Trends 2019: Supply Chain

Stephen DeAngelis

January 08, 2019

We live in hectic times. The U.S. is in a trade war with the world. Britain is trying to disconnect from Europe. Cyber attacks are increasing. Climate change is creating violent weather events. The list of crazy things happening goes on and on. Nowhere is change more evident than in the supply chain arena. The staff at Supply Chain Network (SCN) writes, “With rising customer expectations, changing business models, cut-throat competition and the influx of technologies, it’s critical that you prepare your supply chain to address challenges such as the capacity crunch, last mile strategies, balancing of costs, digital freight market opportunities and navigating the ecommerce maze.”[1]

Trends affecting supply chain operations

Adrian Gonzalez (@talkinlogistics), President of Adelante SCM, writes, “One of the things that defines supply chain management today is the rapid pace of change across all dimensions — competitive landscape, regulations, technology, and many more. Keeping a pulse on these industry trends and changes is increasingly important in order to make sure you’re as prepared as possible to succeed in the months and years ahead.”[2] Below are some of the trends subject matter experts suggest will impact supply chain operations in 2019.

Global trade. Janie Ryan (@janiemryan) writes, “As sanctions on Iran go into effect and Iranian oil exports decline, global oil prices could rise, putting even more pressure on logistics providers. And the ongoing trade disputes between China and the U.S. are prompting companies from apparel to electronics to move production out of China and into other low-cost (and less contentious) regions. A recent Financial Times article stresses that now is the time for manufacturers to diversify their product portfolios to reduce risk.”[3] Previously, Ryan had noted, “One thing remains certain: in this time of shifting trade relationships, flexibility is a virtue in supply chain.”[4]

Worker shortages. Everyone is aware how shortages of truck drivers and warehouse workers are adversely affecting supply chain operations. To overcome these shortages, companies are looking to automation — everything from robots to driverless vehicles are being considered. According to Ryan, hoping technology will come to the rescue is not a good short-term strategy. She writes, “For now, and into the foreseeable future, the logistics industry should be indexing on better recruiting and retention methods to grow its workforce.” As the Internet of Things matures, the Supply Chain Network staff reports worker shortages will likely get worse. They report, “Cisco predicts a shortfall of 300,000 works with IoT relevant skills in industrial and operational settings.”[5] Simon Ellis, Vice President for global Supply Chain Strategies at IDC, is more optimistic about how quickly technology will help decrease the shortage gap. He predicts, “By 2023, talent shortages in the supply chain for 75 percent of the top 500 manufacturers worldwide will largely have been mitigated using supply chain digital assistants.”[6] He adds, “Fundamentally, automation is, on some level, replacing people we don’t have. More often, though, technology augments the work people do. Smart software tools can help people do their jobs better.” The SCN staff is also more optimistic than Ryan about how quickly technology will help relieve work shortages. They predict, “80% of parcel deliveries will be carried by autonomous vehicles in the next 5 years.”

Last-mile logistics. Customer expectations for receipt of goods ordered is growing. Gone are the days when a product was ordered out of catalog and the customer patiently waited weeks for it to arrive. Today, even waiting a week to receive a product makes consumers anxious. The trend is towards next-day or same-day deliveries. To accommodate faster delivery, the next big thing in last-mile logistics may be the rise of micro-delivery companies. Dave Blanchard (@supplychaindave) and Adrienne Selko (@ASelkoIW) report, “If the idea catches on, Amazon expects to see hundreds of small business owners employing tens of thousands of delivery drivers nationwide. To get the idea up and running, Amazon has pledged $1 million to fund startup costs ($10,000 in reimbursement costs per person) for qualified military veterans who want to start their own delivery businesses.”[7] Doug Surrett, Chief Product Strategist at BluJay Solutions, told Gonzalez, “Another emerging influence is geolocation-based deliveries. Think of it like auto glass replacement companies that come to wherever your car is to replace your windshield. You provide a geocode to these new delivery companies, which are popping up across Europe and parts of Asia, and they will deliver your package to that location. I think this is a major trend that will totally change the way we think about logistics today. It’s also a major change for technology companies that today use street addresses for route optimization, for example, but in the future will use more granular address systems.”

Empowered consumers. Ryan notes, “Digitally-empowered consumers no longer see why brands should be in control of their experience. They want to dictate when, where, and how they receive communications, see advertisements, and most importantly, get their hands on products. Social media will become a bigger tool for gaining instant feedback and changing product features at the speed of demand.” The empowered consumer means companies must be able to collect and analyze consumer comments and concerns. The only way to accomplish this is through the use of cognitive technologies.

Advanced technologies. A number of advanced technologies have impacted and will continue to impact supply chain operations. Some of those technologies have already been mentioned (e.g., cognitive computing, robotics, and driverless vehicles). Ellis predicts, “By 2024, more than 60 percent of G2000 manufacturing organizations will rely on artificial intelligence platforms to drive digital transformation across the supply chain, leading to productivity gains of more than 20 percent. … By 2020, 65 percent of ecommerce operations will make use of autonomous mobile robots within their order fulfillment processes, thus helping increase productivity by more than 100 percent. … By 2022, digital technologies will have enabled the automation of repetitive operational tasks, leading to 50 percent less planner intervention and ‘touchless’ sales and operations planning.” Another technology that will continue to impact supply chain operations is distributed ledger (aka blockchain) technology. Blanchard and Selko call blockchain “a powerful tool for transparency in complex supply chains.” The Internet of Things is also expected to grow. The SNC staff reports, “IoT is expected to have an economic impact of between $4 trillion and $11 trillion by 2025.”

Concluding thoughts

Obviously, the above list is not exhaustive; but, it does provide a glimpse into the dynamic future supply chain professionals can expect to encounter. Blanchard and Selko observe, “Thanks to omni-channel distribution, 3-D printing, self-service logistics and other avenues of disintermediation, traditional supply chain roles are rapidly being transformed into all-new opportunities.” Understanding how emerging and continuing trends can affect supply chain operations is key to making the most of those opportunities.

Footnotes
[1] Staff, “Prepare to Master Supply Chain Challenges in 2019!Supply Chain Network, 5 December 2018.
[2] Adrian Gonzalez, “Major Influences on Supply Chains for 2019,” Talking Logistics, 10 December 2019.
[3] Janie Ryan, “The Top 4 Trends That Will Dominate Supply Chain in 2019,” Chain Reaction, 11 December 2018.
[4] Janie Ryan, “Year in Review: The Trends That Defined Supply Chain in 2018,” Chain Reaction, 4 December 2018.
[5] Staff, “Taking a look into supply chain’s crystal ball,” Supply Chain Network, 16 October 2018.
[6] Felix Law, “10 Global Supply Chain Predictions for 2019,” IoT Central, 10 December 2018.
[7] Dave Blanchard and Adrienne Selko, “Top 10 Supply Chain Innovations of 2018,” Material Handling & Logistics, 3 December 2018.