3 Supply Chain Threats in 2024 and How to Turn Them Into Opportunities!
by Tim Judge
Many of you are familiar with the SWOT analysis (strengths, weaknesses, opportunities, and threats) which is a framework used to evaluate a company’s competitive position and to develop strategic planning. A SWOT analysis assesses internal and external factors, as well as current and future potential. Because managing the supply chain has been increasingly complex over the last decade with ever increasing economic, social, environmental, geopolitical, pandemic, and cyber risks (to name just a few), I am focusing on the “T” Threats that can affect most supply chains in 2024. However, by focusing here, I feel we can also ensure our supply chains are more resilient and agile for 2024 and beyond. I believe we can reframe and shift these potential Threats “T” to Opportunities “O”.
Economic Pressures
Threat: It is expected in 2024 that inflation and macroeconomic downturn will inhibit balanced business outcomes.
Product demand uncertainty remains as these economic pressures loom. Many products are 20% more expensive today than they were at in pre-pandemic levels and inflation, although lower, is still estimated at over 2x the Fed’s goal of 2%. This consumer pressure and potentially muted demand for many companies is leading to requirements for cost containment, increased supply chain efficiencies and productivity, flexibility in supply chain design and planning, and agility in supply chain decision making.
Opportunity: With the high probability of these economic pressures, supply chain leaders must walk a tight balancing act between efficiency and growth. Inflation specifically is driving CFOs to expect additional cash from the supply chain, while CEOs continue to want to drive growth, innovation, and gain market share when smaller competitors may be struggling to keep up. Supply chain leaders need to focus on a balanced approach to optimized network performance, not just cash or growth. Supply chain leaders can also adopt a Decision-Centric Planning (DCP) approach to the supply chain. Gartner explains “being decision-centric means that processes and activities are designed to make the best possible decisions for the business, involving the right decision makers, the right stakeholders, which may vary quite a lot depending on the decision being made. The decision itself thereby becomes the focal point for all the decision-making activities.” DCP must be powered by a modern digital supply chain infrastructure including supply chain planning technology combined with a Unified Supply Chain data model of supply, demand, cost, and inventory, and distribution/logistics data.
Global Supply Chain Constraints
Threat: Global wide inflation levels remain high leading to continued uncertainty in consumer spending, decrease in manufacturing output, and transportation and logistics industry contraction. This will continue to lead to unpredictable demand, inaccurate forecasts, and decreased service levels. Further economic stagnation can lead to a higher cost of working capital, excess inventory, and eroded margins. In addition, global geopolitical threats loom impacting both critical supply sources of items from Oil to semi-conductors and threats to critical supply choke points such as the Red Sea, Suez Canal, Panama Canal, and South China Sea which can even have a catastrophic impact to supply chains across the globe.
Opportunity: Similar to the macro-economic pressures, supply chain leaders must focus on agility & resiliency in addition to cost containment, productivity, and efficiency. Unfortunately, Gartner reports that only 21% of supply chain leaders believe they have a highly resilient supply chain management process today. CSCOs need to invest in planning, visibility, network, operations, product, and people. In addition, many companies are focusing on China Plus sourcing policies, moving to regional sourcing strategies, and modeling the supply chain to consider cost and carbon, to both reduce costs and mitigate supply risk. Companies are also moving toward product postponement sourcing and new customer fulfillment strategies to reduce costs while improving service levels. Finally, sustainability laws and circular economy are driving new processes. Companies must be able to track the path of products from development through procurement, production, and shipping to meet the requirements of governments and customers. Companies are modeling sustainability measures like CO2 emissions into their supply chain. They are now including and tracking KPIs such as net-zero emissions, waste reduction, reuse and recycle approaches used, regenerative approaches used, and supply chain miles. These initiatives can have a combined impact on cost reduction goals, sustainability goals, and longer-term supply and capacity issues. For supply chains to meet aggressive goals around agility, resiliency, and efficiency, modern supply chain technology across design, planning, and execution is required. In addition, companies require an end-to-end view of the supply chain, eliminating any system data silos and a Unified Supply Chain data model.
Scarce Expensive Talent
Threat: In addition to the economic and global supply chain constraint headwinds, supply chain leaders continue to be faced with a difficult market to find and retain key talent across supply chain roles. As companies tried to do a lot with less in 2023, employees are feeling overwhelmed and underappreciated in many roles. Gallup continues to report decreasing employee engagement (only 32% are engaged with their work). Gartner reports that flexibility and autonomy in an employee’s role leads to over 3x more productivity, 3x less fatigue, and 3x higher retention. Employees are continually frustrated in doing menial tasks and activities that are unchallenging and not making the greatest use of their skills and knowledge. In addition, companies are still adjusting to an unprecedented increase in remote and/or hybrid expectations for knowledge workers, even for recent graduates entering the workforce.
Opportunity: Gartner recommends that supply chain leaders adopt a human-centric work design to counteract fatigue and retain key talent. This includes fostering radical flexibility, deeper connections, shared purpose, holistic well-being and personal growth, driven by employee choice and autonomy. Supply chain leaders can empower their employees by eliminating tedious spreadsheet and analysis work and replacing it with better systems, infrastructure, data strategy, and data governance. It has been reported that 46% of supply chain experts are still using Excel spreadsheets as their primary operational tool and 67.4% of supply chain managers use spreadsheets as a supply chain management solution. It is therefore no wonder that employees are frustrated, bored, and feel undervalued at work!
We do not have any shortage of threats impacting the supply chain in 2024. However, supply chain leaders can not only mitigate these threats but turn them into opportunities by focusing on agility, resiliency, and efficiency. Many strategies used to tackle these goals can and will include big data & analytics, robotics, generative AI, etc. These are all important, however, first supply chain leaders need to ensure their operating model, technology infrastructure, and data strategy, management, and harmonization efforts are all aligned to enable fact based, fast, and agile decision making. This provides a much better foundation for the advanced technologies taking the market by storm. Building the foundation will also improve employee engagement at work and allow team members to bring their creativity, passion, and purpose to the office (or remotely 😊).
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