October 1, 2024
September 2024
Editorial
This month, we address key developments in procurement, sourcing, technology, and automation, reflecting the ongoing transformation within global supply chains.
One of the most notable developments is Patagonia’s commitment to Canopy’s Pack4Good initiative. By transitioning away from forest-sourced packaging and utilizing non-forest fibers such as agricultural waste, Patagonia continues to lead in environmental responsibility. This move supports the development of Next Generation materials, contributing to the preservation of biodiversity and the reduction of deforestation, while furthering Patagonia’s sustainability goals.
In the procurement sector, Vertice's research has revealed that only 18% of businesses have optimized their procurement processes, leading to significant competitive advantages. The introduction of Vertice’s "Intelligent Workflows" tool provides automated solutions designed to streamline procurement, reduce manual workloads, and enhance decision-making capabilities. This innovation offers companies an opportunity to improve operational efficiency and respond more swiftly to market demands.
In the realm of sourcing, Puma has announced the promotion of Indrajeet Sen to Senior Vice President for Global Sourcing. Sen’s appointment aligns with Puma’s ongoing efforts to improve transparency and sustainability within its leather supply chain, particularly through its involvement in the Deforestation-Free Call to Action for Leather initiative.
On the technological front, GE Aerospace’s increase in component sourcing from India highlights the expanding role of emerging markets in advanced manufacturing. With a focus on next-generation engines designed for improved fuel efficiency, GE’s efforts are a part of the broader industry shift towards more sustainable aerospace solutions.
Finally, automation and artificial intelligence continue to reshape supply chain management. Alibaba’s AI-powered sourcing agent and Amazon Web Services’ significant investment in AI and cloud infrastructure underscore the importance of leveraging technology to improve efficiency and meet evolving business needs.
Procurement & Sourcing
Patagonia vows to stop sourcing fibres from endangered forests
- Patagonia has joined Canopy’s Pack4Good initiative to eliminate forest-sourced packaging by using non-forest fibers, such as agricultural waste, to reduce deforestation.
- The initiative supports the development of Next Gen materials to protect biodiversity and climate, with Patagonia already using 100% recycled content in its packaging and catalogues.
- Vertice's research reveals that only 18% of businesses have optimized procurement processes, leading to significant competitive advantages like faster implementation of new initiatives and product launches. In contrast, 82% of businesses with outdated, manual processes perform worse.
- To address this, Vertice has launched "Intelligent Workflows," an automated procurement orchestration tool that simplifies purchasing, reduces manual effort, and improves control and decision-making for procurement teams.
- Puma has appointed Indrajeet Sen as Senior Vice President for Puma Group Sourcing, responsible for global sourcing, product development, and sustainability, replacing Chief Sourcing Officer Anne-Laure Descours, who will become an external sustainability advisor after her departure in 2024.
- Sen's promotion comes as Puma aims to enhance transparency in its leather supply chain, having joined the Deforestation-Free Call to Action for Leather initiative in 2023 to improve visibility of raw material sourcing.
- GE Aerospace's component sourcing from India has surged 20 times from 2018 to 2022, with major contributions from 13 Indian suppliers, including Tata Advanced Systems Ltd (TASL), which signed a $1 billion contract to supply commercial aircraft engine components. GE currently operates over 1,300 engines in India, with 2,000 more on order over the next 9 years.
- GE is also developing next-generation "open fan architecture" engines at its Bengaluru facility, aimed at improving fuel efficiency by 20%. These sustainable technologies, part of CFM's RISE program, target a mid-2030s service entry for narrow-body planes.
- Lego is increasing its sustainable sourcing, with 22% of its raw materials now coming from renewable and recycled sources, as part of its goal to reduce reliance on virgin fossil fuels. In H1 2024, 30% of purchased resin was certified mass balance, up from 18% in 2023.
- To further cut emissions, Lego launched a Supplier Sustainability Programme in July, requiring suppliers to set emission reduction targets for 2026 and 2028. The program includes a carbon reduction KPI linked to employee bonuses, supporting Lego’s goal of achieving net zero emissions by 2050.
Technology, Automation & AI
Amazon makes £8 billion UK investment to build cloud and AI infrastructure
- Amazon Web Services (AWS) announced an £8 billion ($10.45 billion) investment to build and operate data centers in the U.K. over the next five years, expanding its cloud and AI infrastructure. This move supports the growing demand for cloud computing and generative AI among British businesses.
- The investment comes amid regulatory scrutiny in the U.K. cloud market, with the Competition and Markets Authority (CMA) examining AWS and Microsoft. AWS stated that it is collaborating with regulators while emphasizing the need for innovation-friendly regulation.
- AI-Powered Sourcing Agent: Alibaba.com introduced an AI-powered sourcing agent at the CoCreate conference, which simplifies the B2B sourcing process. Key features include conversational search, proactive sourcing recommendations, and intelligent supplier comparisons, enhancing the ability of small and medium-sized enterprises (SMEs) to navigate global trade.
- Financial and Logistics Solutions: To support SMEs, Alibaba.com launched new financial tools such as the Business Edge Credit Card and a Buy-Now-Pay-Later program. Additionally, enhanced logistics services focus on optimizing delivery speed, competitive shipping options, and offering real-time tracking to streamline the supply chain experience.
- Automation is essential for Black Friday: It helps retailers handle high order volumes, reduce operational costs, streamline logistics (such as carrier selection and inventory management), and improve customer experience through technologies like AI, automated picking systems, and real-time order tracking.
- Selecting the right technology stack: Retailers must adopt a scalable and integrated technology stack that can handle current and future needs, ensuring seamless operations and positioning them for long-term growth in an increasingly competitive and global market.
- Food bloggers like the Leungs of The Woks of Life express worries that AI-generated recipes can lead to dangerous outcomes and lack the cultural depth and sensory nuances found in human-created recipes. An example includes a past incident where an AI mistakenly generated a recipe that produced toxic chlorine gas.
- AI as a Supplementary Tool: While acknowledging the limitations of AI in replicating the intricate storytelling and personal touch of human chefs, some like Andrew Olson see potential for AI to enhance creativity and streamline the brainstorming process in recipe development, provided safety checks are in place.
- Shein utilizes AI-powered algorithms to rapidly adjust its supply chain in response to changing consumer demand, enabling it to list up to 600,000 items at once. However, this efficiency raises concerns about environmental sustainability, as Shein has become the largest polluter in the fashion industry, with a carbon footprint of 16.7 million tonnes in 2023, and reports of labor rights violations among factory workers.
- While generative AI offers potential benefits in optimizing production and reducing waste, it also poses risks of copyright infringement, as seen in lawsuits against Shein for using AI to replicate artists' designs without permission. Experts warn that if AI is primarily used to accelerate production rather than improve sustainability, it could exacerbate issues of overconsumption and exploitation in the fast fashion industry.
Sales & Operations
Semiconductor manufacturing equipment growth to set new high in 2025
- Global sales of semiconductor manufacturing equipment are projected to reach a record $109 billion in 2024, marking a 3.4% year-on-year increase, with further growth expected in 2025 to $128 billion. This expansion is fueled by robust demand in both front-end and back-end segments, driven by applications in Artificial Intelligence (AI).
- The wafer fab equipment segment is anticipated to grow to $98 billion in 2024, supported by increased investments in DRAM and HBM due to AI computing. Meanwhile, the back-end equipment segment is expected to recover, with sales of semiconductor test equipment rising 7.4% and assembly and packaging equipment increasing by 10.0% in 2024. Regionally, China, Taiwan, and South Korea will lead equipment spending, with China alone projected to surpass $35 billion in purchases in 2024, although a contraction is expected in 2025 following previous heavy investments.
- Record EV Sales Despite Challenges: Global electric vehicle sales reached 6.15 million in the first half of 2024, marking a 21% market share, despite reports of slowing growth. The decline in growth is attributed to consumer behavior shifts and regional disparities rather than an overall decrease in demand.
- Automakers' Strategic Shifts: Legacy OEMs are adjusting strategies amid rising costs and competition from cheaper Chinese EVs. They focus on cost-cutting in logistics and supply chains while exploring new battery technologies to lower production costs and meet evolving consumer preferences.
- Temporary Suspension of French Fry Sales: McDonald's Korea has paused the sale of french fries due to unexpected supply chain issues, with no specified date for resumption. In lieu of fries, customers will receive a free medium-sized cola with burger purchase.
- Previous Disruptions: This is not the first time McDonald's Korea has faced such interruptions; the company also suspended french fry sales in August 2021 and February 2022 due to difficulties in potato imports, linked to the COVID-19 pandemic and logistics challenges.
- Nostalgic Resurgence: Tamagotchi sales have surged, doubling between 2022 and 2023, leading to the opening of its first UK shop in Camden Market. The brand, originally a 1990s phenomenon, has successfully attracted both nostalgic millennials and a new generation of kids with enhanced functionality, including Wi-Fi connectivity and downloadable items.
- Community and Escapism: The revival of Tamagotchi fosters a sense of community among fans, with many sharing experiences online. For enthusiasts like Emma and Koby, engaging with these virtual pets offers a form of escapism and a connection to simpler times, making it a cherished hobby amidst modern challenges.
- Retail Sales Boost: British retailers experienced a 1% increase in sales volumes in August, surpassing expectations of a 0.4% rise, driven by warmer weather and end-of-season discounts, particularly benefiting clothing and food sectors. Supermarkets reported the largest annual increase in food sales since summer 2021, contributing to a broader retail growth over the past three months.
- Consumer Confidence Decline: Despite the sales growth, consumer confidence plummeted in September, with the GfK Consumer Confidence Index dropping seven points to minus 20. Concerns over personal finances and economic outlook are influencing spending behavior, suggesting that the high cost of living could further impact demand as energy prices rise in October.
Sources
- https://www.businessgreen.com/
- https://timesofindia.indiatimes.com/
- https://www.supplychaindive.com/
- https://www.cnbc.com/
- https://www.prnewswire.com/
- https://itbrief.co.nz/
- https://www.npr.org/
- https://time.com/
- https://www.digitimes.com/
- https://www.automotivelogistics.media/
- https://koreajoongangdaily.joins.com/
- https://www.bbc.co.uk/
- https://www.independent.co.uk/