There’s (still) a Grinch this holiday season – and it’s the global supply chain

by Craig Gorsline

Holiday shopping season is in full swing, and unlike last year—when holiday goods were stuck at North American ports—we’re swimming in a glut of discounted consumer products.

Craig Gorsline is chief growth officer at Avanade

That may be good news for consumers in challenging economic times, but not for manufacturers reliant on healthy profit margins to survive. The culprit? A global supply chain amid a historic transformation.

The pandemic shone a light on the deep cracks in the global supply chain. But many other world events have accelerated the need to rethink how goods are sourced, ordered, manufactured and transported. Among them: the war in Ukraine, zero-Covid policies in China, rising labour costs, changing consumer expectations and the climate crisis. And then there’s the dark clouds of global economic uncertainty adding more urgency.

The question on my mind this holiday season is, has anything improved over the past 12 months?

The short answer is yes, bolstered by a resolve by manufacturers to reinvent themselves. In our work with manufacturing clients across the globe, those leading the way are prioritizing three areas of transformation:

1. They’re accelerating their investment in building smarter and more agile factories.

Research shows that only one percent of companies think they can grow revenues and profits without changing their manufacturing footprint, with 94 percent of companies planning direct investment in onshoring or nearshoring manufacturing.

This creates an opportunity to create smart factories from the ground up, prompting 72 percent of manufacturers to report in recent survey they’ve already begun to implement a smart factory strategy.

By applying different combinations of modern technologies, their vision is to create a flexible and quick-to-evolve manufacturing capability that connects processes and data together with frontline workers, planners and decision makers.

This effort is as big as it sounds, which is why many are facing headwinds as they bring critical information and stakeholders together. On the list of technical challenges: developing new applications, securing OT networks and the ability to connect with enterprise applications like Enterprise Resource Planning (ERP) or Manufacturing Enterprise Systems (MES).

2. They’re using data, AI and intelligence to connect the supply chain dots and applying automation and innovation in new ways.

It’s hard to be resilient without implementing a smart factory strategy, which is why it’s no surprise the same survey revealed that 73 percent of manufacturers ranked supply chain resilience as equally important.

To achieve this goal, supply chain visibility is key. Artificial intelligence and data analytics open new possibilities for manufacturers to identify issues before they become monumental challenges. Software-as-a-Service offerings can better manage supply chains and warehouses, detect and respond to threats, optimize processes and manage assets in the enterprise.

Unlocking innovation and emerging technologies to deliver new services is also key. It’s encouraging that nearly one-third of global manufacturers have already rolled out supply chain digital twins to model manufacturing operations, with an additional 45 percent in development and proof-of-concept stages. More than 45 percent are piloting Augmented Reality to enhance the planning process. And many are exploring how to harness the power and potential of the metaverse to enable the factories and supply chains of the future.

3. They’re on a path to adopting sustainable practices

It’s clear that climate change is already having a significant impact on manufacturers and the supply chain. In a UNGC—Accenture CEO Study, 49 percent of CEOs said they’re grappling with supply chain interruptions due to extreme climate events and half of CEOs in the food and beverage industry cite concerns about accessing natural resources due to extreme weather.

While the Accenture study reported that supply chains generate 60 percent of all global emissions, it also concluded they hold the keys to winning the fight against climate change. The good news is that three-in-four CEOs globally (72 percent) agree that sustainability remains an immediate priority as they deal with the fallout of the pandemic. Over half say they’re prioritizing climate action.

A sustainable supply chain is more than just environmentally friendly packaging but a much longer list of actions. It’s early warning systems to prepare for climate-risk events. It’s harnessing the power of data and AI to better predict and plan for climate-related risks. It’s bringing factories closer to home to lower transportation costs and emissions. It’s using the cloud to dramatically reduce energy costs and drive efficiencies.

When the supply chain transforms, we will all win

It’s clear that the pandemic has ushered in a new supply chain era. Global lines are being redrawn. Production is coming closer to consumption to lower carbon emissions and meet customer demand. A new generation of digital technologies are ready to transform legacy processes and systems. All of this will give rise to a supply chain that is everything we imagine it to can be.

Yes, it will take some time to transform a decades-old supply chain that is rigid and easily disrupted to one that is more agile, resilient and sustainable. I think that’s a holiday gift worth waiting for.