourced products that are manufactured and delivered through sustainable processes from sustainable companies. And we’re increasingly acting with our wallets.

As Ms. Thunberg states, “We can’t just continue living as if there was no tomorrow, because there is a tomorrow.” And with manufacturing and logistics processes responsible for a large percentage of greenhouse gas emissions, green supply chains are gaining traction among many companies today.

3. Balancing rising populations and limited natural resources requires a circular economy

Also, as the world’s population grows and the natural resources decline, we are challenged to minimise waste and recycle products and materials as they come to their end of life.

And this circular economy requires changes to supply chain processes from design to operations. We strive to design products that are biodegradable, environmentally sustainable, and ethically sourced, as well as generating minimal waste of natural resources and complying with fair trade policies. Manufacturing processes that strive for zero waste and minimal environmental impact while increasing health and safety numbers. Logistics processes that optimise loads to reduce miles covered, emissions, and carbon footprint. And assets that are designed and operated in an energy-efficient manner and are safe for the environment and workforce.

4. The experience economy demands “as-a-service” supply chains

Examples of the “as-a-service” or subscription models are appearing across all industries. We first saw this in the consumer-facing industries such as music and entertainment. When was the last time you bought a CD or DVD? It is now the norm to pay a monthly subscription for unlimited access.  You can now buy everything from contact lenses to clothing, or shaving supplies to sneakers through a monthly subscription.

And this is not only a B2C play. We are seeing the evolution in B2B cases also. Usage-based or fixed subscription options are now offered for industrial machinery such as compressors, drills, diggers, and more.

But to offer an “as-a-service” model that delivers a service based on, say, “hours of usage,” you must rethink your business processes from the design of the product or asset, all the way through to how it is used and operated by the customer. You not only need to know how long it ran for (for billing purposes) but also how well it is performing, as everybody loses if it breaks down. The customer is unhappy (bad customer experience), and you don’t get paid.

Whether you are delivering streaming, a subscription, or pay-for-use, they all have one thing in common: to keep customers coming back for more, a great customer experience is directly linked to a great product experience.

5. Convergence of new technologies (AI, ML, IoT, 5G) will enable intelligent supply chains

Industry 4.0 started with the concept of an “intelligent factory” with automated manufacturing powered by smart (IoT-enabled) machines that leverage real-time data to run autonomously, flexibly, and fast.

But Industry 4.0 is more than just intelligent factories. Industry 4.0 principles and their enabling technologies – such as the Internet of Things and artificial intelligence – are opening the door to processes that are highly automated, integrated, and optimised.

In the 2020s, Industry 4.0 will evolve from simply capturing real-time data to enabling data-driven business decisions. It will be about designing and manufacturing intelligent products and assets and empowering employees to leverage the data from these intelligent products and assets to make predictive, prescriptive, and automated decisions across the entire supply chain.

To this end, we will see a bigger push in the adoption of IoT solutions due to the availability of 5G networks. This will (finally) accelerate the creation of a digital twin of the supply chain. And this, in turn, will provide the opportunity and information for machine learning and AI across the supply chain.

 Changes lie ahead

We are in exciting and challenging times. Product cycles are compressing. Design variability is increasing. Demand is fluctuating. The expected speed of time to delivery is shrinking. And consumers are demanding sustainable yet individualised products and experiences.

These market realities place tremendous operational pressure on the entire lifecycle of your products and assets. And the only way to address these challenges is to deliver an end-to-end digital supply chain – from design and planning to manufacturing, logistics, and operations.

As we go roaring into the 2020s, one thing I can predict for sure.  The only constant is change itself. The key is having the business processes and solutions to adapt to what the future may bring.

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

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