Next-gen supply chain capabilities result in greater profitability, research shows

Companies with the most mature supply chains are 23 per cent more profitable than their peers, according to research from Accenture.

These leaders are six times as likely to use AI and generative AI widely across their supply chains, which allows them to generate additional business value.

For the report, “Next stop, next-gen,” Accenture analyzed 1,148 companies across 15 countries, including Canada and the U.S., and 10 industries. It defines supply chain maturity as the extent to which companies have supply chain capabilities that use generative AI, advanced machine learning and other evolving technologies for autonomous decision-making, advanced simulations and continuous improvement. These capabilities enable companies to adapt more readily to changes as they happen and adopt other new technologies seamlessly as they emerge.

The report shows that “leaders”—the 10 per cent of companies scoring highest on the maturity scale—achieved 23 per cent higher margins than their peers (11.8 per cent vs. 9.6 per cent) between 2019 and 2023. At the same time, they delivered 15 per cent better returns to shareholders (8.5 per cent vs. 7.4 per cent).

“Leaders are investing heavily in increasingly sophisticated technologies—especially AI and generative AI—to build the next generation of supply chain capabilities,” said Max Blanchet, Accenture’s global strategy lead for supply chains and operations. “These capabilities are essential to reinvent supply chains for efficiency, agility, sustainability and resilience. They enable leaders to move beyond traditional supply chain drivers consisting of cost, quality and delivery, which is causing many supply chain vulnerabilities and inefficiencies today and in the future.”

While only nine per cent of all companies use AI and generative AI widely across their supply chains, 37 per cent of leaders already do compared to just six per cent of their peers. Leaders are also expecting to see significant benefits. They are eight times as likely to reduce the time it takes to develop and launch new products by 30 per cent, 8.5 times as likely to develop eco-friendly products, and six times as likely to improve the efficiency of engineering resources by 30 per cent.

However, the bigger picture painted in the report is alarming, says Accenture. While the average supply chain maturity score has jumped by more than 50 per cent between 2019 and 2023, the average score across all companies remains low, at just 36 per cent. It varies across industries and countries—from 22 per cent in Mexico to 52 per cent in Japan, and from 31 per cent for consumer goods companies to 40 per cent for aerospace and defense firms.

“If we compare supply chain maturity to the evolution of navigation—from following the stars to driving semi-autonomous vehicles—many of us are still running supply chains on a mix of paper maps and first-generation satnavs,” said Melissa Twining-Davis, Accenture’s global operations lead for supply chains. “The next-generation capabilities that exist, such as generative design to develop products, highly automated facilities to produce them, and advanced analytics and machine learning to predict supply roadblocks, are just at the beginning. The reinvention potential ahead is massive.”

According to the report, these are the supply chain capabilities companies need to be competitive in today’s economic context. They no longer operate in a time of stable economic growth and frictionless globalization. This means the old supply chain levers, such as global low-cost sourcing and specialized factories in low-cost locations, aren’t sufficient anymore.

“Reinventing supply chains requires the ability to, for example, monitor suppliers up to the fourth and fifth tier in near-real-time to anticipate risks, change the production on short notice, and simulate the entire lifecycle of a product,” added Blanchet. “Next-generation supply chains will autonomously adapt to change and be sustainable by design. Companies with supply chain maturity scores of 25 per cent or lower—almost one in three companies—must act fast to catch up. Otherwise, there is a real risk they won’t survive in today’s new economic and industrial context.”