As we near the end of a challenging 2022, with disruptions and challenges being the order of the day (year?) we’ve identified eight key trends that will shape 2023. Based on our ever-growing customer base and consultancy and support services to help their supply chain and procurement executives optimise their operations, these are the most common and recurring themes we’re discussing.
The Supply Chain Function Gains Authority
As we’ve seemingly shifted from crisis to crisis between the COVID pandemic and the impact of China’s lockdown policies on shipping, to geo-political disruption through to inflation and energy cost surges the supply chain function has inevitably gained visibility, authority and credibility in many organisations.
These disruptions have become incredibly hard to ignore at the executive level due to the sheer influence on sales and marketing operations, productivity, profitability and overall commercial and financial performance.
We believe this change is long overdue and supply chain teams will become more integrated and essential in higher-level conversations that drive company strategy through 2023.
Preparing for this change may not be a simple transition, however, as this increased visibility and authority comes with its own challenges. We believe that digital transformation, data and analytics are essential for this as demands to be more evidence-based, insightful and transparent will grow as the C-suite and director-level conversations increase. This requires a level of quantitative knowledge and confidence that can only be achieved by a deeper and more structured and organised dataset and delivered by stakeholder-centric dashboards and visualisations that encourage better decision-making throughout the organisation.
Risk Management Rises
Risk management has always been a part of the supply chain function, but the priority of the practice within the discipline is set to rise due to the increased occurrence of disruption and the impact on commercial performance.
This throws up several functional challenges that demand strategic and tactical changes. The starting point is knowing where you’re at, so conducting a multi-tiered supplier audit based on the volumes and percentages of particular goods and services and a thorough review of supplier performance.
Again, our discussions with our customers focus on the importance of data to power these conversations. This focus removes the anecdotal and emotional that is essential for success. Whether it’s late deliveries, under quantity, inability to meet contract service level agreements or lack of flexibility – by using data to analyse the reality you’ll be one step ahead of the competition. From a wider perspective, if your current sourcing strategy relies too heavily on a small number of suppliers for a large percentage of a critical item, this may call for a re-think and diversified approach to managing risk, either by looking at stock reserves and resilience or by broadening the supply chain.
Then comes the next stage of running sourcing events or renegotiating contracts to ensure risk is managed. All of this can be done through the SoruceDogg platform effectively and efficiently.
Flexibility in Focus
We’ve already hinted at the need for flexibility in contracts as part of risk management, but the need for agile working practices will become even more prevalent in 2023. As some companies shoot for more solid, robust procurement practices, we believe that a certain amount of “give” is a better strategy for the challenges that will inevitably disrupt the next year.
By reviewing supplier contracts and taking a relational, rather than a heavy-handed contractual approach to your supplier relationships, there is the opportunity to unlock better outcomes for everyone involved.
Flexibility doesn’t necessarily have to mean a power imbalance where both parties are at the mercy of contracts that have no guardrails and no guide for behaviour, but an appreciation for the variables at play and a collaborative approach to solving problems will pay dividends. This also stops the carrot-and-stick approach that often involves the pointless waving of T’s & C’s whenever something unforeseen comes your way. Mutual success isn’t built on punishment, and blame doesn’t solve the problem so building in some flexibility consciously to your contracts is a great starting point to achieving everyone’s goals.
Resilience and Reserves
Resilience has truly been the keyword of the last 3 years in the supply chain industry and we believe this will continue into 2023 unbounded. Far more than just a buzzword for management bingo, resilience can be defined as the capacity to recover quickly from difficulties.
What this means in practice is that the supply chain function has to assess the full supplier base holistically and look at the current situation through a very specific resilience lens.
When done with clean, recent, organised, complete and structured data the picture becomes a lot clearer.
The outputs from this could be additional supplier onboarding to cope with demand fluctuations or material or skill shortages but it could also kickstart the conversations with finance about reserves and stockholding, balancing cashflow with commercial opportunity (or opportunity cost-style metrics being employed.)
Foresight over Hindsight
We don’t sell crystal balls at SourceDogg, but I’m sure if we had a product that could predict the future then we’d have a roaring trade over the last couple of years!
Forecasting and foresight are incredibly difficult skills and no amount of Excel wrangling can predict the unpredictable, but ensuring a level of digitisation across your entire supply chain function can start to deliver significant leaps forward in accuracy.
This could be an analysis of your current suppliers from multiple perspectives such as the aforementioned risk and resilience angles. We’ve worked more recently with companies looking to increase local suppliers and smaller SMBs to fulfil ESG obligations and targets. The first step is to assess the situation with a discovery process, and then identify ways to fill the gaps as required. By assessing where you’ve hit issues in the past with supplier performance can give you the impetus to look for better solutions in the future so you can forecast, anticipate and prepare for the disruption – rather than react to it and be caught on the back foot.
The push for sustainability will be a recurring trend over the next year, and we believe for the foreseeable future. The focus from the C-suite and board of directors, with outward pressure from investors and government legislation, means that the supply chain function will continue to be tasked with making this happen.
Much more than just eco credentials and carbon reduction, sustainability encompasses an ethos of people, planet and profits. This is a longer-term planning exercise where businesses must be able to conserve natural resources, support a healthy community and workforce, and earn enough revenue to remain financially viable for the future.
But how do supply chain professionals do this in practice?
We believe that it all starts with data being captured against sustainable criteria. Whether that’s carbon usage and emissions data for strategic categories and multiple tiers of the supply chain, or collecting diversity statements from suppliers –it all begins with knowing where you’re at against your people, planet and profit goals.
Once you’ve got this all-important data, you can start to assess where you need to go with it, setting strategies, objectives and targets for the long term and working with your suppliers to improve where possible or sourcing new alternatives that help you reach your goals.
Investment in Analytics
We may be biased of course, but the thread running through a lot of these trends is digitisation, data and analytics. At the risk of labouring the point, without data on your supply chain composition – how can you address the challenges that your business will inevitably face over the coming year?
One often overlooked factor in this move to a data-led approach however is the culture change that inevitably has to happen alongside the investment in the platform itself.
The investment in a supply chain data management platform like SourceDogg has to be matched with the appetite for change in working practice from both an operational and competency point of view.
The format of meetings may change significantly to lead with data-derived briefs for all involved, and supplier relationships may move from conversational to collaborative and more metric-based but underpinning all of this is the need for your people to be on board and up to speed with the day-to-day functional changes to their role. This can involve identifying competency framework changes required and a full plan to get them firing on all cylinders, which involves management from across the entire business and an HR-led intervention.
Many of the trends discussed above deal with the downstream changes that a supply chain function can make to its operations in an attempt to keep the business moving forwards, but this trend involves tough conversations with sales and marketing to make happen…
Managing inventory isn’t just about stock and materials, which are more typical supply chain tasks – in 2023, there should be strategic decisions around inventory that discusses cutting SKUs to reduce risk and increase resilience and potentially rethinking promotions and pricing strategies to manage demand.
Earlier this year, Ford stopped taking orders for the 3-door version of its perpetually popular Fiesta vehicle for the first time in 40 years to create a better customer experience and steady the supply chain ship behind closed doors.
These changes may not be popular amongst salespeople who sometimes want to be able to have ultimate customisation to meet ever-increasing customer demands, but we believe that collaboratively working with the commercial elements of the business to be laser-focused in what you offer and, importantly, what you don’t actually support many of the other trends in this list. You’ll be able to serve and satisfy the majority with more success and strategically it makes sense from a supplier point of view to have greater control and influence on the products and services that matter.
The importance of a future-proof supply chain strategy
We know that trends come and go, but over the past couple of years, we’ve been noticing the same key themes recurring time and again amongst our customers and forward-thinking supply chain managers looking to implement SourceDogg.
With change being the only constant, it feels like recognising these shifting global dynamics and setting your company up for dealing with these issues is a recipe for success. There’s no magic bullet, but taking steps toward a data-led strategy can certainly ameliorate the disruption and give you a significant competitive advantage over slower-moving players.
Are you experiencing the same challenges? What are you doing in your business to get ahead of the curve?
We’d love to help you achieve your goals and get ahead of the trends. Speak to one of our supply chain experts today and we can show you how our customers are using SourceDogg to future-proof their supply chains.