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The last two years have shown how special events can throw world trade into chaos. In early 2020, it was the power outages caused by the Covid pandemic that disrupted supply chains.
The past two years have been a lesson in the power of events that can throw the carefully calibrated machinery of world trade into chaos. At the beginning of 2020, it was the Covid pandemic and the associated worldwide power outages that disrupted the supply chains and thus the supply chain. In March 2021, it was the container ship Ever Given that blocked the Suez Canal, the most strategically important waterway in the world. Christian Lanng, CEO of Tradeshift, explains which five trends companies need to adapt to in the supply chain in 2022.
1. Something unpredictable will happen
So my first prediction is the simplest of all: there will be an event that will come out of the blue. And for which most manufacturers and suppliers will not be prepared. This event will further highlight the vulnerability of just-in-time supply chains. By that I mean the whole supply chain model in general. In this, every broken link affects the whole world. Buyers and suppliers are increasingly aware that the models that have emerged over the last few decades are no longer fit for purpose. They recognize that a paradigm shift is urgently needed to create the resilient, resilient and agile supply chains of the future.
2. Supply Chain: Volatility is the new normal
Before the pandemic, companies were preparing for local or at most regional disruptions. The Covid-19 pandemic was an order of magnitude larger than anything we had prepared for. Hardly anyone had gone through such a scenario or carried out a stress test on this scale. We will be busy trying to understand the effects of Covid for years to come. But we can predict one of the medium-term outcomes, which is that volatility will be a feature of global trade well into 2022. ´
This is already evident: The Index of Global Trade Health Q3-2021 shows a significant drop in trading activity on our platform, with order volumes down 24 points – the sharpest drop we’ve seen since the peak of the first lockdown. Longer delivery times, worsening bottlenecks and rising commodity prices are beginning to influence buyer behavior. With no compelling signs that suppliers have started to manage their backlog, expect a bumpy ride for the foreseeable future.
3. Technology will support humans
There are fears that automation will drive unemployment, but in reality it’s the other way around. As robots and artificial intelligence become more prevalent, the need for humans to analyze and interpret the information they generate will also increase. In 2022, companies will be in a race for talent like never before.
You’ll quickly realize that your biggest procurement challenge isn’t sourcing raw materials or parts. Rather, it is about how they can secure their specialist knowledge. They need this to successfully drive innovation and make intelligent, data-driven business decisions. In this way, the stability, integrity and diversity of supplier relationships can be maintained.
In fact, I would say that the companies that are most successful at doing this have not just hired top talent.. They are able to leverage the skills within their supplier network. To navigate the events of the coming year, be it changing consumption patterns, supply chain revolutions or shifting user experience expectations, companies need to work closely with their suppliers. They will need to pool their resources, including the insights and analysis they generate. This allows solutions to be developed that deliver results across the entire value chain.
The demand for these skills will fuel a “revolution of the human” in everything from recruitment to education in the years to come, but their impact will be felt first in the supply chain – and it will no doubt become one of the defining themes of the be next year.
4. Be truthful about environmental awareness in the supply chain
In one sense, 2022 will be like every year before it: companies will continue to emphasize their green credentials and sustainability, and pay lip service to saving the planet. Those claims are often little more than hot air, because an investigation this year found that 42 percent of “green” claims of companies are false or misleading. That will change in the next twelve months. Not only are consumers more concerned about climate change, pollution and other sustainability issues. They’re also increasingly intolerant of companies that talk about sustainability without making any real changes, recognize so-called green washing and denounce it.
In 2022, companies will be under pressure to prove they are taking meaningful action on sustainability. There is no question that it is in the interest of companies to be demonstrably green. The problem is measuring this across complex international value chains. Deloitte recently found that 65 percent of the companies have limited or no visibility into their first-tier suppliers. I predict that the most effective standards will not be worked out at climate summits or in the corridors of power. Rather, they will develop organically, as a by-product of the ongoing drive for digitization and transparency throughout the supply chain.
5. The shift to more technology
Digitization cannot fix global volatility, but it will give businesses the agility they need to respond effectively. However, only if it is accompanied by a changed way of thinking. Instead of looking at each element of the supply chain individually, we need to step back and look at it as a whole. The companies that reap the greatest benefits from this crisis will be those that figure out how to connect buyers and suppliers more dynamically as part of a richer, digitally-centric ecosystem — a community where interconnectivity creates a network effect that matters a lot is stronger than any technical application.
Technology creates end-to-end supply chain resilience
Businesses are realizing how technology can help create end-to-end resilience that protects not just their own interests, but the interests of the ecosystem as a whole. Innovation will accelerate in areas like trade finance, which have not adequately supported suppliers during the pandemic. A new wave of digitized financing products will bridge this gap, giving suppliers faster access to working capital, prompting them to replenish depleted inventories.
The use of B2B marketplaces will also continue to grow as procurement teams look to build more flexible and diverse supplier relationships. The curated marketplace model plays an important role in helping buyers and suppliers protect themselves against disruption by intelligently pooling and aligning supplier capabilities to areas of high demand.
About the author: Christian Lanng is CEO of Tradeshift. The company is active in e-invoicing and accounts payable automation, as well as in B2B marketplaces and access to supplier financing. The cloud-based platform supports buyers and suppliers in digitizing purchasing and invoice processing, as well as automating and quickly scaling workflows in procurement and accounts payable. (sg)
Also Read: B2B Marketplaces: The Solution for Digitization in Procurement?
