As we embark on a new year, now is the perfect time to reflect on the events and supply chain trends of 2021. The lessons that we learned from each instance can teach us more about conducting business this year and how to build the foundation for a disruption-proof supply chain. These unpredictable events in the supply chain brought about new challenges and signaled a need for more agility and flexibility within supply chain processes. The question is, how do we get there?
The past always impacts the future. Below, we'll look at some of the challenges that occurred in 2021 and their role in developing a future-proof supply chain strategy.
A Series of Unusual Supply Chain Challenges in 2021
Accenture reports that last year — and the pandemic in particular — represented a true test of the ingenuity, resilience, and flexibility of supply chain leaders across the globe. According to their figures:
- 94% of Fortune 1000 companies saw supply chain disruptions from COVID-19.
- 75% of companies had negative or strongly negative impacts on their businesses.
- 55% of companies plan to downgrade their growth outlooks (or have already done so).
These grim portents are hardly surprising. Natural disasters ranging from the winter storm that ravaged Texas to wildfires scouring California's logistics network and the infrastructure damage of hurricane Ida were just the tip of the proverbial iceberg. Consider the unanticipated human events of the year.
The Ever Given's blockage of the Suez Canal continues to have ripple effects in shipping. In China, the Yantian port congestion ballooned container dwell times right at peak season (more on that in this astounding Supply Chain Dive piece). There were critical outages, like the closure of Shanghai airport and the Union Pacific railroad service suspension. A surge of COVID-19 in India struck the raw materials and manufacturing across multiple industries.
These impacts have included transformative changes in the workforce, wage hikes, price increases, lengthy lead times, and uncertainty around material and component availability.
Future-Proof Your Business Against Disruptions
“Nothing stops an organization faster than people who believe that the way you worked yesterday is the best way to work tomorrow." – Jon Madonna”
Buried beneath all of these crises is a reason for optimism: they will be a catalyst for innovation. This year will present new opportunities to strengthen your business against future supply chain disruptions as we move into what many experts have predicted will be a long recovery.
With that said, businesses should not be planning 5 or 10 years in advance. A shorter time frame of 2 or 3 years is all that is truly practical due to the now-obvious importance of agility. Businesses throughout the supply chain have pivoted their focus to increased flexibility and resilience in the immediate future:
- 72% of businesses are looking to reduce their operating cost
- 47% of businesses are reconfiguring assortments to accommodate supply chain fluctuations
- 51% of companies say the most helpful technology in this disruption is Order Management
The emphasis on efficiency and order management technology is hardly surprising to product data expert Susan Pichoff. She remarks that "people are looking for solutions to adjust to what is going on, and if you don't adjust, you're going to get stuck in a place where your business is not successful."
Pichoff explains that looking at the past has helped today's businesses prepare for similar, if not equally unpredictable, events in the future. Pichoff believes that organizations are taking action now "to make their business strong and focusing their energy and resources on things that will yield a greater return on that investment." In particular, Pichoff anticipates businesses to take actions to remedy severe disruptions in the logistics and delivery ecosystem. "You hear a lot about trucking, shipping, and getting things from place to place," she shares.
A quick poll of industry DiCentral webinar participants echoed Pichoff's thoughts:
With the closely overlapping spheres of logistics and transportation at the top of business leaders' list of concerns, what can businesses do to improve resilience in 2022 — and beyond?
Lessons Learned in 2021 That Will Matter in 2022
“The past is where you learn the lesson; the future is where you apply the lesson.”
Supply chain professionals are applying lessons from 2021 to increase stability and ensure high service levels in 2022. The coming year will see increased emphasis on agility and supply chain solutions that mitigate the impact of natural disasters or other disruptions that recently created significant fluctuations in the availability and costs of raw materials. Here are a few takeaways on the current direction of supply chain trends in light of last year's events.
- The Workforce Will Lean Into Logistics: The U.S. Bureau of Labor Statistics predicts a 4% growth in demand for logisticians and logistics managers in the U.S. until 2029. There will be an increased emphasis on trade skills (especially for critical logistics personnel like truck drivers and crane operators), but also organizational changes at the C-Suite level. More companies in the SP 500 now feature a Chief Supply Chain Officer, an emergent role, than ever before. Organizations will realize a competitive advantage from mastering logistics and making it more visible from the top-down, with payoffs for shareholders, employees, and the company at large.
- Agility & Adaptability Are Essential: Companies have already begun to diversify their supply chains in response to breakdowns and channel limitations. They seek to simplify moving production between countries and facilities and take their data through language barriers, different software systems, and more. We may see an increase in organizations with enterprise-owned transportation options that reduce reliance on third-party contractors to move merchandise.
- The Supply Chain Must Embrace Technology: Developments in AI, robotics, and data management are already transforming how we work and consume. Customers are growing more informed, which is one of the supply chain trends that transcend industry standards. These customers will want to buy from companies that cater to their desire for real-time information on inventory and shipping. New technology programs are being adopted by supply chain companies that provide actionable, strategic insights into inventory, buying trends, and transportation. By 2024, IDC predicts that 40% of manufacturers will share data in their ecosystems (partners, customers, suppliers), improving the efficiency of their factory operations by 10%.
Disruption Is Here to Stay
The most important takeaway from 2021 is that disruptions are not disappearing anytime soon. Consider China's recently announced zero-COVID policy, which is already set to rock the supply chain in early 2022. A flexible approach and reliance on empowering technologies like EDI can make an outsized difference in an uncertain market.
Powerful data communication technologies play a more prominent role than many consumers realize in streamlining and enabling an efficient, resilient supply chain. As Pichoff explains, robust sharing of manufacturer and logistics data through EDI "supports everything from the initial order to direct-to-consumer to delivery status." We'll undoubtedly continue to see new industries adopting and expanding their capabilities with EDI solutions and digital communication, which are essential to what businesses hope to accomplish in the coming year.
Want to hear more from Susan Pichoff about supply chain trends in 2022, including how agility, needed workforce skills, and adaptive supply chain strategy will help organizations thrive? Watch the webinar today!