Supply Chain Council of European Union |

Next Gen Supply Chain Predictions: Part II

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As we reported last week, the data explosion is at its peak and becoming more mainstream across all industries – the supply chain is no exception, maintains Dr. Madhav Durbha, Group Vice President of Industry Strategy at LLamasoft, a leading leading provider of enterprise supply chain design technology.

He predicts that Artificial Intelligence (AI) and Machine Learning (ML) will move beyond its current “hype cycle” next year to offer more tangible use cases that deliver real business value.

Regionalization and “The Splinternet of Things”

Trade wars and economic nationalism have kicked supply chain conversations into high gear during 2019, observes Durbha.

“Decades old strategic decisions are being reevaluated considering the changing global economy,” he says. “For 2020, regionalization efforts will continue in the physical supply chain and will cascade into the digital form as the splinternet trend will gain momentum.”

According to Durbha, some 50% of companies with exposure to China were already looking for other sources of supply and manufacturing due to rising wages in China when the trade wars started.  The trade wars increased awareness of C-Level leaders to potential geopolitical exposure and risk and will drive more companies to reconsider their global sourcing decisions.

“Manufacturing, warehousing, fulfillment, and transportation will continue to be automated – thus driving down the percentage share of labor costs in an item,” says. “As the share of capital costs of items increases labor costs advantages will be mitigated.  This will further reduce the need for low cost labor as Industry 4.0 will serve as an equalization factor for manufacturing economies to thrive in all regions.”

As the amount of organizations who onshore or nearshore materials continue, they will benefit from being able to more quickly respond to rapidly changing customer preferences as their supply lines are shorter, maintains Durbha. This will lead to a decrease in inventory and working capital reductions that will be partly reinvested into local infrastructure where capacities and manufacturing capabilities will need to be built as existing capacities are exited overseas.

“The EU’s GDPR legislation had impacts that were global in nature considering data privacy and ownership,” Durbha says. “This is not an isolated event.  It serves as a proxy for similar policies that will be issued from other governing bodies on a global basis as ownership of data becomes critically important in a digital world. 

He concludes by noting that The GDPR and China’s “Great Firewall” have led to the “Splinternet of Things” –  the internet splintering and dividing due to factors such as nationalism, politics and regional data legislations.

About the Author

Patrick Burnson, Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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