June 12, 2024
May 2024
Editorial
Businesses are increasingly prioritizing sustainable procurement practices driven by cost reduction, brand reputation, and stakeholder relationships. Leading procurement programs focus on stakeholder engagement, data-driven decision-making, supplier engagement, and technology adoption for transparency and skills development. The rapid transformation in procurement, influenced by internal and external pressures, requires managers to leverage insights and advanced technologies for smarter buying. Strategic sourcing, emphasizing local procurement, offers benefits such as fresher products, lower carbon footprints, and supply chain resilience. Additionally, companies like HMD Global are considering local sourcing of semiconductor chips in India to enhance production and exports.
The integration of AI into supply chain operations is transforming logistics, enabling automation, demand forecasting, and inventory management. Despite challenges such as high costs and infrastructure limitations, the AI market in supply chain management is projected to grow significantly. Meanwhile, the air cargo industry has seen a 12% YoY increase in global volumes, driven by e-commerce demand from China to North America. However, impending U.S. regulations on Chinese e-commerce shipments could affect rates and demand. Partnerships like DHL and Sanofi in France aim to optimize supply chains and improve patient outcomes through advanced logistics solutions.
Procurement & Sourcing
Five strategies to make procurement more sustainable
- Sustainable procurement practices are increasingly prioritized by companies, driven by cost reduction, improved brand reputation, and stakeholder relationships.
- Leading procurement programs excel in stakeholder engagement, data-driven decision-making, deep supplier engagement, technology adoption for transparency, and ensuring the right skills within the procurement organization.
- Procurement is undergoing rapid transformation, with pressure from both ends of the supply chain and internally within companies.
- To address these challenges, procurement managers need to leverage insights and cutting-edge technologies to buy smarter and thrive in any economy.
- COFCO International, China's leading food group, has received its first shipment of deforestation-free soybeans, signaling a shift towards sustainability in China's agricultural imports.
- Chinese companies, including COFCO, Mengniu Dairy, and Yili Industrial Group, are increasingly demanding sustainable agricultural products, influenced by policy signals, investor pressure, and international agreements.
- Strategic sourcing involves continuous evaluation and alignment of purchasing activities with business goals to maximize value from purchasing decisions.
- Local sourcing, driven by economic, environmental, and consumer-driven factors, offers advantages such as fresher products, lower carbon footprint, support for local economies, product traceability, and supply chain resilience.
- HMD Global, the maker of Nokia brand phones, is considering sourcing semiconductor chips from India for local production and exports, provided they meet quality and cost requirements.
- With plans to introduce its own brand of devices, HMD aims to increase local sourcing of components and ramp up production in India, leveraging government initiatives like production-linked incentive schemes.
Technology, Automation & AI
Finding the right AI partner for your supply chain
- Highlights the need for supply chain leaders to navigate the overwhelming landscape of AI vendors by prioritizing solutions with proven track records over those riding the wave of industry buzz.
- Explores the transformative potential of purpose-built AI applications in optimizing Maintenance, Repair, and Operations (MRO) inventory management and procurement processes, citing real-world examples of significant cost savings and operational enhancements achieved through strategic AI implementation.
- The automotive industry's complex supply chains have faced numerous challenges in recent years, reflecting a trend towards decentralization and fragmentation, prompting a need for revamped logistics strategies.
- Emerging technological capabilities, such as real-time monitoring and risk assessments provided by companies like Everstream Analytics, offer opportunities for businesses to mitigate supply chain disruptions and enhance resilience. Additionally, the integration of AI into supply chain logistics enables deeper insights and predictive analytics to proactively address potential disruptions.
- The AI in supply chain market is forecasted to reach US$58.55 billion by 2031, with a notable compound annual growth rate of 40.4% from 2024 to 2031, according to a report by Meticulous Research.
- Artificial intelligence (AI) integration in supply chain operations enables automation of tasks, demand forecasting, route optimization, inventory management, and security monitoring, fostering a new era of industrial transformation. However, challenges such as high procurement costs and inadequate infrastructure hinder market growth. The market is segmented by offering, technology, deployment mode, application, and end-use industry, with analysis conducted at regional and country levels.
- Challenges in Supply Chain Planning: Recent events such as the Covid-19 pandemic, geopolitical conflicts, and trade wars have underscored the need for businesses to enhance agility and resilience in their supply chains. Flawed forecasting processes often lead to delivery delays, mismatched inventory levels, and poor financial performance, hindering effective decision-making.
- Introducing Optimal Machine Learning (OML): To address these challenges, we have developed a novel approach called Optimal Machine Learning (OML), which leverages machine learning and historical data to generate superior recommendations for supply chain decisions. Unlike conventional methods that focus on creating more accurate forecasts, OML emphasizes making actual decisions. This methodology integrates artificial intelligence to create a mathematical model that links key supply chain data inputs to planning decisions, considering company priorities, budget restrictions, and resource constraints.
- High Investment and Expectations for Generative AI: 87% of C-suite executives in supply chain and production plan to increase investments in generative AI, with 85% expecting returns by 2024. However, there is a recognized need for widespread and advanced training in the technology.
- Challenges and Opportunities in Adoption: Only 42% of executives use generative AI tools weekly, a decline from 71% six months ago. While 54% see a need for intermediate training and 40% for advanced training, just 15% feel confident in their data strategy and digital capabilities to leverage generative AI effectively.
Sales & Operations
The strategic advantage omnichannel retailers have over Amazon
- Consumer Behavior Impact: Research reveals a significant lack of consumer awareness regarding the sustainability costs of home delivery in e-commerce. However, when informed about these impacts, 60% of participants shifted preference to store pickup, highlighting the potential for informed consumers to prioritize sustainability.
- Retailer Opportunities: Omnichannel retailers could seize financial gains and environmental benefits by leveraging sustainability information to encourage store pickup. This shift could recapture billions in annual profits, reduce operational costs, and mitigate environmental impacts such as plastic waste and CO2 emissions.
- Declining Sales and Interest in Apple Vision Pro: Despite initial excitement, Apple's Vision Pro headset is facing significantly reduced demand, with sales forecasts halved from 800,000 to 400,000-450,000 units for 2024. Factors contributing to poor sales include its high price ($3,500), lack of significant advantages over existing devices, and absence of a compelling "killer app."
- Broader Implications for Mixed Reality Headsets: The drop in interest suggests that mixed reality headsets, including competitors like Meta's Quest, may struggle to gain widespread consumer adoption. For these devices to become mainstream, they likely need to be miniaturized to the size of regular sunglasses, a technological advancement that could take at least twenty years.
- Boeing has asked suppliers to maintain the current 737 production rate of 42 per month despite the FAA capping it at 38 per month due to an ongoing audit, potentially affecting the supply chain.
- Boeing's supply chain head, Ihssane Mounir, emphasized the importance of cooperation and transparency with suppliers to address quality issues and business requirements following a recent 737 MAX 9 incident.
- DHL Supply Chain has partnered with Sanofi to enhance its logistics services for the life sciences and healthcare sector in France, covering warehousing, inventory management, and order fulfilment at three key sites.
- This collaboration aims to leverage DHL's expertise and infrastructure to optimize supply chains, improve patient outcomes, and expand DHL's Life Sciences & Healthcare division in the EMEA region.
- May saw a 12% YoY increase in global air cargo volumes due to strong e-commerce demand from China to North America. However, concerns are rising about the impact of a U.S. crackdown on Chinese e-commerce shipments, potentially lowering rates by increasing freighter availability in the general air freight market.
- Air cargo spot rates rose by 9% YoY to $2.58 per kilogram, driven by port congestion and the Red Sea conflict. Southeast Asia and China to North America rates surged, while Europe to North America rates dropped by 21% YoY.
Sources
- https://www.scmr.com/
- https://www.reuters.com/
- https://www.maersk.com/
- https://www.livemint.com/
- https://www.forbes.com/
- https://www.emergingtechbrew.com/
- https://www.insidelogistics.ca/
- https://hbr.org/
- https://www.mhlnews.com/
- https://www.fastcompany.com/
- https://www.bloomberg.com/
- https://www.stattimes.com/
- https://www.supplychaindive.com/