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Five Powerful Predictions For Supply Chains In 2022

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Supply Chains In 2022

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Five Powerful Predictions For Supply Chains In 2022

It won't be an overstatement anymore to say that among the top three things on every CEO's and boards' mind is this question - what is next in the global supply chain?

Generally, I stay away from making any predictions solely because there are far too many different kinds of supply chains, and there are always unexpected twists and turns in every supply chain.

Moreover, it is a thankless task to pre-warn people of upcoming disasters.

But, this year, the writing on the wall is so clear and, so important, that I made this prediction the inaugural topic of my newsletter on LinkedIn.

So what do I see for supply chains in 2022? Let's look clearly:

1. Shifting Bottlenecks All Over The Supply Chains In 2022

One of the most important characteristics of the supply chain bottlenecks is that they are never stable.

By definition, as you ease the bottleneck in one area, such as shipping, new bottlenecks will show up in associated areas. The Knock-on effect will also cause shifting inventory surpluses and shortages.

Add to that the ongoing saga of COVID-19 and the complications make the overall supply chain picture extremely chaotic and unmanageable.

If 2019 was the time of extreme VUCA (Volatility, Uncertainty, Complexity and Ambiguity) then 2020-23 will be the time of debilitating bottlenecks, shortages and excesses.

It seems like everything is affected - both in terms of costs and prices. I talked about this briefly in a short piece at the start of 2020 when I built my nine-scenarios model -

coupling 3 scenarios each of demand and supply. Seems like those scenarios have indeed come true.

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2. Shipping Industry Trying To Cling To Its Prominence

The shipping industry gained an unprecedented prominence in 2021, thanks to the bottlenecks at some of the less efficient, and poorly managed ports on the western seaboard of the USA.

The knock-on effect was felt by shipping lines, ports, and even shippers all over the world.

The unusual profits and attention that the industry received were followed by some good moves and many not so good ones inside the shipping industry.

Another effect was the industry's over-reliance on this prominence to achieve its own agenda at the cost of its supply chain partners and customers.

The industry will try and cling to this prominence even when the bottlenecks move elsewhere within the supply chain, and try and ram down its own agenda during its dealing with the shippers and the consignees.

It remains to be seen whether they will succeed, or not. That depends on a number of factors, including how rapidly does the situation evolve,

and how familiar are the shippers and consignees with the shipping industry structure, performance and conduct. Each company will fare on its own merits in these intense upcoming negotiations.

3. De-China-Isation And Protectionism

Even the Chinese are unhappy with China today. A few years ago, China could do nothing wrong - today, it can do nothing right, apparently.

Of course, there are reasons for this turn of events, which I will not go into because they are all well known.

But, one thing is certain - the attempts to remove China from companies' supply chains will certainly reduce over-reliance on china for the manufacturing part of the supply chain management.

No customer likes to be treated badly, or cheated, or lied to. And, no customer likes one-sided trading terms either, no matter how surreptitiously they are brought in.

I warned about this predicament in the preface of my last book and looks like that scenario has now firmly come to pass.

So, who will replace China in the global supply chain? India? Vietnam? Thailand?

I think no one. No other country has that strength of strategic platform - the combination of size, skills, hunger, and economic power.

I would like to say India might be able to do that, but, every project foray on behalf of multi-national clients we have had in India over the past three decades has by now convinced me otherwise.

A discussion on Indian supply chain preparedness will take up an entire article in itself, which I might do at a later day.

What, then, will replace the manufacturing hubs of China? This question leads us to the next point.

4. Multiple Global Hubs Starting To Emerge

This is where the picture starts to become blurry.

On one hand, emerging technologies such as 3-D printing, robotics, and automation are reducing the need for global manufacturing hubs.

But, we have to also acknowledge that even when the technology is on the brink of becoming viable - it still takes a long time to actually become viable.

On the other hand, the new hubs are all jostling for a piece of the China pie. Vietnam, India, Thailand, Myanmar, Bangladesh, Malaysia, Indonesia, Ethiopia, Morocco, and many others are all positioning themselves as a potential replacement for China.

They will likely all succeed, and, all fail together. Together, they will be able to countervail the pull of today's China. Single-y,

none of them will possibly be able to do this. Yet, there is nothing to unite them together in a bloc, or an emerging bloc. And, that is the conundrum.

The key question is how will each of the potential replacements find their own place under the sun (in this case in the emerging global supply chain?)

There are many possibilities, some more directive than others. I would like to think that they will be able to see the light and specialise in what they do best. This leads us to the next trend.

5. Further Specialisation And Rapid Upskilling

The truth is that, for many years, low cost and willing labour were the only two advantages of China. But that reality changed over the two decades we have been running Global Supply Chain Group.

In fact, China's view of itself changed too, along with its expectations of profits from the global supply chains -which is the underlying reason for this current supply chain reshuffle in the first place.

I am not going to go into the question of whether China is replaceable, or not? In fact, there is no need to even consider that question as we move into a brave new world of digital supply chains and rapid global digitisation.

The workforce, in almost every emerging supply chain hub, is upskilling rapidly, and the manufacturing technology is still available relatively freely. A few years more, and the scenario might have changed irretrievably.

Having tasted the rewards of capitalism and global supply chains, the producers and the consumers are all hungry for more of the same.

This energy will be gradually channelised, either by design or by trial and error, into a multi-hub manufacturing model for each supply chain.

The further specialisation will lead to a much higher level of skill sets, almost unavailable in any other part of the supply chain and a new kind of outsourcing will emerge.

I covered this in my book Outsourcing 3.0 and produce below a self-explanatory graphic from the same resource kit.

No alt text provided for this image

I could go on about more trends but that will only dilute the importance of these five key ones for the readers.

Farewell Supply Chains 2021

Supply chains are getting even more complex, which we thought was not possible. Unprecedented scenarios like OMICRON, and war, pestilence, shortages and surpluses are all likely,

all at the same time. Today, we have to be prepared for almost anything - if that is possible at all.

I thank you for reading my thoughts in this newsletter, which are entirely my own. I take the responsibility for all deficiencies and missed calls.

However, now I have come to an age, where I can tolerate a few stones if you throw them at me. Don't hesitate to note down your comments below, and get this newsletter.

It will always start a few fresh lines of thinking - some of which will be useful in your business and your life.

Wishing you a Merry Christmas, and a Happy New Year and hope 2022 will be a little bit more stable and uneventful.

Bon voyage.

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Copyright - These concepts, frameworks and ideas are copyright of GLOBAL SUPPLY CHAIN GROUP from the time of their creation. Do NOT copy these without permission and proper attribution.

Notes:

1. These ideas and concepts will be usually expressed by our thought leaders in multiple forums - conferences, speeches, books, reports, workshops, webinars, videos and training. You may have heard us say the same thing before.

2. The date shown above the article refers to the day when this article was updated. This blog post or article may have been written anytime prior to that date.

3. All anecdotes are based on true stories to highlight the key points of the article - some details are changed to protect identification of the parties involved.

4. You are encouraged to comment below - your real identity and email will not be revealed when your comment is displayed. Insightful comments will be featured, and will win a copy of one of our books. Please keep the comments relevant, decorous and respectful of everyone. All comments represent opinions of the commentators.

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ABOUT THE PRINCIPAL AUTHOR

Today, Vivek and his partners are among 20-30 people on the planet earth who have this deep understanding of supply chain systems, practices and tools. CEOs, COOs, executives and Boards call them in most challenging situations once they know the full potential of supply chain based transformations. Following are key milestones in Vivek's journey:

  • Started in 1983 as a merchant navy cadet at 18 years age, worked his way to qualify as a Captain – qualified to take command of any merchant ship, worldwide.
  • Earned a top tier MBA from UNSW at the top of his class.
  • Joined highly regarded strategy consulting firm Booz Allen & Hamilton, consulting to the CEOs, Boards and senior management of global corporations within Australia.
  • To learn and specialise in supply chain – against all odds, sought out the co-inventor of supply chain in Germany and convinced him to be a partner in his firm, GLOBAL SUPPLY CHAIN GROUP, launched in January 2000.
  • More than 500 successful blue chip projects with high impact business transformations in large corporations using the full power of SUPPLY CHAIN MANAGEMENT.
  • 4 Seminal and path breaking business books IN SUPPLY CHAIN MANAGEMENT – these are available in bookstores and universities and libraries worldwide.

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If you are deeply passionate about the world of business and supply chain networks as I am, and enjoy digging answers to critical questions that will help build and steer your business with wisdom, then join me. This book is a journey of exploration through the world of business networks that run along the veins of today’s commercial world.

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OUTPERFORM OUTSOURCE OUTPROFIT

The trend of outsourcing continues to grow unabated with the whole gamut of services, from simple to mission-critical tasks. There is not a single company on earth that does not outsource anything. It is not just about cost arbitrage, it is also a finer expression of division of labour at the organisational level. Like all leverage, outsourcing is a double-edged sword too. On one hand, it allows you to do more, faster. On the other hand, if it goes bad, it can easily kill your business. If you do not believe that is possible – you can google the Fox Meyer saga from the 90s and see for yourself.

4.3
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UNCHAIN YOUR CORPORATION

Businesses Are Chained By Unseen Chains. If You Are Looking For Ways To “Unchain Your Corporation” A Successful Business Transformation Is Required.

Successful Business Transformations Are Difficult, Yet Rewarding.

Business Transformation Is Fast Becoming A Question Of Survival In The Modern Globalised Era.

Modern Supply Chains Integrate Businesses And Economies Faster By Systematic Information Sharing From Internal And External Sources.

Companies Can Multiply Profits By Progressively Ramping Up Cohesion And Collaboration Of All Moving Parts In B2B Network To Achieve Tighter Integration.

4.3
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GREEN SUPPLY CHAIN – AN ACTION MANIFESTO

It is generally accepted that environmental consciousness is now changing to environmental proactiveness as organizations are discovering that it makes good commercial sense.

Boards are asking the management to review their policies related to environmental norms, not only to bolster their corporate social responsibility aims, but also because consumers are asking for greener supply chains

It is also widely agreed that consumers will increasingly prefer to buy more and even pay more for products or services provided in an environmentally sound manner.

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