The future for the supply chain and manufacturing industries
Google Cloud’s Director, Manufacturing & Industrial Sales, Anne-Marie Scott, takes a look at what awaits the manufacturing and supply chain industries
2021 has been a turbulent year for the manufacturing and supply chain industries. Supply chain shortages, due to a lack of HGV drivers and production stoppages, have negatively impacted many countries around the world. As we look to the new year, companies are recognising the need to be better prepared for the likely event of further disruption.
It’s no surprise then, that 2022 will see manufacturers digitalise their logistics systems and streamline their supply chains to future-proof themselves against further disruptions. Environmental concerns and growing customer and partner expectations will also influence these decisions. As we come to the end of an unprecedented year, we look forward to the trends on the horizon for 2022 and beyond.
Businesses will utilise Artificial Intelligence (AI) and Machine Learning (ML) tools to prepare for pandemic-related disruptions
To overcome disruptions caused by COVID-19, businesses have accelerated more quickly than ever before. Organisations adapted operations, people transitioned to working from home and shoppers took to buying online. Worldwide factories shut down with workers sick or materials having not been delivered. All of this showed the troubling fragility of our supply chains, and the problems they have responding to behaviour changes.
In the new year, it’s paramount that businesses utilise tools to better manage supply chain processes. AI and ML systems, for example, enable scenario planning, demand forecasting, inventory positioning and overall greater awareness. By gleaning insights from data, suppliers and manufacturers can gain a more comprehensive understanding of their inventories and resolve issues before they arise. Purpose-built tools, such as a Digital Supply Chain Twin solution, can give businesses a firmer grasp of potential risks and how they can manage them. Deep learning tools of this nature will also be utilised to study the environmental impact manufacturers have, using AI to assess ethical sourcing of materials as well as the carbon footprint of supply chains.
It’s only with this level of insight that businesses can respond and adapt to new situations and issues to prevent mass disruption and environmental damage.
Climate change will cause raw material and energy prices to rise
Implications of climate change are important to consider in manufacturing and supply chain processes, too. Next year, we expect to see the price of raw materials continue to increase, causing a spike. Extreme weather caused by global warming will cause these inflations, and will be felt across all operations, from the shipment of microchips to agriculture goods.
Understanding these physical constraints in a rapidly digitalising world will be important for businesses to address them head on and plan accordingly. Better understanding can be obtained from third-party weather data, data shared by providers and primary data collected from the extraction and shipment of raw goods to delivery.
Predictive AI and ML tools, as well as scalable solutions, will help businesses anticipate these developments and enable them to adapt in real time so as not to impede day to day activity.
Investment into physical supply chain infrastructure will level with digital infrastructure
We’re living in a time where, on a global scale, the number of infrastructure investment projects is at an all time high. In Europe, for example, 2021 saw the European Union announce a €300bn pledge for more sustainable digital, energy and transport infrastructure under the “Golden Gateway” project. Meanwhile, in the US, Congress passed a US$1trn spending bill to strengthen infrastructure at ports and roads, as well as broadband connectivity.
In 2022, and for the foreseeable future, producing timely and accurate data reporting will be critical for business capability. Improvements in the physical supply chain, therefore, must be met with equal investment in digital capability. As the digital becomes more mature, physical, and digital will be viewed as a single overall capability.
Risk management will be a critical skill for the manufacturing and supply chain industries
After the year we’ve had, it’s more apparent than ever that risk management is the most important function in the supply chain and manufacturing process. Being able to avoid catastrophes, lowering costs and moving fast on new opportunities ensures for smooth business and growth. Having the insights from new data sources to help inform these decisions will benefit companies when it comes to judging, for example, the effects on inventory and delivery of goods, customer and partner notifications, or alternative storage solutions.
Being able to do this effectively will require a solution with real-time dashboards, analytics, and alerts to promote system understanding and responses. AI tools can help manufacturers view and optimise larger-scale systems in product creation, delivery, and use through their predictive capabilities. The companies that use these tools to close the gap between knowledge and disruption to logistics processes, will be the ones best positioned to survive and grow.
Having digital partner ecosystems will benefit businesses through shared knowledge
The pandemic has shown us that it’s not taboo for companies to share information with their partners and customers. The sharing of information is not only necessary for unified progress and survival, but is also critical to creating a resilient supply chain. Having knowledge of an issue helps companies concentrate on their key value areas and put more effort into minimising disruptions in their respective industries.
For example, in the retail industry, customer understanding and communications, or last mile delivery, might be the key focus. Shipping companies would value the management of ports and fleets, or the increasing development of warehouse space on the fly. Key areas of risk focus and management require special attention, and pooling information and best practises, where appropriate, can help sharpen industry focus.
In 2022, we’ll see the exchange of information become easier. Cloud solutions will make this possible. Real-time tools logging shopping information, long-range weather forecasts and potential energy and labour disruptions, will help businesses create a comprehensive view of the situation. Having this data enables better control over how the issues are managed, and can increase response times to better deliver solutions. It's all about managing in an increasingly complex world, and this is possible with the right tools.
With these considerations in mind, 2022 will resemble many of the issues and trends experienced in 2021. However, having lived through these disruptions and made the necessary adjustments, we have the learnings to better prepare ourselves for whatever the future may bring.