Five years ago, most global supply chain managers would tell you they were focusing on increasing efficiency with the just-in-time model and most people on the street couldn’t tell you what a supply chain really was or why it mattered.
Covid changed all of that. Now, business leaders and customers alike understand that an event happening on the other side of the world can take down operations and lead to a lack of basic necessities. 2023 saw a continuation of this upheaval and 2024 looks to be no different. So what should leaders be focusing on when it comes to crafting a sustainable supply chain next year?
The evolution of localisation
Resilience, above all, says Saul Resnick, chief executive of DHL Supply Chain UKI – and particularly with regards to the shifting geopolitical landscape. “Where organisations were historically reliant on very specific markets, with perhaps all their supply coming from one place, they’ve now realised that that can have a massive impact on their ability to supply local markets. Having product nearby, on shore, at a multitude of locations might not be the most cost-effective strategy, but it certainly gives a lot more stability.”
But, rather than bringing whole operations home through onshoring or reshoring, Resnick’s view is that organisations must embrace multi-shoring, with warehouses and factories in several locations so that if one is compromised, the whole supply chain doesn’t come to a halt. Gilles Tisserand, vice-president of climate and biodiversity at multinational food-processing company Tetra Pak, agrees. “In 2024, it is not about getting away from globalisation, but rather accelerating the localisation trend at the same time.”
This drive for greater localisation will bring challenges, however. For decades, many brands have relied on the expertise and cost-efficiency of manufacturing in jurisdictions such as China. Moving sections of the supply chain to untested regions will bring a new set of challenges.
Bindiya Vakil, CEO of supply chain analytics company Resilinc, points to the example of Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest maker of microchips. Following waves of cyber attacks against Taiwan, TSMC has invested billions of dollars in a giant semiconductor plant in Arizona, in order to be closer to its US clients, such as Apple. But the new factory has since been plagued with labour shortages and accusations of poor safety, slowing progress and pushing back the date for starting production. “The world is indeed bifurcating and becoming more regionalised,” says Vakil. “Supply chain networks are in motion and it introduces a tremendous amount of risk because these new factories do not have the same level of quality or expertise. You’re still vulnerable because no country is risk free.”
Resilience is crucial in both people and partnerships
But, for Vakil, the most worrying supply chain trend of all concerns people, rather than place. “The scariest trend is the fact that we have an ageing population in most of the world,” she says. While this might not cause direct concerns for 2024, savvy supply chain directors will be looking to manage talent and source skills to fend off the impending labour shortage as much as possible.
For Andrew Shaw, supply chain director at Nestlé UK & Ireland, this means employing people who are adaptable, above all. “The sorts of people that we’re looking for are curious, they understand that things are evolving and they’re able to cope with change at a rapid pace,” he says.
We need a whole new approach to procurement
Although supply chain managers will on the lookout for specific tech skills in 2024, Shaw believes that an open approach to shifting circumstances is more important than any particular skill set. “It’s about understanding what we need to cope with evolving technology. So you need people who have resilience and can accept that change is going to be perpetual.”
Future supply chain talent will also need to be collaborative, says Tisserand, because making and maintaining the right partnerships will be crucial in 2024. “The need is to have people who are able to engage and collaborate because we need a whole new approach to procurement,” he says.
DHL’s Resnick agrees, explaining that as the economic uncertainty continues into the new year, supply chain managers are opting to work with “bigger, more robust and more secure partners.” He points out that in the past, businesses had “very strong local heroes, smaller entities with niche opportunities in the market.” Now those alliances no longer seem prudent. Bigger players “offer financial security and stability. They can be relied on to withstand the number of events occurring.”
He forecasts that 2024 will see more shifts of this nature as brands all along the supply chain look to make safer choices when it comes to their suppliers – not only from a financial resilience point of view, but also from an environmental standpoint.
Balancing cost with climate responsibility
There is no doubt that sustainability concerns will remain a top priority next year. Donna Lyndsay is sustainability lead at national mapping agency Ordnance Survey. She has seen a shift in the level of oversight businesses are demanding of their supply chains. “People need to genuinely understand where the potential harms are within their systems,” she says. “They need to be conscious of their carbon footprint, including scope-three emissions, but also of nature and biodiversity risks.”
Not only must brands consider the impact of ignoring ESG at a time when customers demand accountability, but climate change is also creating unforeseen challenges for supply chains themselves. This year has seen parts of the river Rhine closed for shipping due to heavy rains at the same time that the Panama Canal was suffering from severe drought.
In 2024, firms will need to keep doing their part to fight climate change and find new ways to decarbonise supply chains, even when it costs more, says Shaw. He explains that Nestlé has been looking to transition its deliveries from road to rail and has developed a rail container that allows products to be double-stacked – the first of its kind. “It’s going to cost us slightly more but it’s the right thing to do because it takes a significant amount of CO2 off the road.”
And it’s not always the case that sustainability carries a financial burden, argues Tisserand – sometimes it can relieve a burden, too. “In many, if not all, cases, sustainability investment is linked to cost savings,” he says, citing the example of moving from gas and oil power to cleaner, cheaper electricity. In the new year, smart supply chain managers should be looking at the opportunities to save money in the longer term by making these green transitions.
Which technologies are moving the needle?
Emerging technology will also offer some solutions to the climate challenge in 2024. Lyndsay is one of the founders of the Ordnance Survey’s Supply Chain Data Partnership. The scheme is a collaboration between businesses and public sector entities to monitor and verify environmentally and socially sustainable practices throughout global supply chains.
AI is a big buzzword at the moment… it will be transformational
“Corporations desperately need this,” she says. “There’s no trust in the system. Everyone is accused of greenwashing. Bad actors can get away with what they want to and nobody knows.” The data collected and supplied by this partnership will allow businesses to use predictive analytics, artificial intelligence and machine learning to stop climate-damaging activities before they start. For example, now that the European deforestation regulations have come into force, brands will be able to use AI to see which behaviours along the value chain are associated with future deforestation activities and stop them before they start.
“We now have access to technology that is powered by these massive connected datasets,” says Vakil. “Information can flow so fast through our networks that we can respond to disruptions in a much more efficient way, beating competition and protecting our business.”
Automation will continue to bring efficiencies across the board in 2024. Robotic picking technology is constantly improving and will continue to be a major area of investment. And pairing this technology with artificial intelligence is generating even bigger wins.
“AI is a big buzzword at the moment,” says Lyndsay. “But it will be transformational. There are some massive productivity gains we can see coming down the line next year as long as people are aware and mindful of the risks.”
Why cybersecurity must become a top priority
But technology can hinder as much as it helps, and one of the biggest risks facing the supply chain next year will be cyber threats.
“Cyber attacks are probably the biggest fear that I, or anyone in my current position, holds,” says Resnick. 2023 was another bumper year for cybercriminals and it has become clear that the ramifications of a hack of a single system can be far-reaching.
Vakil points to the 2021 ransomware attack on the Colonial Pipeline as an example of just how serious supply chain attacks can be. “It creates a massive threat to the global economy,” she says. “A really bad cyber incident in just one hotspot could theoretically shut down the whole world for a period of time.”
For this reason, she explains, it is crucial that next year supply chain managers take responsibility for the cybersecurity of their own operations and that of their suppliers. It is no longer enough to leave all cyber protection in the hands of your IT team.
“When a whole supply chain can’t be fulfilled because one of your systems has been hacked and you can’t process orders – it’s horrific,” says Resnick. “Mitigating against that and partnering with companies who have the most resilient supply chain protections is a non-negotiable.”
If these expert predictions are right, 2024 promises to be another year of upheaval and the best supply chain managers should be looking to build in adaptability wherever possible. From talent to technology, infrastructure to investment, resilience is the watchword for next year.
