Although there’s no shortage of annual predictions at this time of the year, we wanted to share some trends that consistently come up on our platform, across our customers and in the news.
The world promises to be increasingly volatile and uncertain in 2020
Geo-political and geo-economic tensions are going to continue driving turmoil in the marketplace. Some key events that supply chain professionals will need to keep an eye on:
- Brexit: Boris Johnson’s government has a clear mandate to execute Brexit in 2020 – an impossibly short time frame in which to negotiate a comprehensive trade deal. While LevaData’s research shows that manufacturing executives aren’t especially concerned about Brexit’s implications (see below), even a “soft landing” will have supply chain repercussions well beyond the auto industry.
- China: Tariffs aside, there are other growing concerns amongst companies whose supply chains run through China. Labour costs have been rising and environmental restrictions have been tightening. Intellectual property and cybersecurity concerns are drawing increasing scrutiny. There’s also a potential flashpoint as the standards war surrounding 5G heats up and the potential for export controls on ZTE and Huawei become points of contention. China has shown itself more than willing to retaliate both politically and economically when challenged.
- WTO: The handicapping of the WTO’s disputes adjudication process risks a breakdown of the global trade system.
These risks occur against a background of standard risk sources and new areas of concern, in particular, the creeping risks of climate change, and cyber attacks from state and non-state actors.
Risk management will evolve into a core strategic sourcing discipline
The industry is slowly accepting that we’ve entered a new stage of VUCA and contingency planning is becoming a regular practice. To manage, sourcing professionals will have to find ways to adapt.
Unfortunately, risk management is a complex, time-consuming process that most commodity managers and procurement teams are ill-equipped for. Witnessing these concerns across its client portfolio, LevaData partnered with Resilinc to improve on our platform’s ability to identify risk events and recommend alternatives.
As organizations rise to the challenge, more sophisticated approaches to risk management will grow in popularity and many companies will make initial investments in technologies that provide improved visibility, AI-enabled prediction, automated event monitoring and scenario planning.
For a detailed guide to how companies are using new technologies to address volatility, see our joint webinar with Resilinc on Operationalizing Risk Management with Cognitive Sourcing.
Data explosion fuels digital transformation
When we conducted the research for our Cognitive Sourcing Study in 2019, we found that 74% of respondents considered data-driven procurement somewhat or very important. That’s unlikely to change anytime soon.
As the world becomes increasingly digital and the internet of things (IoT) becomes a reality, the amount of data available will continue to explode, as will expectations that recommendations are based on data-driven research. As this becomes the norm within leading supply management teams, data skills will be required of not just engineers but sourcing managers and others.
This will prompt a move towards easy to use, “no-code” technology that will result in a huge rise in the number of data use cases. New ways of interacting with the data will come into wider use (RPA, chatbots). In turn, the improved transparency will spur more cross-functional collaboration throughout the organization.
To manage and make use of this data, organizations will rely on advanced analytics and AI to produce insights and make predictions. As a result “digital transformation” will continue to be a popular theme.
Among the leaders surveyed in LevaData’s 2019 Cognitive Sourcing Study, 75 percent said their organizations had a digital transformation initiative underway.
- Launched in the past year: 22%
- Initiative active for 1-2 years: 26%
- Initiative in place for 2+ years: 19%
- An additional 14% are planning an initiative
- Only 20% have no plans to start
Despite a steady march towards digital transformation, there are some concerns about whether sourcing teams are currently up to the challenge. Leaders surveyed in LevaData’s 2019 Cognitive Sourcing Study, found that only 40% considered their sourcing team to be somewhat or very ready for digital transformation, down from 46% in 2018, and 52% in 2017.
An Elevated Role for Sourcing Professionals
As technology provides sourcing professionals with more accurate information and improved insight into supply chains, they will begin to take on an increasingly strategic role within the organization. And as rising volatility inevitably leads to high-profile losses or missed opportunities for global manufacturers, executives will see their supply chain as a potential competitive advantage rather than a cost-cutting department.
Our Cognitive Sourcing Study 2019 indicates, however, sourcing teams are stretched thin and largely consumed with fighting the latest fires.
As digital transformation and the adoption of AI tools take on more routine tasks, sourcing professionals will find more time to focus on risk reduction and other strategic opportunities.
For more on the state of cognitive adoption among global manufacturing companies, you can review the full results of our Cognitive Sourcing Study 2019.