Supply Chain Trends of 2019: AI & the Global Shift Towards Localization
The supply chain is getting leaner, more agile, and more direct than ever before and delivery channels are closing in on end consumers. Smart technologies are continuing to solve inefficiencies in the supply chain, customer expectations are becoming increasingly stringent, and the future of global trade in flux. As companies reevaluate how to remain competitive, supply chain trends in 2019 are paving the way to the localization of channels and the transformation of global value chains.
As the lines between the physical and virtual spheres integrate and shorten with the roll-out of next-generation automation and smart technologies, so do the links between every area of the supply chain. What’s more, next and even same-day delivery demands and the need to safeguard supply channels from a volatile tariff and geopolitical environment have given rise to emerging domestic supply chains as well as direct and localized delivery channels.
Overview of Top 4 Supply Chain Trends
Every area of the supply chain—from planning, sourcing, and manufacturing, to warehousing, transportation, and the potential return of goods—is becoming more and more integrated and efficient. Here’s a breakdown of the key trends dominating supply chain management in 2019:
- Artificial intelligence and machine learning are enhancing the value of the supply chain.
- Speed of service and customer expectations are leading to more localized supply chains.
- A slowing trade environment is igniting emerging domestic supply chains.
- Changing global and regional value chains are motivating closer supplier relationships.
Let’s jump right into each of these four supply chain trends.
Smart Technologies are Increasing the Value of Supply Chains
Smart technologies such as artificial intelligence (AI) and machine learning (ML) are leading the ever-increasing integration and optimization of every channel and aspect of the supply chain.
Supply chain management is among the top three industries or business function that have benefited from the deployment of AI, per a McKinsey November survey. 76% of the survey respondents involved in supply chain management reported experiencing moderate to significant value from adopting AI. By 2030, artificial intelligence (AI) is poised to contribute as much as $15.7 trillion to the global economy, according to PwC’s 2019 AI Predictions.
The increasing deployment of AI, ML, and automated devices are set to bridge the gap between data and optimization of supply chains, enhance the experience of employees and customers, and increase the competitiveness of supply chain businesses willing to adopt smart technologies like AI-enabled robots (e.g.UAVs or drones) and automated vehicles (e.g. driver-less warehouse carts).
The technological changes in supply chain operations are great news for employees. Humans are a key component to the roll-out and continued success of any smart or automated and connected technology. Although such technologies may render certain chains in the supply chain unnecessary, machine intelligence and automation will increasingly:
- Eliminate repetitive and mundane activities and optimize workflows.
- Call for the “human element” necessary for the symbiosis of the digital experience.
- Improve the accuracy of supply chain forecasts, taking the pressure of employees.
- Curtail the need for certainty regarding emerging and future supply chain trends.
With AI and ML driving supply chain trends, employee training and retaining on next-wave smart and automated technologies will become more and more of a priority for supply chain companies. It’s also likely that immersive technologies like augmented reality (AR) and virtual reality (VR) will become increasingly important in order for supply chain businesses to retain market viability.
Changing Demand is Leading to Direct & Local Supply Chains
To avoid having to predict and rely on the future of tariffs and trade, companies are racing to orchestrate, implement, and optimize local delivery channels and regional supply chain changes. Delivery and speed of service expectations are also contributing to the localization of supply chains.
Prime has changed consumers expectations of quick and easy service with their one-day, same day, and now even 2-hour home delivery options. Not only do you no longer have to leave your home. But the speed to market and speed of service the enterprise giant offers is another competitive advantage that gives them a leg up on pretty much every other competing company out there today.
Adapting to such rapid service demands and delivery challenges in a way that is profitable and sustainable calls for stringent inventory management and logistics processes. But the trick is being able to seize local demand and sales opportunities without wasting space, increasing labor and inventory handling times, and adding to overall costs. Competitors that aren’t able to adapt their supply chains accordingly are cultivating unique customer experiences to set themselves apart from the pack.
What’s more, nearly half of survey respondents to a recentMcKinsey Global Institute report on trade and supply chain trends said their companies are planning to “shift their global footprint in response” to uncertainty over trade policy. And about a quarter of respondents said they also “expect to invest more in local supply chains” and move production capabilities closer to end consumers.
Why? Local supply chains and direct delivery channels have significant benefits for supply chain companies including improving coordination and collaboration, cutting middlemen and unnecessary fat, enhancing tracking and real-time visibility. Localization of supply chains also quickens speed to market and reduces turnover, shipping, and cycle times.
The Trade Climate is Igniting Domestic Supply Chains Worldwide
The tit-for-tat tariffs we’re seeing in the U.S.-China trade war stems from a fear of over-dependence. The U.S. doesn’t want to rely on China, and China doesn’t want to rely on the U.S. This volatile nature of the global trade environment has rippling effects on the supply chain and the economy as a whole, both domestically and abroad.
The JanuaryMcKinsey report highlights how the decrease in global trade intensity has stimulated the emergence of new domestic supply chains in China and other developing economies around the world. During times of trade uncertainty, supply chain companies, especially those with operations abroad, have to rethink how to meet customer demands in a way that is profitable and manageable.
Changing trade situations and concerns over future tariffs don’t sit well with supply chain managers or any C-suite leader for that matter. Oftentimes, new tariffs or regulations leave costs and value chains vulnerable and require significant changes in supply chain management. This uncertainty over the trade environment and concerns about being too dependent on external, uncontrollable factors are key reasons for the current state of supply chain trends and the gradual convergence between today’s advanced and developing economies.
Emerging Supply Chain Trends are Tightening Supplier Relationships
Current trends in supply chain management are leading companies to develop even closer relationships with suppliers. In order to meet customer demands and remain resilient againstpotential future tariffs, supply chain businesses that position themselves as a “preferred” customer have a better chance at securing inventory and keeping costs down.
Companies with close ties to suppliers may also have better insight into upcoming changes in supply chain management and can take advantage of innovative product ideas and process efficiencies.
The New Supply Chain: AI & the Global Shift Towards Localization
Changes in demand and standards of service inevitably lead to changes in the supply chain. How are you planning to remain profitable and competitive in face of emerging supply chain trends? What steps is your company taking to prepare your team for the roll-out of revolutionary smart technologies and the transition to localized supply chains?