As we embark on 2020, let’s pause and reflect on what we learned last year.
Looking at 2019 from a 50,000’ level, the year saw an unprecedented supply chain transformation. Security, outsourcing, garnering greater intelligence via AI, and the explosion of IoT impacted the supply-chain landscape, even while the U.S./China tariff game inserted confusion.
Blockchain adoption is gaining traction, enabling suppliers, manufacturers, customers and those further down the chain to track assets, manage documentation, and record logistics transactions, providing for failsafe digital contracts efficiently and transparently.
The use of Blockchain technology (See Five Things to Know About Blockchain in Supply Chains), makes it much more difficult to cheat in an environment where the players are not known to each other. Although its use is not yet ubiquitous, third-party service providers are making use of blockchain both for themselves and for the clients they service.
Outsourcing – Supply Chain Management
While the use of supply-chain-management software that includes purchase-order processing, sales and distribution, inventory management, warehouse management and goods receipt, customer-requirement processing and supplier management/sourcing is on the rise, it is not problem-free. Given its integration with the financial side, including accounts payable and receivable and general ledger, it is a windfall to companies that no longer want to keep all of these employee-laden services in house.
There are a variety of companies offering software and services that incorporate all of the management and services. In fact, Research and Markets estimates the Global Accounts Payable Automation market portion alone accounted for $1.9 billion in 2018 will reach $5.08 billion by 2027 growing at a CAGR of 13.1% from 2018 to 2027. Reducing delayed payments and fraudulent transactions are driving growth. However, issues abound concerning insufficient data encryption and security are inhibiting the market growth. No matter which segment is involved, caution is called for. (See SCM Software Market Growing but Security Risks May Limit Growth).
Intelligence and the Internet of Things
It’s difficult to separate AI and IoT at this juncture. Their use, combined with Blockchain, are the basis for a new level of collaboration and connectivity in supply chains. The use of machine-learning advanced analytics is becoming the heart of both business operation optimization and the ability to take action based on valid and up-to-date information. Given the prediction of 75.4 billion connected IoT devices in the next five years, the leveraging of this important intelligence in the supply chain can mean lower cost, improved efficiencies and predictions that can ensure competitive advantages. AI and IoT, when combined with 5G and Blockchain, major supply-chain modernization (See Industry 4.0 Worth 156.6 Billion by 2024).
And Then There Were Tariffs
Although there are signals that the first phase of a trade deal between the U.S. and China will go far to end retaliatory tariffs, damage has certainly been done during the past year. Electronics firms were hard hit (See Nearly 90% of U.S. Electronics Manufacturers Feeling the Effects of Tariffs, New Report Reveals). Alternative manufacturing locations, investments into the U.S. and employment have all suffered, according to the survey. Raising prices for products under existing contracts was impossible, causing profit margins to suffer.
While phase one may come and go, it won’t be the end of the battle. Stay tuned for trade fallout to include sanctions, investment policy restrictions and greater export/import controls.
The above-mentioned trends highlight only a few areas of change in 2019. Make sure to review the article library that continually covers supply chain trends, news and predictions at Part Procurer.