What’s Ahead for Supply Chain in 2024?

This is an excerpt of the original article. It was written for the January-February 2024 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2024

Back in 2019, we seemed on a consistent path to the future. Then COVID-19 arrived on the global scene, and all predictions went out the window. As 2024 begins, everyone wants to know what the year will look like. I predict continued interest in circular supply chains, cybersecurity, visibility, and digital supply chains, to name a few. But I am not alone. So, I’d like to share five things that I am particularly interested in this year.

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Coordinating the flow of goods and services from the point of raw material straight through to the final delivery has never been easy, but the process has become considerably more complicated over the last few years. After the pandemic turned demand forecasts, production plans, and inventory management approaches on end, the much-anticipated “bullwhip” effect kicked in, effectively throwing planners in a completely different direction.

Now, it seems, the focus is on working in this “new normal” environment where both uncertainty and disruption are the norm. At least as of now, there’s no going back to where things stood pre-pandemic. Instead, the best-laid supply chain plans are generally those that expect the best but that prepare for the worst.

Pia Orup Lund, a senior research director in the strategy and planning technologies team at Gartner, Inc., has her finger on the pulse of the current supply chain planning environment and shares her insights into the general state of planning, what’s coming around the next corner and how supply chain managers can prepare for it

Q: How has supply chain planning evolved over the last year or so?

A: It’s a new world of planning and that has been clear over the past year. Not only are there more disruptions to deal with, but those disruptions are becoming more global in nature, and therefore they affect one another. Anyone who is doing supply chain planning right now understands that it’s a completely different scenario than it was just five years to 10 years ago. Planning organizations are beginning to realize that these “shifts” aren’t going away and that they require a different planning approach.

Q: What are some of the top-of-mind planning issues that supply chain managers should be thinking about right now?

A: We hear companies talking more about the value of resilience and how they can become more agile and flexible in the way that they perform planning. We’re also hearing more conversations about what companies can do to go beyond the traditional cyclic supply chain planning methodologies like S&OP and operations execution. These approaches may have worked at one time—and for a long time, for many companies—but now planners need to think differently. To help, Gartner introduced the decision-centric planning framework, which addresses the global disruptions that aren’t going away.

Q: Can you tell us more about decision-centric planning?

A: We’ve seen so many companies investing in supply chain planning technologies. They’re trying to boost the way that they do planning, but they’re not effectively changing the way they do the planning. They’re just doing it faster and with less manual effort, but not really changing the planning paradigm. Decision-centric planning, on the other hand, is more about making the best possible planning decisions by focusing on those decisions and reverse engineering the processes, the stakeholders, and anything else that you need to be able to make those decisions. It’s a different mindset that must be embedded in the organization to work—as compared to the more traditional planning processes.

Q: What mistakes are being made right now in the supply chain planning arena?

A: A lot of companies focus on implementing technology that automates processes. They’re trying to do things faster and limit the human touch, which can be good to a certain extent, but it doesn’t necessarily improve their supply chain planning decisions. They don’t necessarily go in and ask: ‘How can we truly leverage this technology to take us to a different level by thinking differently about planning?’

Another problem occurs when organizations fall back into old roles when a crisis is over. When they’ve gone through something (the global pandemic or another major disruptive force), then they tend to kind of go back to what they used to do, instead of using the crisis to improve their planning approaches. This is something we see quite often.

Finally, the cost focus has sneaked back into the business environment after being sidelined for some time. There’s now too much cost focus and too much emphasis on siloed measurements of cost here and there, which doesn’t work well in supply chain planning.

Q: What areas of supply chain planning are organizations getting right?

A: They’re making investments in technology and designing roadmaps that will allow them to do more holistic, end-to-end planning. I think that’s a positive trend. The recent disruptions and other roadblocks have pushed that agenda because you can’t do effective planning using old solutions or Excel spreadsheets; it’s simply too cumbersome. We also see more and more recognition of the need to centralize end-to-end planning decision-making. This is important because we all know that data silos don’t work in the planning world; you need a global, end-to-end view to be able to make holistic decisions that positively impact the supply chain. A lot of companies have realized this need due to the disruptions that have occurred in recent years—at a higher volume and scale than we’re used to. This has driven even more focus on data, the quality of that data, and then using the insights to predict what’s going to happen in the future. Companies are also using more data that’s focused on external drivers. This is a positive trend because it broadens those organizations’ views and helps them make higher-quality planning decisions.

Q: What types of technologies are having the biggest, positive impacts in the supply chain planning environment right now?

A: Generally, companies are investing in supply chain planning solutions that offer end-to-end capabilities and that can handle demand, supply, and inventory planning—all while bringing in the financial component as well. These solutions have to be able to synchronize plans across the supply chain, or at least give planners and other stakeholders visibility into what’s happening in those end-to-end networks.

Right now, there’s still a lot of interest in artificial intelligence (AI), machine learning, and now generative AI. Companies are using these and other advanced technologies to further automate and improve the planning process. They’re also looking at things from the user experience standpoint and leveraging generative AI and/or large language models to get a better understanding of what’s going on in the supply chain and figuring out why plans are being generated a particular way. Being able to leverage that type of technology to gain insights and improve the user experience is still in the early stages, but the momentum has been positive so far.

Q: Looking ahead to 2024, what new supply chain planning opportunities should companies be considering and leveraging?

A: Right now, everyone should be looking for new ways to challenge traditional planning processes that may still be in place. Consider what you can gain from concepts like decision-centric planning, focus on the impacts of your planning decisions, and look at how the different events are affecting your supply chain. Challenge the way you’ve traditionally handled planning for the past 30 years or more. I think that’s definitely an area to be aware of in the future and the direction that companies should be moving in.

Also understand that you can’t get around technology and the fact that you do need some technologies to improve your planning process. For best results, take this in steps, figure out where you want to go, and then develop a roadmap for getting there.

Q: What else is ahead for 2024 on the supply chain planning front?

A: The focus will remain on how to handle uncertainty and variability; that won’t go away. Companies are also moving more toward being agile and flexible and making more real-time decisions that are carried out in execution. This trend will remain in place and probably grow more in 2024. From our recent “Future of Supply Chain survey,” we’re also seeing a great emphasis being placed on how to embed sustainability even more broadly in organizations. We’re starting to see that it makes its way more and more into the planning side as well. For example, companies are modeling sustainability measures like CO2 emissions into their supply chain plans (e.g., measuring the effect that different planning scenarios have on certain environmental, social, and governance targets). These initiatives can have significant positive impacts on an organization’s overall sustainability goals.

The talent shortage will likely continue to be a concern during the coming year and it’s also pushing more companies to invest in the technologies that younger generations of workers use in their everyday lives, and they also expect to be able to use in the workplace.

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