Supply chains of the 2020s look a lot different than they have in the past and they're going to look a lot different in the future. What we want to do today is talk about the future of supply chain management as we know it today.
Supply Chain Management has been rocked over the last few years since the pandemic. It's exposed a lot of bottlenecks and disruptions and it's really proven that supply chains of the past are no longer going to be suitable for the needs of the future. What we want to do today is talk about the five major trends that you should be aware of as you navigate the world of supply chain management in the 2020s and beyond.
One thing that the pandemic of 2020 and some of the geopolitical uncertainties of the 2020s have taught us is that supplier strategies of the past are no longer going to work now or in the future. If you look at what happened during the pandemic for example, we saw that we had an over dependence on certain parts of the world that were no longer as reliable as they had been in the past because of shutdowns and other pandemic related issues and geopolitical issues.
What that has done is, it's forced organizations to rethink their supplier strategies and really focus on diversifying the concentration of risk within their supply chain networks and their supplier networks in particular. For example, many organizations found that they were procuring raw materials and parts and products from China or in Asia Pacific and when the pandemic hit China and Asia Pacific, those regions had a lot more stringent lock downs than other parts of the world and what that did is it disrupted the supply chain.
We were so dependent on a small handful of countries that now suddenly weren't dependable due to factors outside of our control and so what that's doing is it's forcing organizations to think about how they can diversify supplier risk, not just geographically but also looking at a variety of suppliers and making sure that they don't have too much concentrated risk on any one or more suppliers.
This is not only for where you procure materials from but it's also looking at transportation or logistics. For example, do we have too much risk riding on one transportation or Logistics provider or one 3PL provider and do we need to rethink our strategies for how we leverage some of these providers? Those are all questions that we didn't really have to ask prior to 2020 because supply chains were a lot more predictable and a lot more stable than they are now, so in order to navigate the 2020s and beyond, organizations now are being forced to rethink their supplier network and to re-prioritize and diversify their supplier networks as well.
Given the fact that the world seems to be changing at an accelerated pace here in the 2020s is the fact that now we've got to also look at all the data that we have throughout our supply chain, both internally and externally, and we have to figure out how we can use that data to make better decisions and to better anticipate future trends and things that might disrupt our supply chains.
So when you think about a supply chain and all the complex business processes and different touch points that happen from the time a raw material is produced, until the finished product is produced and it's ultimately distributed to your end customers, there's a lot that can go wrong. There's a lot of different data points that are being captured along the way and organizations that are prepared for the future have ways of tying together their systems and their data to track that information and to make better use of that information so that they can anticipate demand and be more proactive about fixing some of the challenges that organizations are facing with their supply chains today.
It's not just our internal supply chain that we need to be focusing on gathering data from, it's also looking at economic and external factors so things like economic growth, economic shrinkage, recessions in different parts of the world, geopolitical dynamics, the insolvency of certain suppliers or logistics providers, those are all things that you need to have data points that can inform your supply chain managers to make better decisions.
The only way to do that is to have the right technologies that integrate with other providers that can provide both that internal and external knowledge to help you make better decisions and help you manage your supply chain better.
Along with all this disruption and change comes opportunity. Anytime there's disruption and change in the world it creates opportunities for new career fields, it increases popularity of certain career fields and that's the case with Supply Chain Management. Supply Chain Management is a very hot area to be in right now especially if you can combine a knowledge of supply chain management with a knowledge of technology and data.
Combining business and technology skill sets and backgrounds is a very powerful combination and people that understand how to manage supply chains, how to improve supply chains, how to do business process improvement, deploy new technologies to make their supply chains better, those people are going to be in really high demand for years to come.
This is something that isn't just a temporary problem or opportunity, this is something that's going to continue for decades as organizations really try to continue this migration to the new post-2020 Supply Chain Management world. Despite all the turmoil and all the problems that we have talked about as it relates to Supply Chain Management, it inevitably leads to more opportunity and potential growth when it comes to your career.
Another trend to be aware of is that in the not too distant future, governments throughout the world are going to start to regulate supply chains more intensively. When you think about mission critical or essential items, things like baby food or energy or food in general, those are examples of really critical items that people need and when supply chains are getting disrupted to the point where people can't get food, they can't get energy, they can't get shelter, that's when government tends to step in and regulate.
Whether or not you think that's a good thing or a bad thing, the reality is, is that governments throughout the world are going to start to clamp down on supply chains and do their part or try to do their part on regulating and putting in standards and service level agreements for what constitutes an acceptable supply chain, especially in critical areas like food & beverage and energy.
One of the things you can do to get ahead of potential government regulation is to fix your supply chain, to improve business processes, to provide better data, to put better systems in place, it's something that's going to help your business anyway and help you be more profitable but it's also getting ahead of potential regulation which may force you to make these changes in a shorter amount of time than if you were to start now.
Now, in the relatively short amount of time we've had since the pandemic happened in 2020, we've seen that organizations have responded to the supply chain disruptions by stockpiling inventory. They're going back to an old model that worked decades ago that we moved away from in the 90s and early 2000s, specifically when we moved to more of a just-in-time inventory management approach and that's been a trend that had been developing for decades.
Now we're seeing that that just-in-time inventory management approach isn't as effective in times of turbulence and unpredictability within supply chains, so organizations are responding by letting the pendulum swing back the other way now to where we're stockpiling inventory making sure we have enough inventory on hand.
That's creating a few different problems, one of which is the fact that now it's getting harder to match inventory to demand because we're stockpiling. Organizations are either over stocking inventory that they're not going to need or that's wasted inventory or they're underestimating customer demand and they're still not able to meet demand. That's one problem.
One of the bigger challenges that organizations are having is the fact that the stockpile of inventory is causing organizations to have more cash and capital tied up in their supply chains. In the past, they had a certain amount of cash tied up in the supply chain but now they're having to increase that reserve because they've got to stockpile inventory, they have to place orders earlier, they might have to pay for products earlier before they receive those products and it's going to take longer for them to receive those products. Everything's getting elongated, which means more cash is going into supply chains.
Eventually organizations and CFO’s of organizations are going to clamp down on these areas of concern. They're going to try to tighten up the cash flow and the capital investments that they've made within their supply chains and that's going to create a conflict or a potential tension between cash flow management and adequately satisfying customer demand. Look for that trend to be something that doesn't get settled anytime soon.
One of the best ways to navigate some of the challenges we have talked about here in the Supply Chain Management space, is to deploy supply chain systems that can help you manage these realities more carefully. There's a lot of really good supply chain management focus systems out there that help automate and integrate the entire supply chain from procurement, all the way through manufacturing production, warehouse management and ultimately distribution to your customers.
These supply chain management systems can be very effective and very focused on solving the immediate problems that supply chain managers face. You also have enterprise resource planning systems or ERP systems software like SAP, Oracle and Microsoft Dynamics 365, these big ERP systems that do supply chain management. They also integrate with Financials, customer service, sales and HR.
Finally, another useful technology in today's day and age and in the future of Supply Chain Management is going to be business intelligence. Having business intelligence and analytical tools that allow you to take all that data that we mentioned and allow you to provide better insights and understanding into what's happening in your supply chain and allows you to more proactively address and mitigate potential supply chain disruptions in bottlenecks so for more information on some of these potential technology options.
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