Prepare for Anything: Supply Chain and Ecosystem Predictions for 2022 and beyond….
Making predictions has become significantly more challenging after the last 18 months. As we look forward to 2022 and beyond, the overall guidance must be “prepare for anything.” While this may sound unachievable, there are capabilities that we can enable in order to be anticipatory and responsive.
Recent cumulative events have increased the emphasis on the supply chain, emphasizing its importance and bringing it to the fore. As was quoted, “no one mentions the supply chain when it works, but when it fails….” As we finish 2021, the supply chain is front and center with challenges reported across the globe; across multiple industries from consumer products through to automotive. These events have highlighted a need for agility and have led to significant changes and approaches to managing supply chains across the Asia Pacific region.
Every year at IDC, we put together a list of predictions designed to guide organizations in creating and/or updating their roadmaps, looking at the impact of technology and processes on businesses, and seeking to quantify that impact. The key drivers we see that will impact supply chains globally are focused on digital ecosystems, coupled with greater technology adoption, including an increase in the amount and velocity of data to support changes in globalization and continued disruption.
IDC expects spending on Digital Transformation (DX) on the top 5 use cases – smart warehousing, freight management, optimized operations, supplier network management, and predictive network inventory orchestration – to hit USD $33Bn in 2022.
A focus over the last 18 months has been on resiliency – being able to withstand shocks and changes. While resilience remains a core planning tenet, we will now start to see additional benefits of this focus and investment.
By the end of 2022, half of all manufacturing supply chains will see the benefits of supply chain resiliency, resulting in a 10% reduction in disruption impact.
The COVID-19 pandemic has been global, with no country or organization immune from its impact. This highlighted the strengths and weaknesses across supply chains and led to many investments in process and technology. Those that got it right will see those investments pay off, seeing a reduction in disruption impact, as approaches to visibility, agility, flexibility, and resiliency enable the supply chain to “see, decide and act.”
By 2024, 40% of APeJ-based supply chain forecasts will be automated through the use of artificial intelligence, improving accuracy by 5 percentage points.
Artificial Intelligence (AI) will become increasingly important to organizations as they seek to become resilient – Figure 1 (ranked number 4). With ever-increasing data sets being fed into supply chain systems, the days of the “big spreadsheet” type of control will come to an end. Data is becoming more immediately available across the entire ecosystem from forecast data through to actual demand data, coupled with production and supplier data. As a result, companies will seek to accelerate shifts in demand and supply, bringing all this together to improve forecast accuracy with implications for resource optimization, capacity planning, cost savings, and increased customer satisfaction
Figure 1. Top Technology investments to Enable Your Participation in Industry Ecosystems
Source: 2021 FUTURE ENTERPRISE RESILIENCY & SPENDING- Wave 9, September 2021. APJ n=370
By 2025, to improve long-term supply chain profitability, 60% of manufacturers in global supply chains will invest in software tools to support sustainability and circular economy business models.
Sustainability is now a key driver for change across all supply chains, coming from customer demand, organizational conscience, and employee attractability. However, managing and tracking sustainability is a significant challenge. As we look to the future, we expect an increase in companies investing in tools to assist in managing sustainability and an increase in new business models, such as servitization and circular economy approaches.
By the end of 2023, chronic worker shortages will prompt 60% of APeJ-based supply chain organizations to prioritize automation investments resulting in productivity improvements of 20%.
The great resignation is impacting all countries and all businesses. As a result, it is getting ever more challenging to attract and retain workers across all levels in the supply chain organization. Mitigating this will require increased investments in automation, both physical and software. On the physical side, there has been an enormous growth of automated warehouses across the region, driven by worker shortages and the need for improvement in quality when picking. As for software, the use of robotic process automation (RPA) is also increasing. Organizations are taking advantage of software robots to automatically move data from one system to another without the need for an application process interface (API), making it easier for systems to interconnect (Figure 1 – Ranked number 6). The latest research by IDC expects 50% of all retailers to have implemented some form of robot over the next two years, whether it be in-store, customer-facing, or as part of the warehouse and logistics operations.
Thoughts for 2022
These predictions give you some guidance on where we think investments, effort, adoption, and results will be achieved. It is recommended that any technology roadmaps be created or reviewed to consider changing business drivers and changing technology. The roadmap should discuss what the business wants, coupled with what the technology can enable. As for implementation, proof of concepts are fine but must be designed to scale – all the organizations we have spoken to say that the time expected to realize value is shrinking as the operating environment remains unstable.
The use of technology can enable you to “see, decide and act,” but to get to that level, you will need to implement the technology and the process. There is already a huge shortage of people who know what the technology can do, and understand the impact it will have on processes. Finding those skillsets and keeping them is going to be key to success moving forward and should be top of mind as you plan for 2022 and beyond. Finally, continue to “prepare for anything….”
Dr Christopher Holmes – Managing Director, IDC Insights Asia Pacific
Dr. Chris Holmes is Managing Director for IDC Insights Asia/Pacific responsible for leading the Retail, Energy, Manufacturing, Health, Government, Telecommunications, and IoT research teams. He is responsible for setting the direction of the research and managing the delivery teams. His research focuses on industry transformation, the application of new technologies to enhance business processes, and cross-industry learning. He is also the Asia Pacific regional lead for the Future of Industry Ecosystems.