The Stream by River Logic

Top 11 Supply Chain Trends You Need to Know in 2020

December 23, 2019 | By River Logic

2019 has come and gone, and it's time to look at the latest supply chain trends for 2020. Many exciting things are happening as supply chain executives respond to changes arising from the availability of Big Data, supply chain digitization and omni-channel marketing, to name just a few. 

Looking forward, there's also the economy to consider, as its performance has a direct effect on supply chain trends. While economic performance has been good, there are signs that 2020 will be somewhat bumpy. According to Deloitte, the trade war is heating up and the automotive industry is slowing down, but at the same time, unemployment is at its lowest and the economy is resilient.

These and other indicators will undoubtedly have an impact on supply chain innovation, speeding up some initiatives while slowing others. Against this backdrop, here are our predictions for the top 11 supply chain trends in 2020.

1. Supply Chain Digitization

Digitization of the supply chain, encompassing all efforts to integrate corporate systems into a unified whole as well as implementing new digital technologies, will continue to be a priority. The goal of digitization, as described by PwC, is a smart, efficient supply chain ecosystem that demolishes silos, creates transparency and enhances responsiveness. It envisages a digital environment that does away with manual processes and provides a single view of the organization. It encompasses initiatives for creating paperless systems right through to techniques for modeling supply chain networks and creating what-if scenarios.

2. Supply Chain Solutions Will Continue to Move to the Cloud

While many organizations still rely on legacy on-premise supply chain software, the future is in the cloud. Available in many forms, including Software as a Service (SaaS), Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), supply chain cloud computing offers flexibility, scalability and a global reach while doing away with the need to maintain extensive, expensive on-premise computing infrastructure. According to McKinsey, cloud -specific spending in 2020 will grow six-times faster than other IT expenditures. Able to work with and complement on-premise supply chain software, cloud-based supply chain applications offer a better user experience, greater functionality and easy access to new features and releases.

3. Omnichannel Supply Chains Become the Norm

In response to customer demand, businesses will make big strides towards offering a true omnichannel buying experience. Allowing customers to seamlessly shop online or in brick-and-mortar stores, omnichannel supply chains place greater demands on logistic and supply chains with the simultaneous requirements of supplying individual customer orders as well as replenishing stock at retail outlets. The switch from single- and multi-channel supply to omnichannel supply requires a complete rethink of supply chain logistics.

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4. Sustainability Is Becoming Essential

Sustainability has become one of the key global supply chain trends, with customers demanding green products and sustainable practices. The NYU Stern Center for Sustainable Business reports products marketed as sustainable grew 5.6 times faster than those that did not. For Unilever, the organization's sustainable living brands were responsible for 70% of its growth in turnover. These trends highlight the importance of eco-friendly supply chain practices, such as switching from plastic to cardboard packaging and using smaller packaging. Organizations also need to be aware of their carbon footprint, take steps to become carbon neutral and include sustainability as part of their supply chain planning.

5. Growth in Circular Supply Chains

There's a move away from the traditional linear supply chain to the circular supply chain where manufacturers reuse and rework discarded and worn out products through refurbishment or by recycling components into raw materials. Apart from regulatory requirements for the safe disposal and reuse of discarded products, there's a clear indication that customers favor businesses that recycle materials, and many leading companies are discovering additional value through circular supply chains.

6. Agile Supply Chains

To effectively compete, supply chains need to be flexible and agile, as well as able to respond to changes on short notice. This is a radical departure from traditional supply chain thinking that focuses on reliability, consistency and low cost. One of the notable supply chain management trends is a switch from off-shore manufacture to local or near-shore supply. Advantages of this include shorter delivery times and lower shipping costs. With less money tied up in stock, organizations can respond more quickly to changes in demand.

7. Internet of Things

It appears the Internet of Things (IoT) is coming of age. As costs fall, research shows the number of businesses using IoT devices grew from 13% in 2014 to 25% in 2019. The IDC forecasts 13.6% annual growth through to 2022. IoT allows organizations to monitor inventory, automate stock reordering and keep track of deliveries, all in real time. Sensors can predict wear and tear on equipment, allowing timely ordering of spare parts. IoT increases supply chain transparency.

8. Big Data Analytics and Supply Chain Logistics Coming Together

Big Data is here, thanks to the digitization of the supply chain, the growth in IoT, and the greater availability of customer data. Companies today have access to enormous amounts of data and are using this to generate business intelligence ranging from understanding past performances to predicting future trends. Using Big Data, it's possible to determine customer preferences and market trends, as well as redefine the supply chain.

business analytics

9. Artificial Intelligence (AI) and Machine Learning

With greater access to Big Data, more organizations are turning to AI and machine learning to simplify tasks and automate procedures. Gartner reports that in the four years to 2019, there was a 270% increase in the number of organizations using artificial intelligence. Predictive analytics and machine learning algorithms are being used to improve planning and decision support systems, identify purchasing patterns, automate tedious warehousing processes and manage inventory. Many organizations are using AI to replace humans performing repetitive supply tasks and to perform complex supply chain calculations.

10. Using Prescriptive Analytics to Move Beyond the Limitations of Predictive Supply Chain Analytics

While sometimes regarded as the new kid on the block, prescriptive analytics is being increasingly used as a supply chain decision-making tool. While other forms of analytics, such as diagnostic and predictive analytics, focus on past and future trends, providing useful insights, they share a common failing: They don't provide information needed to make informed decisions. In early 2019, Gartner predicted the prescriptive analytics market would grow at a 20.6 CAGR to 2022, while more recent research suggests even faster growth.

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11. Robotics and Automation in Logistics

As companies respond to the conflicting demands of omnichannel supply chains, especially with regard to the need for flexibility and agility, many are turning to robotics to speed up labor-intensive tasks. Robots are ideal for repetitive tasks such as sorting, counting and even for fetching and carrying products in the warehouse. The International Federation of Robots expects demand for robots and cobots (collaborative robots) to grow by 10% in 2020, while Honeywell Robotics are confidently investing heavily in warehouse robotics automation.

Wrap up: 2020 Supply Chain Trends

When looking back on supply chain trends in 2019, it's interesting to note the focus even then on AI, IoT and advanced analytics. This trend appears to be accelerating. What's also notable is the new focus on sustainability and circular supply chains as customers flex their muscles regarding waste and the environment. Agility and omnichannel supply chains are becoming the norm, while the increased availability of Big Data means organizations are now able to close the loop with prescriptive analytics and make informed supply chain decisions.

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