What next for supply chains in 2022?

Supply chain pressures have been at the forefront of business owner’s minds for the last couple of years as they come to terms with the volatile, uncertain, complex, and ambiguous environment they have been thrown into.

This is a culmination of rises in freight costs, shipping volumes, unpredictable and extended lead times for goods. This has prompted a reactive short-term strategy derailing long term planning, but as the landscape has shifted, the positive news is that pressures are easing, and opportunities are opening up for industries. 

The Baltic Dry Index, which provides a benchmark of costs for moving major raw materials by sea, saw a significant spike over the last 12 months. However, the current trend has been rapidly reversing with costs now in line with October 2020. This reduction in cost is a welcome reprieve and, not with standing another Suez Canal scenario or substantive Covid-19 variant, suggests a brighter outlook for industries. This assertion is reiterated by the New York Federal Reserve based on the Global Supply Chain Pressure Index.

A change in a consumer culture that has been subtly evolving over a number of years, is set to dramatically alter supply chain strategy as we look to the coming months and years. Although, we have seen changing needs and expectations from consumers reflected in retail practices, supported by the rapid growth of e-commerce, this has now accelerated and presented an opportunity to rethink the entire supply chain approach. Pre-pandemic, the likes of Amazon introduced availability and expectation for goods to be delivered in days and hours, not weeks. Furthermore, forward-thinking organisations meeting these expectations have developed their capabilities further to provide tailored offerings to meet local demand.

“…with companies seeking technologically advanced production hubs closer to their customers, making them more agile, responsive, and capable of faster delivery” (abmagazine.accaglobal.com), known as glocalisation, this is a trend on the increase across Europe and Asia.

This is paralleled by a change in consumer power with greater disposable income and a plethora of alternate buying styles leading to:

  • A dichotomy within the industry, for example, the shortage of semiconductors in the automotive sector affecting new car availability (and pushing up used car prices), alongside the rise in popularity of PCP financing which reduces the initial cost of ownership of vehicles, both new and used.
  • Subscription-based models introduced through media orientated services such as SKY, Virgin Media and Netflix are seeping their way into other sectors from healthcare e.g. Philips and electric toothbrushes on subscription, through to Volvo and car subscriptions in the automotive space. This model introduces flexibility and shorter-term consumer commitments and pushes the industry to continuously innovate and stay current.

Subsequently, just as our lives are interconnected, the goods and services we procure must now also be interconnected, and we are seeing this in the prevalence of the ecosystems that are building up around us. From the way we pay for goods with the explosion of digital payment facilities from PayPal to Klarna, through to our expectation of inoperability of apps on smart TVs, mobile phones, and the cars we drive. This pattern must therefore also be reflected in the supply chain from our R&D through to manufacturing and distribution with open innovation, collaboration, and digitisation.

No matter what your strategy is for developing your supply chains, there are good practices that can be introduced and reinforced to minimise unwanted exposure.

  • A transparent supply chain allows for better visibility and management of the supply chain not just for first and second-tier suppliers but also to the nth tier
  • It also presents opportunities to address concentration risk in the supply chain and enhance resilience
  • Now is the time to level-set environmental and social governance commitments which may have stagnated through the recent disruptive period. Reinvesting in responsible procurement practices considering living wage, environmental and human rights due diligence will mitigate reputational risk and enhance the efficiency and reliability of supply chains

“There is a clear disconnect from the technology that T&L companies recognise they need, to the seamless adoption into their existing infrastructure”, “With an integrated mobile and IoT management platform, T&L companies are not only able to increase speed, but also minimise costs and ensure transparency in the delivery channel.” (SOTI’s Mobilizing the Delivery Workforce: State of Mobility in Transportation and Logistics 2021 Report)

The building blocks for this approach include authorised economic operator (AEO) compliance and ISO standards such as ISO 28001 for supply chain management, alongside ISO 9001 for quality management and ISO 14001/ 45001 which respectively address Environmental Management and Occupational Health and Safety. These ISO standards also map across to the Sustainable Development Goals (SDGs) allowing organisations to demonstrably address their shareholder priorities. 

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