Finance and Digital Supply Chain at SAP

To paraphrase a much-attributed quote, “Making predictions is hard, especially if they are about the future.” The last few years have not made the challenge any easier in the topsy-turvy world of global supply chain trends.

Since the start of the decade, supply chains have become a strategic pillar for many global businesses and industries. What constitutes a well-run supply chain? It depends on who you ask. Sometimes, it’s about cost and efficiency; other times, it's customer service versus profitability. Resiliency, sustainability, and artificial intelligence (AI) have recently been stealing headlines.

Will these supply chain trends continue to make headlines in 2024? Let’s take a look.

Risk Resiliency is here to stay

  ​The future will focus on companies using IOT, AI, and other technologies within their factories, across the supply chain of smart assets, and into the hands of consumers and customers leveraging the smart products and devices they enable. 

Over the past three years, the risks and shortfalls in our global supply chains have been brought to the forefront across all industries. Supply chains are now recognized as central to business survival, success, and growth rather than an opportunity to just reduce costs.

Companies have, and will continue to revisit risk-mitigation strategies:

• Strategies for on-shore, near-shore, and off-shore to be closer to the actual demand.

• Alternate sourcing strategies for key materials to reduce supply chain risk by identifying alternate suppliers in different geographical locations to reduce dependencies on a single source of supply.

• Rethink inventory optimization strategies to identify decoupling points and postponement strategies to better position the right materials, intermediates, and finished products across the supply chain.

• Improve  HYPERLINK collaboration and increase visibility with suppliers, logistics service providers, contract manufacturers, and other key trading partners.

Sustainability is top of mind

2024 is the year we will begin to see a constant flow of regulations around ESG coming into effect. Companies will be required to both understand and disclose their carbon footprint and emissions. And they will look to their supply chains for the data.

Supply chains are a huge part of the problem when it comes to emissions (estimated to be about 70% for most companies), circularity, and inequality, and are, therefore, a great area to focus on when looking for solutions.

Employees, stakeholders, customers, and regulatory bodies are demanding sustainability data, and decision-makers must understand how the supply chain performs, which suppliers and logistics providers contribute to a greener business model, and what changes can impact the rest of the business.

Suppliers that cannot meet ESG regulations will see business dwindling as customers look for more sustainable alternatives.

Transparency and Predictability are the enablers

To be more risk-resilient and sustainable, you must start by knowing the current situation. How can leadership predict and respond to the supply chain without a clear line of sight into what’s happening across various business units and partners?

To meet sustainability initiatives, companies must be able to pinpoint where emissions and waste are in the supply chain or where slave labor and inequality are occurring across the business network and track it to translate the findings into actionable next steps.

But visibility alone is not enough. What is the point of knowing you have a problem if you are not in a position to resolve it?

This is where predictive and prescriptive analytics are critical in anticipating upcoming challenges and opportunities and providing relevant and timely information to make an informed decision. Predictive and prescriptive analytics help supply chain practitioners make decisions based on what’s likely to happen next week, not just telling them what happened last week.

Digitization and AI are the game changers

One key to enabling risk-resilient and sustainable supply chains is digitalization. With a more digitalized supply chain, you can handle disruptions better, faster, and cheaper. By investing in supply chain technology to digitalize processes, such as artificial intelligence (AI), the Internet of Things (IoT), and robotics, companies have been able to improve visibility, agility, and resilience across the supply chain.

Digitally networking all the trading partners puts companies in a much better position to anticipate disruptions and take appropriate actions to keep customers and regulatory bodies happy. The goal is to transform fragmented supply chains into agile, collaborative networks for supply, logistics, asset management, and service—all connected by dynamic workflows with real-time data to increase the pace of business.

The word (or words) of the year for supply chains in 2024 will be “GEN AI.”

Companies need to segment their AI strategies into three different categories:

•  Improve supply chain efficiency: How can you drive an organization to do the things that you do today in a different, more accelerated fashion?

•  Improve the user experience: How can I make things more intuitive and provide contextual information?

•  Deliver new processes and innovation: Can I develop a capability that you've previously not had in the organization?

Are we ready for the Supply Chain Worker of tomorrow?

The worker of tomorrow is digitally connected and has access to information at their fingertips, 24/7 in their personal life. They expect the same connectivity and access to information in their work environment.

The future will focus on companies using IOT, AI, and other technologies within their factories, across the supply chain of smart assets, and into the hands of consumers and customers leveraging the smart products and devices they enable.

Technology will also help alleviate worker shortages and improve retention by improving existing employees' retention, productivity, and decision-making and attracting new talent with state-of-the-art tools. As the degree of automation increases, it frees the workforce from repetitive tasks and allows them to focus on more complex problems and decisions requiring human interactions.

One thing is certain. Supply chains play a vital role in a business’s strategy both today and moving forward.