7 supply chain predictions
Looking ahead with 2020 vision to a world where sustainability and digital disruption make waves.
Innovation and transformation are occurring at a speed never witnessed before as the digital revolution changes the way we live, work and interact. The power of information is clear as more decisions are based on data, while the application of artificial intelligence (AI) is starting to deliver significant value.
Meanwhile, global movements to protect the planet and operate responsibly continue to grow in importance. An undercurrent of de-globalisation continues to change the way countries and companies interact. Here's a look at some of the emerging trends and themes you can expect to take shape in 2020.
1. Sustainability a must: Sustainability is increasingly expected by business customers, shareholders and the public at large.
One major initiative, the IMO 2020 low-sulphur fuel mandate, took effect on Jan 1. This move by the International Maritime Organization has the potential to hit the shipping industry with eye-opening impact. Demand for costly scrubbers and low-sulphur fuel will eat into margins and catch many carriers and shippers off-guard.
Slow steaming will add days to already lengthy trips, forcing entire supply chains to restructure how they plan and execute the production and delivery of goods.
2. Eliminating empty miles: Empty containers will be an increasingly hot-button issue in the shipping industry. In freight, waste means that more fuel is consumed, more carbon is emitted, and drivers spend more hours sitting idle.
Non-revenue or deadhead miles are a drag on the industry and economy, as businesses pay more to move goods. Everyone from shippers down to end-consumers -- and, of course, the environment -- ultimately pays the cost of empty miles.
3. Politics and commerce intertwined: Shifting trade policies are now part of the new reality we live in. Tariffs and trade regulations will become mainstays in business strategy discussions and everyone will be keeping tabs on trade developments as a matter of routine.
4. Human intelligence shapes AI: Researchers are striving to enhance AI and machine learning (ML) models to be less linear and rigid, and more curious and perceptive, like human learning.
Current ML engines require feeding thousands of labelled images to teach machines to recognise what simple objects or animals look like. Yet errors still occur when blurred images are presented. An infant, on the other hand, learns through a handful of experiences what a cat looks like.
Infants also learn through experimentation and curiosity. In order to imitate this experience, some ML programs are being developed to be rewarded for curiosity versus accuracy.
As supply chains progress towards autonomous processes, machine learning and AI platforms will continue to learn by observing humans and data signals that span parties, regions and supply chains, to understand the complexities and nuances of global trade.
5. Supply chains retreat inward: In 2019, we saw supply chains shift out of regions such as China because of tariffs and trade conflict. In 2020 the emphasis will shift towards self-sustaining economies with supply chains relying on domestic resources and trading partners where possible. Production will increasingly lean towards "produce locally, deliver locally".
On the consumer side, there's a growing trend towards domestic brands. In China, consumers are increasingly turning to Chinese brands for clothing, high-tech devices and cars -- and increasingly shunning Western names. In the US, companies are diversifying their supply networks beyond China and building up new networks elsewhere, in many cases closer to home.
6. The digital Berlin Wall: IMF chief Kristalina Georgieva has warned that current trade rifts could lead to changes that last a generation -- broken supply chains, siloed trade sectors, and "a 'digital Berlin Wall' that forces countries to choose between technology systems".
As supply chains retreat inward and technology enhancements are further ingrained in trade, some of the moves being made today could have long-term ramifications on supply chains, with parties or regions becoming walled off.
Resilience and flexibility remain important, but suddenly the ability to rapidly bring onboard and support suppliers outside of traditional sourcing hubs becomes essential as new digital barriers arise.
7. Industry norms upended: In October, the luxury brand Louis Vuitton announced plans to open a 9,200-square-metre factory in Texas, the latest example of a shift away from consolidated production of high-end goods. Production of its high-end handbags is increasingly spread out, with eight of its 24 sites now located outside of France.
In November, Maersk announced a pullback on ocean vessel investments, saying it would focus on land services as part of a broader initiative to drive growth.
In 2020, expect more upheaval of standard practices as businesses seek new ways to innovate and serve customers amid a tense trade environment.
Moving into 2020, it's more important than ever for businesses to be thoroughly connected to their overseas partners. Collaboration, visibility and free-flowing data are essential ingredients for thriving in a future that is increasingly uncertain and pressure-packed.
Those companies that orchestrate their supply chain as a single cohesive network will have the agility and speed of execution to proactively sense and respond to meet their customers' needs. This will be a significant competitive advantage in 2020 and beyond.
Fabio Tiviti is the vice-president for Asean of Infor.