2022 Supply Chain Predictions
ARC analysts have published predictions about supply chain technology trends at the beginning of the year in past years. This year we have decided to lead with our predictions about the broader supply chain function – as supply chain itself has become such a hot topic in executive suites, corporate earnings, general news media, and even our own personal lives.
Supply Chain Disruptions Will Diminish, but Remain Substantial
Supply chain disruptions, product shortages, and inflation are top of mind for the average consumer today. It is therefore unsurprising that these characteristics are central to our 2022 supply chain predictions. However, I believe that our reasoning and the factors behind these topics will generate some thought and hopefully provide some insight into the mechanics of today’s supply chains and markets.
COVID-19 has greatly impacted supply and demand, and it’s reasonable to assume that COVID-19 impacts will be with us to one degree or another for some time. We expect direct impacts to diminish in 2022. However, we expect the secondary effects and the responses to these disruptions to exert longer-term impacts on supply chains and their functioning.
Inflation Will Hinder Supply Chain Resiliency, Supply Diversification Efforts
The disruptions caused by COVID-19 came in the form of port delays, warehouse quarantine requirements, and travel restrictions. Many companies have taken steps to mitigate these types of disruptions in the future. However, risk mitigation efforts often come at the expense of higher supply chain costs. There is typically a trade-off between greater efficiency or greater reliability/responsiveness. The current high rate of inflation places cost pressures on companies, as they typically cannot pass 100 percent of the increases onto buyers. As a result, companies are likely to forego substantial supply chain risk mitigation efforts that will drive up costs. Instead, they are likely to carry higher levels of inventory as a lower cost alternative. The move away from risk mitigation will leave supply chains at greater risk to future disruptions than would be the case if risk mitigate efforts were established. The move toward carrying higher levels of inventory will initially increase GDP growth numbers as inventory restocking occurs. However, this process will also increase inventory carrying costs and place additional pressure on demand for existing facilities and square footage.
Labor Shift – It’s About Want Not Need
It’s time to shift the dialog about labor in logistics. It’s not about availability of jobs and workers. It’s about work appeal and interest in work. Simply stated, logistics jobs need to be more competitive with alternatives. The rate of e-commerce growth and the resulting labor requirements is substantially greater than the growth in the labor pool. This means that labor must shift from other functions to logistics. Doing so will require a more competitive offer to attract logistics workers. A more competitive offer can include a better work environment and better monetary compensation.
Warehouses are likely to address the increasing workloads with a combination of labor and automation. Working with modern automation and robotics offers labor pools with an interesting work environment, exposure to modern technology, and the development of skills that will likely be in growing demand in the future. Furthermore, experience with modern computing technology, in the form of handheld operating systems, also develops transferrable skills that will more likely be desirable by future employers. Adoption of modern technology in these ways can increase the quality of work, offer the development of more transferrable skills, and increase labor retention. These functional improvements, in conjunction with more competitive compensation, will likely be necessary to attract and retain workers.
Companies Embrace the Need for Speed
The pandemic rewarded companies that could move fast and punished those that could not. Agility is now talked about at the board room level. Supply chain digitization efforts are now focused on gaining end-to-end visibility from the supplier’s supplier to the customer’s customer. The pandemic made it clear that there was a need for collaboration. Supply chain collaboration networks (SCCN) are getting increased attention as a critical component in building robust supply chain control towers. Meanwhile, companies who have embarked on the control tower journey are discovering just how difficult they are to build. The key building blocks for the modern supply chain control tower includes data from key supply chain partners, robust supply and demand planning, and a master data management/data harmonization layer that helps to normalize the data and can then feed accurate data to the planning engine or team members.
But being able to react with speed is also a matter of culture. To sustain speed, companies must build those capabilities into the company. The agile methodology, initially used to speed software development, is now being embraced as a better and speedier project methodology. The ability to create tiger teams – a specialized, cross-functional teams brought together to solve a critical issue – that can move quickly and effectively, is core to embracing the need for speed.
Artificial Intelligence Will Transform Trucking
Artificial intelligence (AI) has been, and will continue to be, a key component of transportation management systems (TMS). Aside from improved ETAs, AI plays a role in other aspects of transportation management. Shippers learn which carriers meet on-time service levels and which do not, which lanes typically carry more chance for delays, and whether there is an optimal number of stops before shipments become late. AI aids shippers in better understanding how to drive efficiencies without sacrificing service levels.
But AI is moving beyond this dynamic. While dash cams have been in use by trucking companies for years to help prove innocence in the event of a crash, for example, AI has entered the fold. AI-enabled dash cams will become more commonplace, as they monitor the driver while also using data to help the driver make better decisions. AI video telematics are combined with vehicle cameras and sensors to understand what is happening both inside and outside the truck in real-time to make for a safer and more efficient trip. The data that is collected, at least according to some, can also be used to help with infrastructure planning and development. This can be combined with data available to a TMS to better understand which roads are safe or unsafe, which roads have low bridges, and which roads have the least traffic. While autonomous trucks might be the future most people are looking for, AI-enabled dash cams for safer trucking is the new reality.