Industry executives and experts share their predictions for 2022. Read them in this 14th annual VMblog.com series exclusive.
Top 5 Investments in 2022 for the Upstream Supply Chain
By Hank Canitz, Vice President Industry & GTM Strategy, Nulogy Corporation
2022 couldn’t come fast enough and it should be an interesting year for supply chains and supply chain practitioners. There are several hot issues that this industry will need to focus on in the New Year if we want to try and fix what is broken. Here are the top five areas for investment in 2022 in the supply chain space.
1. Invest in Sustainability and Waste Reduction
We have all seen the pictures over the last few years of produce rotting in the field, raw materials being disposed of due to spoilage, and excess packaging ending up in the garbage dumps-or worse-while at the same time empty shelves at the grocery store. Consumers are becoming more aware of sustainability issues and are demanding more sustainably produced products. As opposed to 10 years ago, customers are actually willing to spend more on eco-friendly products. Investors are investing in companies that have sustainability programs and goals, and governments are strengthening carbon emissions regulations and establishing tighter multilateral environmental agreements. Being “green” is becoming an increasingly important business necessity.
It is estimated that over 80% of all potential sustainable improvements are tied up in the end-to-end supply chain. However, greening the end-to-end supply chain can’t happen through individual company efforts alone.
The only way to truly minimize waste in a supply chain ecosystem is to take a holistic approach minimizing the common practice of shifting inefficiencies and waste from one partner to another. This requires enhanced multi-enterprise visibility and collaboration to enable holistic decisions and optimal tradeoffs around costs, customer service and yes, sustainability.
2. Invest in Labor
We have all asked the question, “Where has all the labor gone?” The scarcity of semi-skilled labor seems to be common across the entire supply chain, but none more than the supplier ecosystem. Outsourcing of manufacturing, primary packaging, and secondary packaging grew by leaps and bounds over the decade prior to the onset of the COVID-19 pandemic. In some industries, like the Fast Moving Consumer Goods (FMCG) Industry which produces many of the products we find in big-box retail and grocery stores, we know from our experience that upwards of 25% of goods are produced by partners.
Contract manufacturing and packaging companies fight for the same labor sources that work in distribution centers, retail stores, construction, and other employers of semi-skilled employees. Quite frankly, there just aren’t enough workers to go around.
This scarcity has lit a fire under businesses to automate repetitive tasks and augment workers to higher levels of efficiency. However, to automate or augment usually requires data generated from digitally enabled operations. Since the scarcity of labor isn’t a problem that can be solved in the short-term, supply chain operations need to invest in laying a digital foundation upon which advanced automation and augmentation capabilities can be built. This digital foundation is also needed to build multi-enterprise data visibility and process collaboration.
3. Invest in Product Innovation
During the pandemic, many companies have delayed introducing new products to focus on a core set of products to maximize overall equipment effectiveness (OEE) and product output. We have all noticed that certain sizes and product variations (flavors, scents, features, etc.) have been difficult to find.
At least in the FMCG industry, many new products and lower-volume products are produced by contract manufacturers and co-packers, which have more flexible manufacturing capabilities to accommodate smaller production runs cost effectively. Research and development into new products haven’t stopped during the pandemic, so at some point there will be a surge of new product introductions. When that happens, the supplier ecosystem will be stressed to respond and FMCG companies will be challenged to find partners with capacity with the right capabilities to build their products.
This challenge can be addressed through solutions architected for multi-enterprise business flows. Companies need only one connection to a multi-enterprise platform to be able to conduct business with any other company connected to this platform. This enables partners to quickly connect or disconnect as needed to meet new product and seasonal needs.
4. Invest in Agility and Resilience
The past year has shown more than ever that supply chains must be agile to deal with market and supply fluctuations and resilient to rebound from ever-frequent disruptions. Change and disruptions aren’t going away. Over the last couple of years, disruptions like natural disasters, trade wars, Brexit, economic uncertainty, cyberattacks, and labor and political unrest have become the new normal. Although the COVID pandemic has completely changed the supply chain, it only accounts for about 4 % of total supply chain risk. Even when the pandemic is a distant memory, supply chain professionals will still need to deal with the other 96% of supply chain risks.
Most of these disruptions take place outside the operations of a single company. To respond and recover quickly requires the ability to quickly sense the disruption wherever it occurs in the end-to-end supply chain, analyze its impact, develop scenarios and simulations to evaluate options, seamlessly collaborate with supply chain partners and rapidly respond. Multi-enterprise data visibility enables the ability to sense when a disruption happens and provides the necessary data to develop and evaluate options. Multi-enterprise collaboration enables fast bi-direction communication to develop the appropriate response that enables a speedy recovery.
5. Invest in Cybersecurity
Last, but certainly not least, cybersecurity is a growing concern for supply chain professionals. It is estimated that 50% of all cybersecurity attacks originate through some type of partner system connection. Cyber criminals can gain access to systems by hacking a partner’s systems and piggybacking into a business’s enterprises systems. Considering that most supplier ecosystems use manual and/or antiquated legacy solutions, it’s not surprising that cyber criminals find easy access through partners.
Supplier portals that directly connect a supplier to their customer’s enterprise systems are a prime example of a potential entry point for cyber criminals. Another common practice is to provide a supplier a remote login into a company’s enterprise systems. Again, these remote login terminals can be penetrated by cyber criminals providing direct access to enterprise systems. A SaaS-based Multi-Enterprise Supply Chain Business Network (MESCBN) platform eliminates many of the avenues a cybercriminal can use to penetrate a company’s enterprise system architecture. A MESCBN platform provides a high-security way to exchange data and to collaborate.
Looking forward to 2022
The investments discussed above are critical to building a stronger supply chain in 2022 and beyond. I am optimistic that we will see progress in these investment areas in 2022. Here’s to a successful and prosperous New Year.
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ABOUT THE AUTHOR
As Vice President of Industry Solutions, Hank guides Nulogy’s product development and market positioning to accelerate the value Nulogy can deliver to consumer brands and their external supplier networks.
