Digital supply chains, circular economies, and a whole bunch of uncertainty

Back in 2009, at the close of the first decade of the 21st century, Cliff Lynch, author of our popular “Fast Lane” column, declared that the three biggest logistics trends of the preceding decade had been globalization, technology, and Walmart.

Now, as we look back at the second decade of this century, it’s astonishing how little has changed. Globalization and technology continue to drive rapid change in logistics and supply chain. As for the third trend, some might argue that we should swap out Walmart for Amazon, but even that’s open to debate.

So when we look back on the 2020s a decade from now, what three trends will we point to as having most influenced supply chains? A solid case can be made that Cliff’s 2009 pronouncement, whether it includes Walmart or Amazon, will still ring true. And on a macro-level, it’s a winning case.

The smart folks at Gartner, though, have gotten a bit more granular on the topic. At last month’s virtual Gartner Supply Chain Symposium, analysts offered their take on supply chain trends, identifying three key issues facing industry professionals that they believe will collectively shape the future of supply chain.

The first is the rise in digital business. Gartner analysts say their research indicates that many supply chain leaders are struggling to develop a “holistic, digital supply chain roadmap,” while at the same time feeling pressure from upper management to make their business more digital.

“Given the critical role of supply chain in ensuring customer satisfaction and experience, much of the digitalization efforts will be on the shoulders of the CSCO (chief supply chain officer),” said Mike Burkett, vice president and analyst with the Gartner Supply Chain practice. “This is the greatest transformation of supply chain structures in a long time, and it will not be easy.”

It will not be easy because several barriers stand in the way. These include dealing with legacy technologies and processes; the challenge of sifting through mountains of data to find actionable points; and perhaps the biggest obstacle of all: culture. Navigating these challenges will require a unified approach on the part of upper management and supply chain leaders.

The second key trend identified by Gartner is uncertainty—both competitor uncertainty and trade uncertainty. As to the former, Gartner notes that while uncertainty has long been a constant in supply chain, its analysts have seen an uptick in uncertainty on where the next competitor will come from and what its impact will be. Nearly 50% of CSCOs believe that their business is at risk of being disrupted in the coming years, with the greatest risk coming from nontraditional businesses such as startups.

Then there’s trade uncertainty, sparked by such events as the U.S.-China trade war and Brexit. More recently, the Covid-19 pandemic has exacerbated this uncertainty by shutting down global supply chains and trade routes, as well as raising concerns about future pandemics.

“The ongoing uncertainty calls for a new approach to supply chain management,” Burkett notes. “CSCOs must build more flexible and resilient networks that can respond effectively to global shocks and disruptions—be [they] caused by nature or a competitor.”

The third and final trend identified by Gartner researchers is sustainability and the circular economy. Gartner (and others) define a circular economy as “an economic model that separates the ability to achieve economic growth from the consumption of natural resources.” It further notes that “supply chain plays a critical role in every part of the cycle: make, use, return, recycle, reuse.”

“A supply chain that enables the circular economy has to have strong reverse logistics capabilities,” Burkett points out. “The heavy equipment and machinery industries are already on a good path. However, this is a trend that no industry can miss out on—including consumer products.”