Supply Chains 2019 - Part 1
Paul Trudgian Ltd | Supply Chain & Logistics Consultancy No Comments

As we begin to gain momentum into 2019, we’re seeing an emergence of new trends and a continuation of those already underway. There’s no doubting that the word ‘uncertainty’ is hanging over us from 2018, and has no chance of abating just yet. Supply chains are used to flexing and bending like a young sapling. However, this climate of uncertainty is at the more extreme end of our experience.

This article on supply chains in 2019 looks at what is coming ahead on the horizon. We look at how technology continues to develop and, indeed, drive change. We look at the political landscape and how this combines with predicted global economic situations. Using our experience over the last year and the conversations we’re having, we’ll look at the trends which are going to dominate our headlines.

‘Supply Chains in 2019: Looking Ahead’ covers the global political environment and its impact on global tariffs and trade. We also examine the labour shortages and how these two are affected by the wider political landscape. We then move on to where the effects of this are being felt most keenly.

Then, we’ll look at technology and the continued importance and development of digitisation within the warehouse and wider supply chain. Within this framework we’ll look at the increased push for ethics and sustainability, as well as personalisation of product and service.

The Global Tariffs and Trade Landscape

Let’s take the bull by the horns and start with the frankly enormous elephant in the room: global tariffs and trade, most notably within the context of Brexit.

We cannot pretend that we have remarkably found certainty here. We haven’t. However, it is this very uncertainty which is going to dominate the arena of global tariffs, trade, and indeed free trade agreements throughout 2019. Even with an agreed Brexit Deal, there will be immense uncertainty at least for the next 6 months, and beyond.

Global tariffs and trade also need to be considered within an even broader context than Brexit alone. 2018 shook the world for fragile trade agreements. But it went back further than this, with the likes of the Trans-Pacific Partnership which died a death.

Last year we saw the global angst regarding tariff tug-o-war between the US and China which gradually eased into renegotiating NAFTA into the USMCA. Global tariffs are certainly not on a firm footing just yet.

Indeed, despite the fun and games of Brexit, it’s the US-China situation which really impacts supply chains. Together, Brexit and US-China could have ramifications we are, as yet, unable to truly appreciate. However, for the moment we can certainly predict that supply chains are going to encounter border control problems and slow-downs at a level which is unfamiliar to us over the last few decades.

However, this is where we begin to uncover a real problem for supply chains in 2019. You’re still navigating largely in the dark. Whilst ramifications are obviously going to happen, we still don’t know the precise nature of them. It’s still conjecture, made worse by political meanderings. Knowing what to do to prepare and pilot your business through 2019 isn’t coming with a route map.

Generally, we’re discovering that companies are falling into one of two main camps: the wait-and-see approach and the attempt to circumnavigate. Both approaches are understandable, but both are accompanied by obvious problems.

Logistics Labour Shortages

Whilst talking about borders, it’s perhaps sensible to move on to the building problem we’ve been watching develop over the last few years in supply chains: the labour shortage. Before we move on to the reason for, and the management of, the labour shortage, let’s quickly explain why this is made worse by the uncertainty over borders.

When labour shortages exist, borders pose problems. To the businesses who are struggling to fill their roles with adequately skilled and experienced staff, they want to be able to recruit from the widest pool possible. Therefore, they need to have minimal immigration restrictions so that they can recruit based on talent and aptitude alone.

Whilst this is particularly obvious at the skilled and qualified level, it’s also applicable in lower levels too. Traditionally low-skilled workers for roles, such as logistics and warehousing, have come from Europe. These staff are no longer ‘on tap’ due to a combination of the uncertainty and the potential restrictions which may be put in place.

So, whatever the reasons for the labour shortage in supply chains in 2019, the political environment is going to make handling it harder.

As we know, labour shortages aren’t restricted to the UK because of Brexit, however. For example, in the US we are seeing extreme shortages of drivers due to the boom in e-commerce.

We’re also simultaneously developing a skills gap. The skills needed in the modern supply chain are radically different from those needed a few decades ago. The industry needs to attract talent which can be nurtured and shaped, focusing on technology.

Nonetheless, the labour shortage is also met with an interesting technological environment. In theory, the technology available should be helping to reduce the labour shortage, and indeed the problems it is posing. Driverless trucks and warehouse automation are two areas which are being driven precisely because of the looming labour problem.

The Ground Level Situation

However, we cannot escape the fact that the real impact of labour shortages, and even the political environment, is like a tornado which touches down in one point. In this instance, it is touching down at the logistics and warehousing end of the supply chain. No matter what the plans and strategies imposed at higher levels, it’s these on-the-ground levels which are struggling and will need help in 2019.

For this reason, we do expect to see a great deal more automation and robotics take-up and development in logistics and warehousing over the next year.

The role of automation with the labour shortage

It makes sense that the drive to increase automation in customer fulfilment and warehousing is sparked by the labour shortage. Combine this with uncertainty and supply chain managers are looking for both flexible and scalable solutions, which don’t necessarily depend on labour. Automation goes a long way to helping to provide such solutions.

It would be naïve to suppose that the entire problem regarding the labour shortage in supply chains can be solved through increasing use and development of automation. We still need to tackle the recruitment issue head on through training and retention programmes. Combining these with robotics and automation is more likely to be the best approach.

Digital supply chains

Technological changes and advancements aren’t simply limited to the warehouse and logistics level. We need to continue to pay attention to all aspects of our digital supply chains throughout 2019 and beyond. Evaluating the right software which is suitable for our current needs and those in the future is a challenge, but one we need to embrace.

The technology available to us is still highly variable. This makes selecting and defining what we need inordinately difficult. Therefore, we should focus our efforts on achieving increased visibility. By doing this we are making use of technology in a way demanded of supply chains by the wider market. This, in turn, will facilitate collaboration. We can then also use this knowledge to feed through to artificial intelligence (AI) and machine learning.

Therefore, it’s safe to say that 2019 will continue to be a year where increasing numbers take up greater levels of digitisation and thus automation too. It will be a supply chain’s ability, through their technology, to adapt and flex, which will underscore the winners and losers of the wider political landscape.

Of course, for many, this means an introduction of the Internet of Things (IoT) and its effective use in various initiatives throughout the supply chain. The scale at which we’ll see it being used will reach new heights.

The IoT will combine with warehouse control systems to provide the real-time information that consumers and businesses now expect.

The impact of machine learning

2019 will be the year that machine learning in supply chains accelerates. For the last year, AI and machine learning have still largely been concepts, not plans. However, momentum is building and we are likely to see continued introduction of machine learning on a wide scale over the next 12 months. As consultants within the supply chain industry, we are seeing more and more demand to utilise machine learning to gain the competitive edge.

This is because the insight we are gaining from digitisation (and such things as the IoT) is fairly meaningless if we don’t have the capability and the capacity to do anything about the information gathered. Machine learning is the only way of implementing effective change on the back of ever dynamic data. In the political climate we’re experiencing, this ability to ‘flex’ seamlessly couldn’t be more important.

This is aided by improvements in machine learning itself. It can now be used across a range of areas from fulfilment operations to supply chain planning, and warehouse management systems to control-tower visibility. It is machine learning which allows the supply chain to actively adapt to the situation around it.

Other drivers of technological change

We need to look beyond flexibility, labour shortages and an ability to weather the political landscape for drivers of technological and supply chain change.

The growing drive for increased corporate social responsibility (CSR) is acutely relevant to supply chains. Consumers want to be able to trace the origins and provenance of their entire item. They want to know that retailers care enough to achieve visibility all the way up the chain and it is digitisation which makes this possible.

This also applies to climate change. Ethics and sustainability need to become core to supply chain organisations. As consumers are increasingly willing to pay more for sustainable products, this doesn’t just make environmental sense, but financial sense too.

However, this is still unlikely to come at the expense of the convenience achieved through online shopping. Therefore, digitisation and automation will need to occur from end-to-end. If you’re the company who can guarantee ethical sourcing yet still deliver using same-day delivery (based on a Just In Time model), then you’ll be well ahead of the curve. This will involve combining everything from the IoT, machine learning, blockchain and more.

Personalisation

Off the back of this, we also need to consider how personalisation will continue to be a notable trend and driver in 2019. We’ve seen increasing demand (and capacity) for automation in the last few years. This is set to continue.

Consumers expect both individualised products and individualised service. Again, this will only be possible through the development and use of technological tools. We can likely expect to see increasing 3D printing within warehouses and at the manufacturing level, to make this possible in an attempt to personalise products as close to the consumer as possible.

Let’s get stuck in

Looking at our two-part series, we can see how 2019 is going to be a hugely interesting year for supply chains. The political landscape of global tariffs and change is still in a melting pot of uncertainty. However, within this, technology continues to provide solutions and meet our expectations.

Get us in your supply chain camp to tackle your 2019 with confidence, call us on 0121 517 0008.

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