Future-Proofing Supply Chains for 2022 and Beyond
While we hoped the supply chain disruptions of the past couple of years would wane in 2022, many challenges remain. It’s now clear that material and labor shortages, inflation, transportation bottlenecks, and pandemic uncertainties will likely impact supply chains in 2022 and beyond.
Organizations must not only address current disruptions but future-proof their supply chains for whatever issues may come. They will need to make their supply chains more resilient, nimble, and adaptive. Many are looking for new technologies and processes to build the resiliency and optionality needed to adapt to changing market conditions.
Here's what to watch for in 2022 and how to stay ahead of tomorrow's challenges.
Why supply chain resiliency and optionality are here to stay
Supply chain resilience will remain a priority in 2022, and organizations will continually look to build optionality to de-risk their supply chains.
Many are seeking new models of transportation and flow paths, all of which enable them to get to market faster and turn challenges into new opportunities. Organizations are also considering shorter, smarter supply chains through near-shoring and regionalization. In some industries, such as semiconductors and pharmaceuticals, these pivots may take several years and be highly capital intensive. Manufacturers are also reducing dependency on concentrated powerhouses and looking further into Europe, Central America, and South Asia. As they redesign these supply chains, they’re also assessing tradeoffs between the cost of labor, inventory, transportation, and carbon footprint.
Stakeholder capitalism is gaining further traction, and companies are moving ESG (environmental, social, and governance) initiatives from after-the-fact reporting to active impact preplanning. Governments around the globe are introducing more incentives and penalties in 2022. In the United States, the Supply Chain Resiliency Act aims to invest in American companies to reduce reliance on long supply chains.1 In Germany, the Supply Chain Due Diligence Act (GSCA) goes into effect in 2023 and requires companies to identify and assess risks to human rights and the environment within their supply chains.2
Finally, organizations are also looking to greater automation across the supply chain to address labor shortages and last-mile logistics. As inflation continues to pressure companies, there’s also growing interest in supply chain finance to remain liquid and ensure business continuity. Companies are now seeking to build relationships with financial institutions to manage the cost pressures and reduce risk.
New technologies and ways of thinking
Organizations will have to be nimble in decision-making and execution to respond to supply chain disruption in 2022 and beyond. This will call for new ways of thinking and new technologies with the visibility and insights to respond quickly.
As a result, many organizations are taking a closer look at continuous supply chain design. While supply chain design used to be “episodic” and with annual refreshes, robust data and digital twins now enable organizations to conduct design exercises on demand with increasing frequency. This allows them to pivot quickly to respond to disruptions or take advantage of opportunities.
Technology can also bridge the digital divide between procurement and supply chain, making them smarter together. The need for optionality and increased regulatory mandates will result in a more dynamic supplier mix. New technologies that optimize both supply chain design and sourcing will become a significant competitive advantage as they allow organizations to identify gaps in the supply chain design phase and turn them into sourcing events.
Cloud-based platforms can also support and improve supply chain finance, ensuring organizations make timely payments to suppliers not only to retain loyalty but to ensure suppliers remain liquid, resulting in win-win outcomes for both suppliers and customers.
Finally, artificial intelligence will offer new opportunities and enable organizations to prepare for a broader range of scenarios, rather than just locking themselves into one possibility. Organizations will be able to move from the current deterministic models of prevailing systems to probabilistic models that enable them to explore more options.
As many of today’s trends will accelerate beyond 2022 and beyond, it’s clear that organizations must build more optionality and flexibility into their supply chains. Coupa’s robust modeling capabilities enable decision-makers to continually design their supply chains to meet the challenges of today and tomorrow.
1 "Baldwin Introduces Legislation to Address Supply Chain Disruptions and Support Made In America Production," Tammy Baldwin - United States Senator for Wisconsin, 4 Nov 2021.
2 "Germany: New Law Obligates Companies to Establish Due Diligence Procedures in Global Supply Chains to Safeguard Human Rights and the Environment," Library of Congress, Jenny Gelsey, 2021.