Orchestrating the supply chain in 2024 will be like a chess game
2023 is coming to an end. Nationally and worldwide, a lot was demanded of supply chain managers. Amidst the frenzy of commercial events (both online and in-store), geopolitical change and the challenges posed by environmental and climatic agents, an astute ability to adapt to sudden change, enact swift disaster response & recovery initiatives throughout medium- and large-scale supply chains was required.
The supply chain managers that were able to ride the wave of 2023, turning every challenge into an opportunity, are those that focused on the quality of future-proof decisional processes. Decisions are distributed across sectors and variable operations, while keeping a strict relationship of reciprocal influence over the development of the entire value chain. In other words, at these levels of competitivity in complex contexts, each decision has the potential of influencing all the others, in the present as well as for future decisional processes.
The relations between decisions throughout the several supply chain processes can be thought of as a woven fabric, but this imagery would deprive decisions of their proactive quality with respect to the overall generation of value. If value is king, as it is both key and consequence of competitive advantage, then a more evocative image could be that of a chess game. Each piece on the board has its own function and value, each move is both a risk and opportunity.
And if the secret weapon to face the challenges of the supply chain in 2024 is technology, then the best ally upon which to rely is surely Artificial Intelligence.
Port congestion and intralogistics: rooks in crucial points
Among the favorites in the palmares of challenges that, in 2024, will affect the research of competitive advantage on the part of supply chain managers is the congestion of ports and logistic nodes. Especially for extended, international supply chains, ports represent a crucial point for the circulation of large quantities of goods. This means that any malfunctioning, unforeseen setback, and bottleneck in ports or at the routing stage have the potential to cause immeasurable loss – and we all remember what happened in 2021 with the Evergreen episode in the Suez Canal. Mobility and motility of the supply chain, in the sense of efficiency of material flows to and from ports, is a quality that can greatly contribute to the overall generation of value.
As the rook piece on the chessboard, good port operations have the potential of going far, elevating the overall competitivity of the supply chain. At the same time, rooks can be easily blocked by other pieces on the board. Seizing the whole potential of a good logistic and intralogistics system means freeing up the execution of such processes from any vulnerability. This metaphor does not apply to ports and marine routes only, but to the entirety of goods circulation flows over the whole logistic line.
The technological solution to counteract such risks develops in two directions. The first direction points to the internal processes of digital transformation. Implementing technological resources to optimize the functioning of the supply chain naturally brings to an increased visibility on real-time data on the supply chain. When such real-time data is fed to mathematical models for analysis and forecasting, it is possible to optimize routes for the whole fleet -ships, planes, trucks, and so fort –, avoiding high-traffic areas and swiftly re-elaborating routes in response to sudden changes in traffic conditions.
The benefits of digital supply chain transformation are also noticeable at the level of warehouse and port operations management, thanks to an enhanced traceability of goods, of their movements and the communication flows that accompany such operations.
The second direction, the one which might be more difficult to follow, or slower to undertake, sees a knowledge-sharing system – through Cloud architectures – among supply chain managers and other businesses. This would increase and optimize communications and coordination between logistic actors – naval, on the road, and so forth. A standardized knowledge-sharing system among such actors would reduce time and space needed for port and logistic operations, with the perk of annihilating any chance of bottlenecks and future malfunctioning.
In addition to the supply chain digitization process, Gartner® also recommends protecting your organization by aggressively addressing cybersecurity challenges by implementing cloud and hybrid solutions. The report Predicts 2024* states that supply chain leaders are increasingly concerned with cyber threats and have identified cybersecurity as one of the three most critical strategic levers for organizations over the next five years.
Inflation is moving like a knight
The last years showed the signs of a loss of control over inflation levels, at the national, European, and global level. For a series of factors, relationships among economic and geopolitical actors had all the symptoms of uncertainty, which ultimately translated into unexpected fluctuations of inflation levels. Inflation has seen a series of peaks and drops, alternated with periods of fermenting stability. In a way, inflation moves back, forth, and sideways on the chessboard, and much like a knight, its movements are unusual and, for the less expert ones, even unpredictable.
But here lies the secret turning point for the supply chain managers that want to turn problems into opportunities. Taming inflation is possible, again through artificial intelligence solutions. One of the main reparative measures against a variable inflation is cost optimization. In this sense, a vast array of technologies may be implemented.
Most suites of warehouse optimization, for example, allow for inventory optimization and are able to develop the optimal distribution of such goods among the network of warehouses, reducing the minimum stock quantities needed to cover demand – which is also unstable, but whose instability is accounted for in the predictions – without representing a prohibiting expense.
Fleet management technologies, on the other hand, make it possible to reduce the overall fleet waste generated by the movement flow of goods. Such technologies produce optimized routes factoring in external agents, both regular and temporary. Intersecting fleet management and warehouse optimization suites allows for (truck) load optimization, reducing time and costs associated with the delivery.
Revenue management can also contribute to turning inflation into a potential competitive advantage. Through the analysis of historical data series fed to complex mathematical models, a forecasting model is built, that based on external factors – both temporary and/or unforeseen, as well as profit opportunities – dynamically adapts product price. This way, in the overall variability introduced by inflation, it is possible to invariably offer the most profitable price, compared to the competitors.
Sustainability is queen
If value is king… Then sustainability is inevitably the queen. Especially in the last few years, sustainability rose to be one of the most influential and challenging topics of supply chain management.
But here lies the secret turning point for the supply chain managers that want to turn problems into opportunities. Taming inflation is possible, again through artificial intelligence solutions. One of the main reparative measures against a variable inflation is cost optimization. In this sense, a vast array of technologies may be implemented.
On the one hand, we have changing regulations and increasing standards and frameworks, in light of a normative turn of the screw towards emission levels, pollution and global warming. Supply chains are intuitively among the most affected economic structures, given their highly impacting nature at the environmental level.
On the other hand, customer bases and global communities are increasingly aware about environmental issues, as well as about ethical and social concerns. Respecting ESG and sustainability protocols may constitute a value-generating competitivity asset for supply chain managers, as it seizes the whole potential of an increasingly informed client base.
Sustainability is therefore queen, it is the theme that now everyone knows, that piece on the chessboard that extends in almost any direction and touches the destiny of all the other pieces. In 2024, sustainability is intertwined with value, as the queen is fundamental for the protection and success of the king
The technological strategies for the implementation of a sustainability perspective are, again, numerous. First, the mere application of the concept of supply chain digital transformation implies the reduction of the overall impact of the structure. Digitalizing flows and automating decisional processes, optimizing warehouses, inventories, and routes, and developing mathematical models for prediction and data analysis: all these technological expedients increase the efficiency of the supply chain, which becomes swifter, generates less emissions, and occupies less space. This is why sustainability and value are so tightly connected in 2024. Digital transformation automatically brings to an increased sustainability of the supply chain, which in turn generates competitivity
But implementing sustainability is not just a matter of technological optimization. Focusing on this aspect would mean showing interest for the part of sustainability that is more strictly connected to value, the first “R” of the Reduce, Reuse, Recycle motto. Artificial intelligence is able to support, improve, and in the worst-case-scenarios also start, new sustainable policies for business circularity in the supply chain.
For example, the elaboration and data analysis capacities of AI mathematical models can be exploited to obtain models and/or benchmarks for less impacting raw material sourcing. AI techniques can also be employed to design products that are easy to recycle and eventually upcycle. Furthermore, AI can be employed to extend the product life cycle and offer it in a Product-as-a-Service modality, a service which would intuitively be flooded with AI – chat-bots, automated decisions, automated complaint management and customer care, and so forth.
Moreover, AI can be a new scouting tool for the implementation of policies for business circularity, at the different steps of the supply chain as well as at the disposal stage. In industries for which circular policies are more challenging, AI still stands as an ally for the development of recovery policies.
Next level workforce: pawns at maximum efficiency
Analyses for 2024 future trends and challenges showed a radical, yet long-lasting change in the shape of the workforce. With increased levels of literation and secondary education, skills and knowledge of the current workforce are elevated, with a more specialized and technical knowledge base, compared to just a few decades ago.
As Gartner® mentions, “The U.S. logistics and transportation workforce will grow less than half as fast as the U.S. GDP over the next decade. U.S. GDP is expected to grow at 2.5% while frontline workers in transportation will grow only 1.1%.”
We believe this means that not only the workforce will become more specialized, but also less available and more costly.
In this context, too, the challenges the employee management poses to the supply chain can be turned into a competitivity asset. As pawns on the chessboard, if the supply chain manager successfully manages, values and enhances the workforce through the use of innovative technologies, then these pawns become an unstoppable drivers of pervasive value all along the value chain.
First of all, human-machine interaction is an avant-guarde solution to balance the changing shape of the workforce. Through the implementation of robotic solutions in mixed and non-mixed environments, it is possible to delegate more repetitive, exhausting and/or dangerous tasks to machines, allowing the workforce to concentrate on more complex, sophisticated and rewarding tasks.
Among the other technological solutions for employee retention and satisfaction, there is also the streamlining and digitalization of processes and communications. This process also enables the gathering of a new kind of data for diagnostic analyses of an area – that of the small setbacks and changes at the operational level of the workforces – that could hardly be traced before. To this, a set of further technological initiatives and solutions for employee engagement may be added to the list, all of which can be easily orchestrated in integrated suites for corporate culture and satisfaction management.
Generative AI: the technological innovation bishop
Finally, in the chess game of 2024 we have a peculiar trend, that curious piece on the chessboard with the potential of projecting the business into the future, accelerating its innovation and grow diagonally, just like the bishop. This piece is generative AI, a relatively recent evolution of artificial intelligence, the application of which is expected to bring much value to the business.
The computing and data analysis modules of the more sophisticated suites of artificial intelligence currently in use are already capable of elaborating accurate predictions, diagnostics and projections. Nonetheless, generative AI can greatly enrich the data base and remove eventual noise – or any data that could spoil the sample and increase the margins of error of the elaboration. This is bound to enhance predictive capabilities like KPI reporting.
All technological challenges discussed above can be faced with greater power when AI processes also include simulation. The forecasting capability of artificial intelligence is applicable to all processes and stages of the supply chain management and may also benefit from generative AI dynamics. In this case, generative AI can multiply and expand contexts and scenarios of simulations, increasing the elasticity of the whole forecasting model and providing prompt solutions to sudden events and changes.
The last strategic recommendations for 2024
This article covered a series of challenges which, through the application of artificial intelligence technologies, can be turned into drivers of supply chain value. It is necessary to carefully study the features and vulnerabilities of supply chain management, tailoring innovative solutions so that each move – in each area – is perfectly orchestrated with all the others.
Like in a chess game, each piece has its strategy, risk, and hidden value. With 34% of respondents identifying the improvement of decision-making speed, quality, and robustness as one of the top three goals driving their investments in emerging/new technologies, this supports the prediction that Gen AI will play an important role in supply chain solutions over the coming years. Among the insights from the report, there are some suggestions for supply chain managers who will face these challenges:
- Lay the groundwork for rapidly growing and evolving portfolios of robots by developing new management techniques and an organization structure to support the evaluation, adoption, prototyping, deployment, management, and support of robots across the organization.
- Gain meaningful data-driven insights by learning about and educating the supply chain team on potential use cases for GenAI. Scout the organization for current challenges and additional business value from easier KPI queries and reports.
- Identify use cases for cloud computing within manufacturing operations by focusing on broad applicability to enhance existing process capabilities. Aim to minimize disruption by considering hybrid deployments that leverage solutions on the edge using existing on-premises systems.
- Take a holistic approach to capturing the hearts and minds of operational labor by leveraging emerging workforce management tools and techniques like gamification.
- Identify and remediate known cyber vulnerabilities by performing an inventory of all critical software systems used to run your supply chain and analyzing software bills of materials (SBOMs).
The implementation of such suggestions further enhances the value of the challenges described above, as they prepare the corporate structure and culture so that new or adapted, on-premises technological solutions can be implemented.
*Gartner®, Predicts 2024: Supply Chain Technology, 26 October 2023, Dwight Klappich, et. al.
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