4 critical supply chain trends from industry expert Graham Slack

Earlier this year, Philip Ashton, our CEO, sat down with Chief Economist and Head of Strategic Intelligence at Maersk, Graham Slack. Together they discussed the current state of supply chains and explored the major industry trends and impacts. In the first of an ongoing video series, Graham introduces the four trend categories that are changing the face of supply chains. 

Watch the video here

 

Changes to globalisation

According to Graham, just a few years ago globalisation was lauded as the way forward. Now, however, progress toward that has slowed significantly. In part, this is natural. As wages slowly begin to equalise, the commercial incentive to spread supply chains has waned. On top of labour costs rising, so has complexity. This compounds the costs of globalisation.

Beyond cost, global trade policies and attitudes have also shifted over time. We are seeing protectionism increasing. Many governing bodies, the US and EU included, now have policies that highlight strategic trade and co-shoring. Meanwhile, in China, dual circulation has become more prevalent which enables the country to become less dependent on foreign inputs. Policymakers are now recognising the limits of the efficient frontier. The balance between costs, social costs, efficiency and security is being reassessed.

It’s not just policymakers either. Experts from MIT and Harvard have begun to emphasise the social costs of trade. They question whether unfettered markets are really leading to efficient and resilient outcomes.

 

Technology

Another key trend is technology. In Graham’s, view supply chains and logistics are still in the early stages of unearthing the possibilities of tech. Right now, there is an increasing recognition of the need for visibility. However, only small fraction of supply chains that have visibility beyond their tier one providers. This shows the industry is still in the building phase of technology and data usage. Where other industries have already seen massive disruption (think banking, music, retail, etc.), supply chains are still setting the stage for it.

As part of implementing more supply chain technology, there are more and more tools that can help. For example, NFTs and blockchain are being used for better authentification. More broadly, the digitisation of supply chains is accelerating the move toward technological disruption. In this first phase, data exchange is increasing through platforms and integrations. Data acts as the foundation for all digitisation and needs to play a major part in current supply chain strategies.

Although the industry is still maturing on the tech side, it’s going in the right direction toward supply chains that are more efficient, more transparent and more actionable. For the future of supply chains, marrying the physical and the digital is crucial.

 

Rise of e-commerce and omnichannel

Trends in e-commerce and omnichannel are training consumers to be wasteful. This means customer expectations and the necessity of efficient and sustainable are at odds. In particular, a large proportion of returns end up going to landfills, exacerbating the waste issue. However, public consciousness and changing habits show a slow down of the behaviour. Our expectation is that, if the trend toward conscious buying habits doesn't accelerate, policy will begin to nudge in that direction. More than anything else, price  will be regulating force in that attitude.

What e-commerce needs to consider is twhere we need to go next. We won’t get where we need to go purely through sustainable supply chains and emissions reduction. The circular economy needs to take hold. And that is going to have profound implications for supply chains.

 

Resilience - the rise of ESG

As resilience continues to be an important theme for supply chains, there is an increased tension between balancing resilience, cost, sustainability and agility. But there are steps businesses can take to remain resilient as more emphasis is put on ESG (environment, social, governance) considerations.

First and foremost, there needs to be more awareness supply chain configuration. Certain types of business will see significant policy changes, but addressing these concerns needs to happen for reasons beyond policy. Businesses need to take a deliberate reassessment of their supply chains, understand the coming trends and work closely with their providers to be sure all angles are taken into account for future planning.


In the coming years, these four categories and trends are only likely to become more relevant. Supply chain managers who are aware of them and plan accordingly will find greater success. More videos from this series will be coming weekly, so head over to YouTube and subscribe, so you don’t miss out.

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