Supply Chain Predictions 2020
Industry insiders look to the future, and offer advice and strategies to help you successfully navigate the year ahead.
Expect maximized capacity and minimized empty miles.
We will see a more concerted effort to reduce waste in the supply chain. Eliminating empty miles and excess carbon dioxide emissions will become a bigger focus for smaller companies as larger organizations use it as criteria when selecting supply chain partners.
Major manufacturers, shippers, and carriers have the clout to move the rest of the market. Smaller companies will invest in sustainable initiatives and reducing carbon emissions as a cost of working with major companies.
CEO, Blume Global
The linear supply chain will be replaced by the circular supply chain. On the heels of Nike's Reuse-A-Shoe program and Adidas' partnership with Parley for the Oceans, companies will start moving away from the old-school "take, make, and throw away" model, and will shift toward "supply chain loops" that cut down on costs and create less waste. Instead of producing one-time-use products, companies are refurbishing used parts or melting down products to transform them back into their raw material form.
Vice President, Apps Business Development, Tradeshift
Governments and customers will push for manufacturing to be more environmentally sustainable.
The way we create value in business today is linear: We use natural resources to build a product, sell that product into market, and dispose of it at the end of its life cycle. The circular economy aims to reduce waste and the continual use of resources.
Adidas has the Futurecraft Loop shoe where consumers return the shoes to Adidas once they have worn them out, and the shoes are repurposed for future Loops.
It's inevitable that this same model will make its way to the manufacturing sector, as governments, consumers, and Wall Street will all expect more sustainable business practices.
Chief Marketing Officer, Syncron
Sustainable fashion is in demand, and will continue to be for years. With major brands such as Patagonia continuing to push out new initiatives that highlight sustainable practices, more brands will have to follow suit in the coming years to stay competitive.
In 2020, companies will follow this path and evaluate their own practices, including energy and water use, to make sure they are limiting negative effects on the environment.
As part of this, companies will increasingly employ the Higg Index, an assessment standard measuring sustainability performance. With this, brands will have a better understanding of their environmental effects, as well as their partners, within the supply chain.
Consumers will also require complete transparency into the supply chain—from origin to sale. To keep customers happy in the year ahead, companies will review their third-party suppliers and elect to work with partners that are compliant with sustainability standards, requiring them to adopt technology to ensure a transparent and sustainable supply chain.
By implementing planning tools across the supply chain, companies will be better able to align production to sale, and reduce the amount of unsold goods.
President, Business Applications and Technology Outsourcing Division, CGS
Scanning the Digital Supply Chain
Expect a shift from people-centric to data-centric decision-making. In 2020, we will witness a move to automated decision-making that leverages predictive and prescriptive analytics, including artificial intelligence (AI).
To meet rising customer demand for tailored service, industries will need to make better use of their supply chain technology to remain innovative and efficient.
Supply chain networks are connecting logistics parties more tightly. We are transitioning from legacy point-to-point EDI networks to real-time, API, collaborative networks.
Furthermore, there are new specialty networks that connect parties and also integrate into the larger networks.
These include real-time freight visibility; Internet of Things (IoT) networks for tracking assets such as containers, pallets, and unit load devices; and capacity networks. This is creating increased visibility and collaboration, which result in improved asset and fleet utilization, better inventory control, and reduced congestion and detention.
Data-as-a-Service (DaaS). With the expansion of networks and associated data, there is a huge growth in harmonizing data and providing it as a service to downstream applications. This includes data on truck locations/routes and data to identify warehouses and their congestion.
Additionally, information on trading lanes, volumes at ports, and shipments from overseas suppliers can be leveraged in applications for sourcing, transportation, and carrier negotiation.
Analytics & AI. With the growth of networks and data, the ability to leverage analytics for better and faster decision-making is unprecedented. New technology for visualization and benchmarking is making its way into operational teams to enable more agile supply chains.
As data quality increases, AI can further accelerate supply chains by using data to improve carrier selection, identify new sources of products, and classify products for global trade more quickly.
Senior Vice President, Industry Strategy, Descartes
AI won't yet allow for users to sit back and relax while it handles all of their tasks for them but it will make an appearance in back-office tasks. Freight payment auditing, invoice payment, and in some select areas, chatbots will be the initial mainstream uses of AI. They will be seen not as an anomaly but as more mainstream in 2020.
Global Director of Manufacturing and Transportation,
We've been talking about the potential of the digital supply chain for more than two decades. In 2020, the balance finally shifts from future potential to current benefits.
Connected devices and IoT-enabled solutions are giving us more data than ever to make better decisions—connecting the legs of the supply chain path while simplifying information exchange.
To improve the flow of products and information from point A to point B, we will see more shippers adding sensors on almost everything, not just the most expensive equipment.
AI will reach its potential by becoming domain specific. The potential productivity gains from AI are anticipated to be anywhere from $13.7 trillion to $15.7 trillion by 2030, according to the McKinsey Global Institute and PricewaterhouseCoopers, respectively.
The next phase of AI success happens when technical capabilities are matched with industry-specific expertise. We are at a significant inflection point in the adoption of AI-enabled solutions. Linking domain expertise and data with technical innovation is necessary for technology to reach its full potential to deliver measurable, effective results.
Warehouses/DCs: Saving Space
Automation is on a high-growth trajectory and its variety and sophistication are increasing. What was once considered fringe technology will start to become more mainline. Sophisticated automation such as shuttle systems and high-density picking solutions will gain more adoption.
Better utilizing workers. With the proliferation of automation technology, warehouse workers will be freed up to focus on other tasks. This is an important factor in the demand for automation as many warehouses face a labor shortage and need to better leverage available employees.
Voice direction. More DCs will use solutions with voice direction to guide workers through complex steps, eliminating the need for them to look at their devices. This won't be a two-way interaction—workers will continue to do their jobs as normal, but will be eyes-free from guidance.
Using the supply chain as a differentiator. It's no longer enough to have status quo supply chain operations that are "good enough." A modern, efficient supply chain is a competitive advantage, driving down an organization's costs, increasing capacity, and maximizing labor.
Intelligent WMS. This is going to become much more mainstream and offers a huge benefit for the warehouse and the individual worker.
The system can automatically recognize where it needs to make an adjustment. If workers were responsible for noticing that need, they would spend a lot of time monitoring the system and might miss a change. That's not efficient or reliable.
Overall, the supply chain will start to move advanced technology from pilot programs to full-scale rollouts. Many DCs are reaching a new level of knowledge and are confidently embracing the new technology.
Senior Director, Product Management, Manhattan Associates
Private cellular networks will enable mobile robots to have always-on connectivity throughout the warehouse floor and adjacent outdoor areas.
Because of this, mobile robots will be able to move goods around the warehouse, navigating around obstacles without following a fixed path. They will increase productivity as the number of warehouses using robots worldwide will increase from 4,000 in 2018 to more than 50,000 by 2025.
5G connectivity will enable manufacturers to implement smart automation solutions to improve inventory accuracy. For example, drone-based stock counting systems will ensure the digital inventory matches the physical so that products expected to be in stock are always in stock.
According to ABI Research, an average U.S. third-party logistics provider will generate a net increase of approximately $230 million during a five-year period through condition-based monitoring and asset tracking.
Augmented reality (AR), based on a foundation of cellular connectivity, will accelerate workforce training and improve warehouse picking precision. AR-enabled smart glasses will provide workers with hands-free displays of instructions and information to help them accurately locate, scan, sort, and move inventory—reducing human error and providing efficiency gains starting between 5% and 25%.
Head of Advanced Industries, Ericsson
Based on recent surveys of chemical distribution rail customers, freight rail costs will continue to rise: 50% of chemical distribution rail customers saw a rate increase in 2018; more than one quarter of chemical distributors surveyed in the first half of 2019 saw rate increases.
Furthermore, many National Association of Chemical Distributors rail-shipping members report they received wrongful demurrage and/or accessorial charges, and that in a majority of those cases the rail carrier failed to provide on-time delivery before the charge was imposed.
If this trend of increased freight rail rates and fees holds, rail users in 2020 will need to factor in those increased costs, leading to higher costs along the entire supply chain.
2020 will be the year the Surface Transportation Board will be fully staffed. A fully staffed and functioning U.S. Surface Transportation Board can tackle some challenges with rail competition and punitive freight rail policies to help tamp down those supply chain costs and support growth across the entire U.S. economy. Unfortunately, shippers won't feel that relief for a couple of years.
Eric R. Byer
President and CEO, National Association of Chemical Distributors
Getting returns right is critical for retailer success, with 95% of U.S. consumers saying a bad returns experience would make them less likely to purchase from a brand in the future. In 2020, brands will double down on returns, with a focus on both policy and process.
Online shopping has drastically changed the perception of what's considered a new item and what's a return. If a return is made within an immediate window, then it's clear; when a user wants to complete a return three months later, it's murkier. As retailers adopt more flexible returns policies, this is a question they'll need to answer.
Turning a return into a new sale should be a priority. There's often a quality-control process, then back to the retailer to re-enter the available inventory. The ability to shorten this cycle—or eliminate it entirely—will be critical.
Director of Strategic Alliances,
3D Printing Gets fashionable
Designing clothes has long been a labor-intensive, drawn-out process that often results in wasted products. In 2020, 3D technology will be the game changer.
Designers will start to use 3D technology to more effectively collaborate with suppliers, allowing products to be made faster and with fewer wasted resources.
In the product life cycle management phase, fashion brands will increasingly use 3D technology for collaborative design, sampling, and fit sessions, allowing them to adjust product iterations and changes in real time. Brands will leverage 3D models to assess the fit of a garment without having to waste design materials or time, by sharing designs and samples virtually with internal team members and external suppliers.
By adjusting their processes and limiting the number of prototypes that need to be cut and sewn, brands will further reduce the amount of physical sampling and increase the speed to market. As a result, they will also reduce their own carbon footprint and cut costs.
Small Retailers, Sizable challenges
Retailers are innovating at a faster pace than ever before to keep up with Amazon. There is growth opportunity in 2020 for smaller brands that keep—or in some cases, take back—control of their supply chain, and utilize new systems and technologies to achieve greater levels of transparency, visibility, and growth.
Supply chain autonomy. Brands of all sizes that control their own supply chain will find they are able to achieve higher levels of growth, closer relationships with customers, and higher revenue. It's likely smaller brands will follow suit, recognizing the benefit of maintaining autonomy in 2020 and for years to come.
Smaller brands have the edge on transparency. What products can you sell that are yours exclusively, that cannot be counterfeited or down-marketed? When a customer buys your product, how can you make it clear to them that they acquired the "real" version?
Compared to larger, more ambiguous retailers, small brands are at an advantage when it comes to achieving full transparency in every aspect of their business, including their supply chain. Companies that add their own secret sauce, while providing unimpeachable customer service experience and a guaranteed product provenance, will continue to be more successful. Customers care deeply about getting authentic products and will pay extra for that assurance.
RFID is on the rise. Smaller brands can take steps to obtain documentable proof that products are real, including cost-effective, scalable technologies that can be used to drive greater visibility into their supply chain, from manufacturing to customs clearance and transportation.
One example of this technology is radio frequency identification (RFID), which drives greater inventory visibility and mitigates risk, theft, and product loss.
Once a luxury only affordable to larger retailers, RFID is now attainable to smaller brands. As these technologies become increasingly more affordable, we anticipate a fast uptick in implementation by small businesses.
CEO/Founder, Quiet Logistics
Canadian consumers will continue to purchase goods online from the United States and around the world. Canadian companies will increasingly see the benefit of truly going global—expanding beyond the U.S. market—to drive growth for their business. The world needs more Canada.
CEO, DHL Express Canada
Tariffs and trade woes mean new supply chain opportunities in Southeast Asia.
Bigger, more sophisticated supply chains will seek out new primary sources. In part due to the tension over tariffs with China, companies are moving their supply chains out of the country and building up new footholds in Southeast Asia.
Aside from tariff concerns, companies are looking at overall cost of business and the availability of resources to meet their needs.
Unpredictable events like international trade tariffs, project yellowhammer, and no-deal Brexit will continue to threaten supplier relations, costs, and global supply chain partnerships—with delays at the border lasting up to six months.
Companies will prioritize a superior system of communication between partners and customers to ensure organizational agility and safeguard against potential devastation.
Manufacturers, retailers, and logistics companies that achieve tighter integration between systems, partners, and applications (and can onboard or offboard each as needed) will build the most resilience during economic uncertainty.
Director of Product Marketing, Cleo
With rising geopolitical tension across the world—Hong Kong protests, China-U.S. tension, Brexit, and more—companies will need to engage more proactively with trading partners across all tiers of the supply chain on addressing potential risks, improving sustainable procurement and supply chain performance, and ensuring they have alternative forms of supply in the face of disruption.
Know Your Suppliers initiatives that enable procurement teams to make better decisions are becoming must-haves in the age of geopolitical tensions and regulatory pressure.
Senior Vice President of Research,
We can no longer consider North America a "safe zone" for suppliers, transportation networks, warehousing, and manufacturing. We will continue to experience an increase in hurricanes, sea levels, and other natural disasters due to climate change.
In 2020, more risk leaders will re-evaluate their supplier and logistics strategies to mitigate the risk of costly production slowdowns and rethink their classification of the United States as a traditional safe zone.
Tariffs and trade wars will accelerate in 2020. More companies will begin to leverage the price increases associated with tariffs as a negotiation weapon, which will add even more complexity to the market.
Staying on top of the geopolitical landscape and the interconnected changes associated with changing regulations will be crucial. This will impact the entire supply chain, including supply negotiation, transportation, supplier risk, compliance, and more.
General Manager of North America,
Employers will have to devote more resources to find and retain talent. Programs like the expansion of the U.S. Chamber of Commerce Foundation's Talent Pipeline Management movement will offer a hybrid learning experience with the opportunity to impact more than 3 million businesses nationwide.
The rise in robotics, algorithmic intelligence, and cloud computing is making an entire generation of supply chain professionals obsolete. These technologies are hollowing out the middle of the jobs' spectrum, pushing humans to the edges, requiring extreme physical or cognitive dexterity.
To close the skills gap, organizations will need to invest in upskilling the workforce through online platforms and continuous learning, embrace intern and co-op programs, promote inclusiveness, rotate employees through different functions to gain a broader perspective, and invest in cognitive automation to relieve employees from routine tasks.
Dr. Madhav Durbha
Group Vice President of Industry Strategy, LLamasoft
Supply Chain Velocity Speeds Up
Companies that are already under extreme market pressure to satisfy customer demand for greater speed in product availability and delivery will have to find new ways to run their supply chains like digital natives such as Amazon.
To meet market expectations, leading companies will make significant improvements in supply chain performance by leveraging newer technologies, including cloud-based systems, IoT, AI and machine learning, and cognitive automation. These technologies automate and augment the decision-making of supply chain managers.
Senior Engagement Director, Customer Engagement,
Drone deliveries are the next natural step in the midst of an instant-gratification, on-demand culture. In 2020, customers', retailers', and restaurants' appetites will grow for even faster and more affordable, sustainable deliveries.
We will see developing regulatory frameworks enabling the deployment of large-scale on-demand drone deliveries in the United States. Drone operators will need to collaborate closely with regulators and local partners to get their systems off the ground.
Following the debut of this new set of regulations, the first large-scale drone delivery deployments will begin rolling out. These kinds of deliveries will redefine our understanding of on demand and will create a ripple effect throughout the supply chain.
CEO and Co-Founder, Flytrex
Better technology and planning will close the gap between planning and execution.
Traditional, long planning cycles don't align to the expectations of today's consumers. While the Amazon effect has elevated customer experience across the board, it has also resulted in companies stockpiling trillions of dollars of inventory. As a result, fewer companies will stockpile inventory and focus more on improving inventory management and execution in 2020.