What’s Ahead For 2019: A Global Perspective On Digital Supply Chains

Richard Howells

Part 1 in the 4-part “Digital Supply Chain Predictions for 2019” series

“It’s difficult to make predictions, especially about the future” So said Danish physicist Niels Bohr – or was it Yogi Berra or maybe Mark Twain? Whoever said it, I’m keeping this quote in the back of my mind as I nevertheless look ahead to predict some of the trends, technologies, and political situations that will affect digital supply chains in the coming year.

In this series, we will cover topics in multiple categories – including the global supply chain perspective, emerging business models, using intelligent technology, and more. In this first blog, we’ll focus on global issues.

Global uncertainty will drive the need for resilient supply chain operations

On the 29th of March, Brexit in the UK becomes a reality. And yet, as of today, nobody knows exactly how it will work out. Despite repeated efforts within the UK, Parliament cannot reach an agreement on how to proceed. Prime Minister Theresa May’s has postponed her planned vote on her latest proposal on fears of it being rejected. Will she propose something new? Will Parliament come up with something else at the eleventh hour? Maybe the UK will reach the deadline with no deal at all. Or maybe they’ll be a new referendum to negate the original Brexit vote. Who knows.

That’s a lot of uncertainty. And while I won’t make a prediction on how Brexit will turn out, I will predict that companies will put contingency strategies in place to increase safety stock for all kinds of goods.

One possibility is to put goods (safety stock) on ships that act as floating warehouses. This will enable companies to quickly respond to demand outside the UK while the Brexit situation – whatever course is chosen – normalizes. To prepare for the possibility of a no-deal Brexit, businesses need to be able to foresee and respond to potential bottlenecks such as new tariffs and customs checks that could cripple the supply chain. Digitally enabled supply chains that offer transparency, flexibility, and resilience in the face of changing dynamics will be key for companies that want to continue delivering the positive experiences that customers expect.

Of course, when it comes to global trade, Brexit isn’t the only apple cart being upended at moment. Domestic and international politics, rising oil prices, and global tensions are creating a volatile and highly unpredictable trade environment. Companies will need to be nimble – implementing technology that enables them to quickly adapt to new trade regulations and shifting resource availability and import/export restrictions. The “trade war” – such as it is – will accelerate in the first half of this year. But as the 2020 elections in the United States come into focus, we will see new agreements struck in an effort to get the stock exchange rising and keep the unemployment rate low.

Climate change will drive innovation

With dire climate news released regularly, today’s customer is looking to do business with ethical companies that can prove the sustainability of their operational processes and practices. Data from Nielsen, in fact, finds that 66% of global customers are willing to pay more for sustainable goods. Customers are looking for:

  • Sustainable products that are biodegradable, environmentally sustainable, and ethically sourced
  • Manufacturing processes that strive for zero waste and impact the environment minimally while increasing health and safety numbers
  • Logistics processes that optimize loads to reduce mileage, emissions, and carbon footprint
  • Assets that are designed and operated in an energy-efficient manner and are safe for the environment and workforce
  • Adherence to environmental and government regulations and standards such as the initiatives outlined in both the United Nations Sustainable Development Goals and the Paris Agreement on climate change

While these may be daunting challenges, companies have an incentive to move forward beyond the moral imperative. Sustainable supply chain processes, after all, are good not only for the environment but also for customer satisfaction and – in many cases – for cost reduction as well.

BRICS countries on the rise again?

With GDP growth rates of 6% and higher, the BRICS countries (Brazil, Russia, India, China, and South Africa) will again do very well in 2019. While the focus will be on domestic markets, expect a fair amount of collaboration with other markets for specific areas. Overall, trade from and to these countries will increase – with major corporations expanding or building manufacturing and logistics hubs in all these countries.

  • Brazil: Whatever the downside of the county’s newly elected president, markets have reacted positively to the promise of getting corruption and violence under control. Opportunities may abound.
  • Russia: An increase in oil prices may bring much needed economic relief to the oil-dependent economy. An improved outlook is emerging.
  • India: Market regulations are starting to pay off and businesses are tapping the huge domestic market – with “Make in India” becoming a key theme nationwide. Expect strong performance.
  • China: Despite uncertainties around disputes with the United States, China will continue to grow at a healthy rate. Look for closer relations with Europe, Africa, and India.
  • South Africa: Corporations will continue to use the country as a base from which to increase their influence on the continent (at least the southern part). Continued growth will be the result.

I’ll stop there on global predictions. This is a four-part series, so please stay tuned for more. Next up: New business models on the horizon.

Join an interactive session featuring Jeff Hojlo, Program Director of Product Innovation Strategies at IDC, and Hans Thalbauer, Senior Vice President of Digital Supply Chain and Industry 4.0 at SAP, to get inspired by how best-in-class companies are reinventing their supply chain. Register here.

About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.