Supply Chain Trends of 2021

Nobody expected that a global pandemic would arrive last year and wreak havoc for many industries and their supply chains, as well as many natural disasters across the world. Considering what has happened and what we have learned from last year, supply chain trends in 2021 will likely reflect a need for change and more resiliency in supply chains.

Here is my prediction of trends for this year:

1 – AI and Machine Learning

Artificial Intelligence and Machine Learning technology has brought about some new processes in supply chains, such as large scale automation being one of them. By the end of 2019, 37% of organizations had implemented AI, and in 2020 it was predicted to grow. A study by Gartner discovered that 37% of organizations have implemented AI in some form and that businesses who make use of AI technology in their supply chain have seen significant improvements, in such areas as inventory management, staff productivity, supplier selection process and customer experience. AI will remain a trend in 2021 as sales organizations will try to dramatically improve their sales performance, such as with the use of algorithms.

In 2021, it’s predicted that businesses will improve AI governance across their organizations by instituting strong model assurance within their machine learning operational workflows, which is set to become an essential capability for ensuring that AI apps carry out their intended functions accurately while avoiding privacy violations, demographic biases and other adverse algorithmic outcomes.

The COVID-19 crisis has left sectors grappling with disruptions in raw material availability and shipping times, even as demand for certain products increased. Using AI and machine learning can help to provide the agility that is needed in today’s supply chains, which are susceptible to disruptions, from pandemics to inventory software hiccups.

2 – Resilience

According to a study from the Capgemini Research Institute on supply chain resiliency in a post-covid-19 world, more than 80% of organizations have said that their supply chains have been negatively impacted by the COVID-19 pandemic, with a large majority struggling across all aspects of their operations. The pandemic has forced many organizations to prioritize their supply chain resilience. 66% of organizations stated that their supply chain strategy will need to change significantly in order to adapt to the new normal, with just 14% expecting a return to business as usual.

There is a growing awareness and need for supply chains to be more flexible in order to react and adapt quickly to sudden disruption. In the mentioned above study by the Capgemini Research Institute 68% of organizations have said that the current crisis has forced them to adapt their business models, and 62% said increasing supply chain resilience post-COVID-19 is a top priority. In order to achieve resistance and recovery capacity, supply chains will need to build three critical components which are:

• visibility and end-to-end shipment tracking;
• velocity with the real-time flow of information;
• and responsiveness to quickly act on the insights that are presented by the data.

2020 has brought constant change and unpredictability, but companies with resilient supply chains will be more successful and able to make the greatest impact.

3 – Sustainability

Sustainability will see a significant investment in 2021, especially because of the events that unfolded in 2020. Fires raged across Australia for almost 80 daysand – of course – the COVID-19 pandemic has majorly disrupted everyone’s lives.

The pandemic has in particular put sustainability in the spotlight. It has forced policymakers to confront challenges concerning how supply chains function. During the current COVID-19 crisis, organizations have had to rethink their global supply chain strategies and accelerate their capabilities for the adaption of long-term sustainability in managing future challenges.

With the increasing awareness that electricity and transportation are large contributors to greenhouse gas emissions, green logistics has gained significant attention in recent years. Many organizations sought to advance energy management systems and electric and solar powered vehicles in order to lower their carbon footprint. Many organizations are also looking at climate-smart supply chain planning due to the effect that climate change has on the availability of materials and resources.

Research by the Capgemini Research Institute revealed that more than 77% of organizations recognize the need for change and are accelerating their investments in supply chain sustainability over the next three years, focusing heavily on key areas such as logistics and manufacturing. Businesses are recognizing that consumer preferences are changing as they prefer green alternatives and are more willing to back this up with their buying decisions.

In times of crisis, innovation and sustainability has become even more critical to help businesses survive and prevail. According to a Harvard Business Review study, companies who advocate for sustainability grow 5.6 times faster than brands who don’t.

4 – E-commerce

Changes in customer preferences, economic situations and a global pandemic are changing the way we shop. A study by Criteo named Peak to Recovery revealed that only 64% of people miss going into physical stores and 88% plan to continue purchasing gifts online and sending them to recipients. But despite the impacts the pandemic has had on all of us, research by the Boston Globe predicted that people would still do their Christmas shopping – just not in the same way or on the same scale as in previous years. A survey showed that 3 in 10 shoppers said they would start their holiday shopping earlier than usual in 2020.

Retailers have encouraged shoppers to start shopping early to avoid logistical problems of large last-minute crowds which can be expensive for retailers. Retailers have also encouraged early shopping to avoid delayed gifts or sold-out stock. It was estimated that e-commerce sales grew up to 35% in 2020 and will increase in 2021. According to a Federal Statistics Office in Germany, sales by mail order and Internet retailers increased significantly by 23.4% in 2020 compared to the same period of the previous year.

Shopping early has allowed customers to be more socially distant and safe, rather than having a mad rush to get to the over-crowded stores in mid-December.

5 – Re-shoring

The last trend on this list is re-shoring.  Due to issues brought about by the pandemic such as not being able to travel, widespread shortages of medical supplies and other assets, sudden lockdowns and restrictions placed on suppliers all over the world, reshoring is becoming more talked about.

Reshoring will be a leading trend in 2021 as manufacturers try to reduce or eliminate dependency on materials produced abroad. This will help manufacturers to remain resilient to future disruptions and provide a much-needed boost to economies. As uncertainties around COVID-19 continue, an increasing number of organizations see domestic manufacturing as crucial to economies, public health and national security. In 2020, reshoring exceeded foreign direct investment in job creation.

Research shows that reshoring had significant momentum in January 2020, just before WHO declared a global health emergency related to the pandemic. The near-shoring trend to North America was already gathering momentum before the pandemic, but now companies are working to adjust their entire supply chains toward a more geographically spread production. This is true in particular for the pharmaceutical and healthcare fields. Relying on one country to produce the world’s supply of medical equipment, medications or other goods could put everyone at risk of production disruptions and shortages.

Final Thoughts

While some of these trends have been around for years, other trends have grown stronger due to the Coronavirus pandemic. 2021 will be an interesting year for supply chains, with trends such as e-commerce and sustainability in the spotlight.

By learning from the impacts that events of last year had on supply chains, as well as embracing innovation and creating more resilient, sustainable supply chains, businesses will be more ready and able to face more difficult challenges that may be ahead in 2021