A 2024 Supply Chain To-Do List

1 It’s Still All About Risk Resilience

From aerial drone attacks on Red Sea shipping to Federal Reserve interest rate announcements, supply chain disruption and uncertainty didn’t end with COVID-19. Lately, they feel like just another day at the office.

Five years ago, the big unknown for supply chain managers was in demand forecasting. Now it’s not just downstream demand, it’s also upstream supply and impacts on both from sudden, more frequent, headline-driven shocks. “We’re seeing supply chains evolve,” says Darcy MacClaren, chief revenue officer for SAP Digital Supply Chain, “from a focus on operations and cost efficiency, to being highly reactive during Covid, and now to proactively risk-proofing the business.”  

An SAP Insights survey of 4,200 global business leaders and managers shows future-resilient companies expecting 6% average revenue growth in 2024. Four in 10 respondents, however, report difficulty making the needed organizational, process and technology upgrades. Two key problem areas: cross-functional data silos that limit information-sharing within the organization, and connectivity among supply chain partners to resolve issues, manage disruption and plan for growth.   

2 Sustainability: Think Beyond Compliance 

Sustainability’s role in supply chain planning has been elevated in recent years, but many businesses remain wary over tensions with traditional commercial objectives. Recent data offers a more upbeat story: Realistic strategies, supported by the right technology to track and optimize energy and materials use, are in fact yielding actual cost savings, faster return on investment and customer satisfaction, alongside the environmental benefits.

Leading companies are pursuing ‘materiality’ strategies that target sustainability efforts where customer demand, investor interest, and compliance or reputational risk are strongest. Carbon emissions are an obvious target: Supply chains account for 70% of global carbon emissions, regulation at all levels is growing rapidly, and global measurement, reporting, certification standards and offsets are already in place. 

Both consumers and regulatory bodies expect a greater focus on eliminating inequality. Ninety percent of Gen X consumers now say they would be willing to pay more for sustainably produced items, compared to 34% in 2020. New regulations that go into effect this year are also turning heads, like the EU Corporate Sustainability Reporting Directive (CSRD) which will require companies to report on a range of environmental, social and governance (ESG) impacts in the short, medium and long term, including a comprehensive analysis of the social effects of their activities throughout their value chain.

Circularity is gaining attention in sectors like apparel or consumer electronics where materials waste, scarcity, and rising costs are concerns. Reverse logistics designed for handling returns now promises additional revenue streams from recycling, repurposing and reuse. 

Again, MacClaren argues, the biggest obstacle is in the organization chart; revamping divisional silos to implement the technology solutions or implementing change management strategies to effectively integrate sustainability and commercial objectives companywide. Another pitfall is in playing it too safe, fixating on regulatory compliance and leaving significant potential revenue, performance gains and efficiency savings on the table. 

“The exciting part isn’t the measuring and reporting, it’s when you begin acting on the data,” she says, “building it into the design of your product, your manufacturing, your transportation…and seeing the improvements.” 

3 Learning to Embrace AI 

Artificial intelligence (AI) and machine learning (ML) are already embedded in many enterprise activities, from procurement to process automation and optimization to fulfillment. And data center capacity and capabilities expand costs are falling, making big data accessible to businesses of all sizes. 

And none too soon. The introduction of tens of millions of new data points from more partners, data providers, and devices has made tracking and managing with manual processes and spreadsheets obsolete. Decision-making itself is changing too, from setting static forecasting targets to drawing from a much larger, more granular internal and external data set to test and rank, in a matter of seconds, a range of scenarios by probability.

Underlying AI must be 1) relevant to a company’s business processes and objectives; 2) paired with reliable, properly structured, and secure data; 3) managed responsibly and ethically; and 4) embedded throughout the end-to-end supply chain. ML, in turn, will “learn” from past exceptions and responses over time, to anticipate and test likely scenarios for sharpened decision making. 

Generative AI will enable users to make natural language queries like ‘Why are margins for the western region not meeting expectations?’ The system will unpack the question, analyze the relevant data, and recommend solutions.  

Visibility Begins With Connectivity

Covid disruption delivered a wake-up call for supply chains focused up to then strictly on efficiency and cost control. 

Resilience requires real-time visibility across internal functions as well as external partners and vendors, spanning every stage — from design-to-operate, and factoring in dynamic location, contextual, and sensor data — to pivot quickly as conditions change. Sustainability needs those same capabilities to optimize performance and eliminate waste. 

Businesses and their supply chain partners sharing information and analytics from a trusted central data source via intuitive dashboard visualizations, will enjoy an important competitive edge from faster, better-informed decision making.    

5 Collaboration Across Networks

An estimated 80% of the data generated by an organization’s supply chains now originates outside the organization, yet conventional supply chains still assume a largely one-way, ‘inside-out’ flow of data, communications and directives from the organization to partners and vendors.

A mix of pandemic disruption and omnichannel, direct-to-consumer fulfillment complexity has changed that dynamic over time, bringing upstream and downstream partners into closer collaboration. More bi-directional conversations extend to strategic problem-solving in product simplification, packaging, alternative sourcing, warehouse slotting, customer experience and so on. 

Critical to the change management needed for this, MacClaren says, is that software works seamlessly in the background for frictionless information sharing among many more partners, data providers, and devices, so that workflow isn’t slowed or inhibited.  

SAP Digital Supply Chain: A Network of Networks

SAP Digital Supply Chain (DSC), part of the leading enterprise resource planning (ERP) software firm SAP, offers a ready-to-run cloud ERP supply chain-as-a-Service (SCaaS) platform to help accelerate business growth with the latest industry best practices and continuous innovation. This platform is fully integrated with modules for advanced supply chain capabilities across design, planning, manufacturing, delivery, and operations that enable risk resilience and sustainability. 

Supply chain was an early focus in SAP’s shift from proprietary, “out-of-the-box” ERP to cloud-based SCaaS. The company’s in-depth knowledge and experience with conventional ERP across a range of industries, deeply rooted customer relationships and expansive portfolio of comprehensive business solutions are key differentiators. 

SAP DSC works with customers to break down organizational information silos, connect functions to provide operational visibility across the entire enterprise, and bridges functional networks to partner networks – of suppliers, logistics providers, channel partners and third-party data vendors — for real-time, end-to-end visibility and collaboration. 

Embedded AI and ML enables businesses to accelerate product innovation, optimize manufacturing and logistics processes, incorporate emissions reduction and ethical materials sourcing into supply chain planning, and develop reverse logistics service and circularity programs. 

SAP DSC customers include luxury automotive manufacturer Smart Press Shop, pulp and paper products manufacturer Kimberly Clark, alcoholic beverage brewery Lion, software maker Microsoft, global miner Freeport-McMoran and automotive parts supplier Hyundai Mobis. 

Resource Guide: www.sap.com