7 key trends that will redefine SCM in 2023: Insights from o9 solutions
o9 solutions, a leading enterprise AI software platform provider for transforming planning and decision-making, today shared key insights from its supply chain experts and leaders and highlighted 8 interesting trends that will redefine Supply Chain Management (SCM) in 2023.
- Supply chains will become the strategic drivers of business
During the pandemic, companies who had been investing in their SCM were positioned to deal with change more rapidly. For example, a big-box retailer that started to build out their pickup services, their delivery services, etc. so that when the world pivoted, stores were closed, people still wanted this retailer’s products, they already had all of that investment there. Companies that are building a future strategy would need to think of the criteria, in dicators; and how this is a continued investment. The key is to not lock yourself into anything unless you are 10 0% sure that that is the direction you want to go.
- Disruption can become a catalyst for supplier collaboration
One major impact that is being witnessed in the oil and gas industry is disruption in operations from raw mater ial shortages and delays, and headwinds brought about by inflation increasing price of materials. Companies are getting to a point where they can’t handle additional demand and will cycle through their existing inventories. T he other big area of impact is logistics, supply gets stuck at ports, and clearance and delivery take time due to a shortage of labor. There is also an increase in supplier collaboration. Service levels improve when there is a plat form where suppliers can see the demand and can update their commits. In today’s constrained supply market, it’s even more critical to know what your suppliers are able and unable to support and then how best to allocate to high-priority demand.
- Circularity could change business models
Circularity and supply chain transparency will be critical in the fashion industry, especially as EU regulations will mandate companies to provide details about their carbon footprint. As more consumers are becoming aware of sustainability and HR issues within the industry, purchasing trends may shift towards higher-quality products fo r those who can afford them or second-hand items. Retailers will also need to start shifting their business model s to become more agile, increasing collaboration with their network to produce limited batches but faster to me et the ever-changing demand without compromising the product quality.
The industry challenge now is to move to more natural, environmentally sustainable fabrics. Circularity means a product needs to be more durable, as well as recyclable, reusable, recoverable, etc. In major markets such as Eur ope, consumers are looking for more durable, long-lasting products, because products that do have these chara cteristics become waste and go to landfill faster. Brand manufacturers will likely need to engineer their business models to accommodate a lower turnover rate of higher-cost, more durable products on a year-over-year basis. This will characterize the transition to a sustainable, circular economy.
- Product environmental footprinting will become more prevalent
Over the next three to five years, industries will have to incorporate true sustainability—not simply adhere to or comply with sustainabil ity reporting standards. Companies will have to transparently shar e metrics related to t heir decarbonization efforts or their use of no n-sustainable materials in their product lines. Historically, the prod uct ‘footprinting’ exercise was both tedious and expensive. Typicall y, product life cycle studies included just a handful of products, and results were extrapolated to similar products. Currently, there’s a lo t of effort being de voted to making the product life cycle assessme nt process more automated and streamlined. The goal is to create t emplates allowing you to generate product environmental footprin ts efficiently, thereby increasing the thro ughput of the process with out requiring highly specialized domain expertise.
- The proliferation of data will change the scope and role of demand forecasting
The things you buy and use to the things that you say and do – all of this is going to become data. It’s going to get bigger and bigger. Traditionally, companies had one stream of data, which was their sales, shipment, or invoice hi story. That single stream of history was used to indicate what you’re likely to do next month and next year. Now you have access to 1,000 to 3,000 streams of external data. In five years, that will be 50,000 to 100,000.
Businesses know if they do not start (incorporating AI/ML) now, they are going to lose because they know that t heir competitors are doing it. It has become an essential activity. From a role standpoint, companies should ha ve a demand analyst or a data scientist, an analytical resource who can work with the data and make the mach ine run.
Companies must understand what internal and external data drivers they need, where they come from, and, on ce you have the information, how to manage it so that it makes sense within the technology platform. So, it is a vast topic, but you can’t get machine learning to work without obtaining that data.
- Supply sensing capabilities can help businesses navigate supply chain uncertainties
The CPG industry has experienced unprecedented disruptions since the beginning of Covid-19. Companies have been facing inflation (i.e., the Food Price Index rose 20% since 2020-21; source: BCG research), capacity constrai nts in logistics resulting in significant price increases (i.e., 61% cost increase for flatbed trucks since 2020-21; so urce: BCG research), changing consumer behavior (i.e., online shopping increased 40%; source: NPD ), and raw material shortages never experienced before (futures prices for commodities such as wheat have reached the hi ghest levels ever in March 2022, source: WSJ September 8th, 2022).
These challenges are not expected to improve in 2023 and beyond, and companies are facing a new normal of op erating in a world of constant disruption. As a result, there is a continued need for companies to invest in new pr ocesses, organizational models, and new technologies to help manage supply chain complexities and costs, and potentially sense disruptors before they impact the supply chain. Organizations that anticipate and manage thr ough disruptions will set themselves up as industry leaders.
- Artificial Intelligence (AI) will continue to shape the workplace of the future
Speaking about how AI will continue to shape the workplace of the future, Igor Rikalo, President and COO at o9 Solutions says, “A key aspect of any technology, including AI, is that it should augment human capabilities by pro viding computational models, powered by relevant data, to enable fact-based and unbiased decision-making. W e see increasing levels of automation permeate many jobs today, both in factories as well as in the headquarters offices of many companies. The outcome of this automation is that companies will have access to very granular d ata about employees, their productivity, and the ratio between value-added vs. non-value-added activities in th eir work patterns. At o9, we believe that creating a new technology-enabled management system is required to achieve high-performing organizations in any industry. For example, our Digital Brain platform allows ente rpris es not only to model their operational decision-making processes but also to model the organization and work processes necessary to run their business.
About o9 Solutions, Inc.
o9 Solutions is a leading AI-powered platform for integrated business planning and decision-making for the ent erprise. Whether it is driving demand, aligning demand and supply, or optimizing commercial initiatives, any plan ning process can be made faster and smarter with o9’s AI-powered digital solutions. Bringing together techno lo gy innovations—such as graph-based enterprise modeling, big data analytics, advanced algorithms for scenario p lanning, collaborative portals, easy-to-use interfaces, and cloud-based delivery—into one platform. For more inf ormation, please visit www.o9solutions.com.
