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February 02, 2023

How Long will the Supply Chain Crisis Persist?

How Long will the Supply Chain Crisis Persist

Is the “New Normal” even a thing?

Even as some improvements are being reported on the supply chain front, fashion and consumer goods supply chain leaders have come to realize that business will continue to be anything but “normal” for the foreseeable future.

It’s clear that supply chain executives must actively rebalance and reimagine their operations to meet rapidly changing conditions. One global supply chain leader explained, “This is just a day in the life: disruptions across the world. We must know this is our world and plan and operate within it.”

Supply Chain Leaders Mitigate Risk

This sobering reality is evident in a recent IBM survey of global chief supply chain officers (CSCOs). The consensus of the 1,500 participants across 24 industries is that issues related to supply chain disruptions, technology infrastructure, and sustainability will continue to be their greatest challenges over the next two to three years. Indeed, corporate boards and C-suites are prioritizing how businesses navigate supply chain uncertainties and putting greater emphasis on supply chain functionalities, roles and digital transformation.

The extensive sampling of CSCOs ranked near-term challenges in this order:

  • Supply chain disruption - 51%
  • Technology infrastructure - 44%
  • Sustainability - 42%

Some critical insights from IBM’s analysis include the following:

  • 95% of top performing CSCOs are using more digitalization and automation than their peers
  • 86% predict an increase in the importance of macroeconomic forces in the next 2-3 years
  • 36% note an increase in CEOs citing supply chain disruption as one of their greatest challenges

Compared with the 2019 responses, the most significant shifts saw macroeconomic and environmental factors moving to the top of the list. Formely, top-of-mind challenges like market shifts, regulations, and people skills fell precipitously in 2022.

Perhaps most interesting is how these organizations have reacted to supply chain disruptions so far. Almost half of all survey participants said that they had introduced new technologies, an approach that can add predictability, flexibility, and intelligence to operations. A similar percentage have also rebalanced their workforce and increased collaboration with business partners. These and other forward-thinking strategies provided an “Innovator Advantage” that enabled the top 20% performers to achieve, on average, 11% more annual revenue growth than their peers in 2021.

Manufacturers Hit Hard

Supply chain disruptions have significantly impacted manufacturers. A Deloitte study based on a survey of more than 200 U.S.-based manufacturing executives concluded that their most impactful challenges included:

  • Rising costs – 46%
  • Raw materials shortages – 43%
  • Talent shortage – 53%
  • Restricted supplier network – 50%

The manufacturing group reported using four key strategies in response to these issues:

  • 83% are strengthening existing supplier relationships
  • 81% are working to engage/diversify their supplier base
  • 78% are adopting digital solutions that enhance visibility and transparency
  • 65% are shifting from a just-in-time to a just-in-case inventory approach

A Data-led Future

With little room for failure, innovative supply chain leaders and manufacturers must deliver on efficiency and resiliency today while rapidly creating data-led insights that bring the future into greater focus. 

Automation and AI technologies are a significant part of both goals. These powerful tools can deliver more timely insights, enabling leaders and teams to make faster, better-informed business decisions. They equip supply chain organizations to quickly identify, prioritize, and take the most effective actions.

For automation/AI technologies to provide predictive analysis, workflow management and their many other benefits, they require data from across the entire ecosystem (the organization, supply chain, and customers). Of course, this data must be accessible, secure and trusted. This is a key reason to make these and virtually all other investments in conjunction with a strong technology backbone across the entire enterprise.

Because customers now expect full transparency, most CSCOs expect enhanced transparency and visibility to be a key differentiator in the next three years. Specifically, they see substantial increases in using intelligent workflows for data analytics, monitoring and scheduling events and decision-making.

The CSCOs identified seven areas where new technologies can provide greater visibility and transparency - all have direct relevance to supply chain operations:

  1. Trusted, secure ecosystems and digital network connections
  2. Customer visibility of inventory from first-to-last-mile logistics
  3. End-to-end supply chain workflows across ecosystems
  4. Supplier production plans and fulfillment commitments
  5. Vertical collaborative enterprise and partner integration
  6. 360-degree collaborative insights and impact analysis
  7. Ecosystem inventory responsiveness and control

From Now to Next

Today, many companies are taking a steady-as-they-go approach to technology. But survey analysis shows that the 20% of CSCOs, who are the innovators, are obsessed with investing in transformational technology and are already adopting a data-driven approach. As noted earlier in this update, these innovators are achieving much higher annual revenue growth. Notably, they have outperformed their peers in planning, cybersecurity, and agility over the past three years. The 20% also edge out their peers in sustainability metrics, including customer engagement, products and services, and premium pricing.

While the innovators are not currently in the majority, their growing performance trend provides ample evidence of the future of supply chain operations. Even if you have doubts about the role of technology, consider that in the most recent survey, more than half of the CSCOs indicated that their digital transformation initiatives would become the most significant competitive advantage in the next few years.

Want to explore how to ramp up your supply chain operations? CGS is the industry leader in successful digital transformation for fashion and consumer goods businesses. To learn more about our solutions, click here.

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