1. Strategic Sourcing Puzzles
We anticipate that CEOs and boards will take a keen interest in the risks that strategic suppliers present in today’s increasingly complex risk environment.
Whether it’s nearshoring, fundamental performance or cost controls, key suppliers will dominate the executive radar. As a result, nearshoring and friend-shoring will require balanced analysis and consideration. Such a sourcing shift would unlock benefits like being able to manage a supplier in a neighboring time zone, who can be visited without the need for transcontinental flights – and, in some cases, even favorable government incentives.
Yet nearshoring and friend-shoring can also bear significant risks. These include:
- The transition period when switching suppliers is often costly, difficult and lengthy. Supplier development costs and risks can mount up as the new supplier works out quality, production times, and costs;
- Meanwhile, the old supplier – now seeing out its obligations to you as a customer – may become less responsive or difficult to manage. They will also likely look to become a supplier to your competitor – posing a significant strategic risk;
- Dependencies on raw material providers and other suppliers of suppliers are unlikely to change significantly – maintaining substantial risk related to lower tiers of the supply chain.
2. Tariffs, sanctions, bans and other restrictions
Government actions affecting supply chains are nothing new but, in 2024, their reach and impact look set to expand. Two interconnected drivers are key: geopolitical frictions and conflicts and important elections scheduled in countries with half of the world’s population. Together, they will represent a catalyst for further government action.
Trade actions, such as tariffs and sanctions, are prominent in a limited arsenal of tools readily available to political leaders around the world. And leaders often want to show that they are people of action. We expect more restrictions and resulting cost increases to impact supply chains around the world.
3. Generative Artificial Intelligence (GenAI)
Lastly, we cannot – of course - escape AI and GenAI. This year, we expect AI’s Supply Chain impact to be felt in the following areas:
- Ensuring data consistency
AI will be used to identify inconsistencies in data, analysis and documentation. Across supply chains, we see oceans of inconsistent data – from mislabeled industry codes to typos in different fields. AI can help improve the quality of underlying data and its analysis.
- Risk monitoring
Supply chain risk monitoring is often handicapped by the constant flow of useless and irrelevant notifications. Improving the definitions and relevance of alerts remains a human job. What AI can do is deliver meaningful notifications and workflow – including tracking whether a human has given every useful alert the due attention it deserves.
- Problem-solving and solution mapping
GenAI will also be leveraged to define mainstream solutions to Supply Chain issues. Much like how a GPS usually recommends the same route to all drivers with the same destination, GenAI will be able to generate a viable solution for all Supply Chain leaders with the same problem. Once they have seen GenAI’s recommendations, it will be each leader’s individual choice whether to follow the suggested path – or, design an original solution that is a better fit for their company.
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