The megatrends impacting supply chains in 2022 and beyond

Call it the perfect storm. Events over the past two years seem to have conspired to disrupt the global supply chain. Covid-19 was the key factor. It forced the slow-down or even shut-down of production and distribution means, while simultaneously creating soaring consumer demand for unanticipated items. Meanwhile, political uncertainty and extreme weather posed an ever-looming threat. Perhaps nothing summed up the fragility of the global supply chain better than the image of a 400-metre-long container-ship blocking the Suez Canal in March 2021.

 Now, as we approach the 2-year anniversary of the global pandemic, supply chains are still vulnerable to disruption. Staying on top of supply chain trends is critical for retailers and logistics companies who want to remain leaders in 2022. Not only will this help them prepare for and adapt to changing scenarios, but it will also help entire industries stay competitive.

So, what trends should supply chain leaders be looking out for?

Shifting attitudes

Thanks in large part to months of lock-down requirements, consumer preferences have shifted from traditional bricks-and-mortar stores to online channels. This was a boon to companies who already had a large on-line presence. However, Gartner predicts that over the next five years e-commerce will no longer be a competitive differentiator for retailers with the yearly rate of increase slowing down from 17.9% in 2021 to 13.7% in 2025.

Therefore, in a world where expectations for product availability continue to rise, every link along the supply chain must operate efficiently. There are multiple points in a single product’s journey where eliminating delays could mean increasing profit and optimising the customer experience. 

One way to ensure this happens is to improve inventory visibility. You can’t avoid problems you can’t foresee, and you can’t optimise what you don’t understand. Not only will accurate inventory visibility improve consumer trust, but it will differentiate retailers from the growing competition.

Live commerce, which blends entertainment with instant purchasing by featuring products on social media, may provide a competitive edge. Brands can take this a step further, by hosting livestreams that encourage viewers to participate or instantly purchase products. Therefore, it is vital that firms ensure supply chain capabilities are flexible enough to cater to this demand.

Addressing sustainability

There are two ways to achieve sustainability objectives: the reactive or the proactive approach. New Government regulations in the ESG domain will require companies to publish data on the sustainable of products the supply chain. New policies, like the Plastic Packaging Tax, will require manufacturers to collect relevant product information, such as packaging weight and waste generated. Retailers will also need data based on the size of their business to ensure that they meet recycling targets. These regulations follow a ‘reactive’ approach.

In contrast, the proactive approach is the conscious effort to follow sustainable ways of living such as reducing waste and supporting local production. It can be cost effective for organisations to source materials from distant countries, but this results in a higher carbon footprint. With consumers becoming increasingly environmentally conscious, businesses generating higher carbon footprints could lose customers. As such, organisations should proactively report their carbon emissions and work towards near-shoring.

Firms must also ensure that the suppliers they work with are compliant with sustainability practices. Failure to do so, could tarnish brand image, customer loyalty, and overall business performance.

Digitalisation and automation

Done right, digitalisation can deliver operational effectiveness across the supply chain and develop value propositions across the organisation. Auto-replenishment is an emerging technology within the automation space that helps retailers keep track of stock levels and gives them insights on how, when and why their customers shop.

Further, research from Gartner reveals that by the year-end of 2025, global fashion retailers will use artificial intelligence (AI) to create more targeted assortments, reducing product ranges by up to 30%. This could result in less personalised products, but may appeal to sustainable shoppers. The potential impact of this variety reduction is positive as it will deliver efficiency in supply chains, and so, organisations must prepare to take advantage of this.

Finally, a game-changing technology that will radically influence buying behaviour is the metaverse. Within this virtual world, every physical entity has a virtual counterpart known as the digital twin. Organisations should look for ways to gamify the customer buying experience – especially as the Global Twin Digital market size is expected to reach $63.5 billion by 2027!

This could open a whole market for virtual ownership managed by non-fungible tokens (NFTs). The idea of owning the physical and digital counterpart has created an entirely new revenue stream. Supply chains must support consumers and cater to the model of impulsive buying in this virtual world.

To conclude, change is inevitable and organisations that have flexible supply chain capabilities are in a competitive position to respond to unknown events. To cope with the disruptions in the dynamic world, it is essential that businesses invest in the appropriate technologies so that they are agile enough to respond to changing consumer demands.

To be attributed to Nimit Pahwa & Piyushi Pawan, Retail Reply

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