In recent years, supply chain management (SCM) has come face to face with many challenges—global pandemic shutting down factories, post-pandemic labor shortages and port congestion, intensification of climate change, growing inflation, and geopolitical tensions. These challenges forced organizations to rethink what it means to build a resilient supply chain to thrive in the midst of all these risks and bottlenecks. Not all hope is lost. More opportunities to build a more efficient, intelligent, and sustainable supply chain have emerged.
In light of all these challenges and opportunities, we’re sharing three focal points for SCM and their trajectories in 2024. As every organization is unique, your priorities might very well be different. We are excited to learn more about the top SCM hurdles organizations expect to cross next year and your most important considerations for the new year. Make your voice heard by taking APQC’s 2024 SCM Priorities and Challenges survey. We’ll share the results in the first quarter of next year.
1. More organizations will advance the digitization of their supply chains
The digital transformation of an organization’s supply chain has gone from having first-mover advantage to becoming industry standard. In fact, digital supply chain has clinched first place in the Association for Supply Chain Management’s top 10 supply chain trends for 2024. Many organizations have already begun the process of supply chain digitization by leveraging automation and business intelligence to establish master data management that aggregates information from the entire supply chain and external sources (e.g., internal historical sales data, public socioeconomic data, and competitor data). Wherever possible, organizations will continue to search for opportunities for greater automation and making data-driven decisions. The end result is cost savings, greater accuracy, and faster processes in the long run.
2. Labor shortages and rising inflation will continue to be critical risks in SCM
Managing a supply chain effectively goes in tandem with mitigating risks effectively. We expect that labor concerns and strong inflationary pressures will continue challenging SCM in the next year. Many industries and businesses are interconnected; labor shortages in one can create a ripple effect on the others. During the pandemic, the manufacturing industry lost about 1.4 million jobs, and even though the pandemic is now behind us, there are still 616,000 unfilled manufacturing jobs as of August 2023. An understaffed factory can mean slower production, skewed inventory levels, disrupted distribution, delayed delivery, and unsatisfied customers.
In addition, businesses will also have to contend with rising supply chain costs as they now operate in a high inflation and high interest rate environment. The cost of raw materials, freight, and labor are expected to continue to exert pressure on procurement, manufacturing, and logistics costs, hence posing a threat to profitability.
The downstream effects of these challenges can be difficult to mitigate, so it is ever so critical for an organization’s supply chain to have contingency plans in place and come up with alternate scenarios.
3. Sustainability will emerge at the forefront of SCM amidst new ESG regulations
Building a sustainable supply chain requires organizations to embed environmental, social, and governance (ESG) considerations in the sourcing of raw materials, conversion of raw materials into products, and delivery of those products to customers. Sustainability in supply chain will soon go beyond making end consumers happy and differentiating one’s brand to abiding by new ESG regulations. The US Security and Exchange Commission (SEC) is expected to mandate ESG reporting as early as 2024, and public companies will soon be required to report their greenhouse gas emissions. The EU’s Corporate Sustainability Reporting Directive (CSRD) is also mandating sustainability reporting, with almost 50,000 organizations expected to start sustainability reporting in 2024. Therefore, top executives will have to prioritize building a sustainable supply chain and integrating ESG reporting into their business, which may require recrafting their procurement and logistics strategies with sustainability in focus.
Where do you think SCM is headed for 2024? Let us know your predictions by taking APQC’s 2024 SCM Priorities and Challenges survey.
To continue the conversation, connect with Maria or Marisa on LinkedIn.