Do you remember the supply shortages of toilet paper during the last 2 years? For many of us, this was certainly a new and drastic experience that dramatically demonstrated our dependence on functioning supply chains. Suddenly the risks and shortfalls in our global supply chains have been front and center in presidential briefing rooms, company boardrooms, and even family dining rooms. Supply chains are now recognized as central to business survival, success, and growth, rather than an opportunity to just reduce costs.
After the first few months of 2022, the uncertainties for the next 12 months seem to be getting even bigger rather than smaller. On top of the rapid changes due to the Covid 19 variants, there have been dramatic fluctuations in energy and pulp prices with massive implications for production and logistics costs along the supply chain. This is forcing companies in the paper and packaging industry to pass on their rising costs to their customers or, where this is not possible, to consider cutting production or deliveries in extreme cases. In combination with other factors, this will probably initially lead to further uncertainty before the "new reality" begins to ease.
For me, it comes down to 4 main themes. Resiliency, Sustainability, Visibility and Technology.
Resiliency – As supply chain risks continue to flare up
For the past 20 months, the word that everybody is using to describe what is needed has been resiliency.
Experts predict continued disruptions in the short term, with challenges around transportation, labor shortages, and supply and demand imbalances. According to a survey from the Wall Street Journal, about 45% of economists believed that it would take until the second half of 2022 for there to be improvement.
To increase resiliency across global supply chains companies will need to rebalance on-shore, near-shore and off-shore strategies for manufacturing locations. As they’ve been doing for the past two years, they’ll have to keep identifying alternate sourcing strategies to reduce dependencies on individual suppliers.
Inventory optimization strategies will continue to be crucial, helping decision-makers identify key materials, intermediates, and products, and determine how much and where to store them across the supply chain. Organizations will also need to improve collaboration and increase visibility with suppliers, logistics service providers, contract manufacturers and other key trading partners.
Sustainability is the challenge of the 2020s
Climate change, circular economy, ESG and sustainability have all become business priorities over the past few years, and our supply chains sit right in the middle of these challenges, both as a major contributor to the problems, and as a great area of focus where we can take action to address the problems.
However, there’s a gap between sustainable mission statements and the ability to carry them out. This was a major finding from an Oxford Economics survey of worldwide supply chain decision makers across industries: 88% have either created a clear mission statement around sustainability or they're in the process of writing one, but only 52% have put those words into action and reduced their shipping miles.
What’s more, less than half of those respondents said they had significant visibility into their own sourcing of sustainable products. And only 21% had complete visibility into their supplier sourcing of sustainable products.
As environmental, social and governance (ESG) initiatives continue to be a corporate priority in 2022, companies will look to their supply chains for answers. With major consumer brands reviewing their entire supply chains from a sustainability perspective, this will also have an impact on companies in the paper and packaging industry, but also on low-density products such as tissue.
Visibility drives resiliency and sustainability
The old saying goes, “you can't manage what you can’t measure”. How can we become more resilient to changes across the supply chain, or meet sustainability goals, if we do not have the data to make informed decisions?
In 2022 there will be a major focus on improving visibility to collect, consolidate and consume data and insights in real time from across the supply chain.
In the production of paper and packaging products, huge amounts of data are produced at the operational level. Using this data, people can determine how production and quality are performing, measure carbon emissions, see if they require maintenance, and so much more. Add to this the improved demand and customer data available from sentiment analysis, and social media, and environmental data such as traffic and weather patterns, and we have a real-time, 360-degree view of the supply chain.
Technology provides the data and tools
Industry 4.0 is expected to ramp up in 2022 as machine learning and AI use volumes of IoT-based and social media data from people, devices, assets, products, and vehicles across the supply chain to automate decisions and processes.
Meantime, predictive analytics will empower employees to make more informed, real-time decisions, and drive new business models.
From smart factories featuring 5G, greater connectivity and enhanced AI solutions, to smart products and assets across the supply chain, Industry 4.0 has a lot to offer companies who have invested in these technologies.
The coming year will bring greater focus on companies using Industry 4.0 within their factories, across the supply chain of smart assets, and into the hands of consumers and customers leveraging the smart products and devices it enables.
Technology will also help alleviate worker shortages and improve retention by improving the productivity and decision making of existing employees and attracting new talent with state-of-the-art tools.
And as the degree of automation increases, it frees up the workforce from repetitive tasks, and allows them to focus on more complexity problems and decisions that required human interactions. The last few months, which have been shaped by COVID, have also shown that this also makes remote working and collaboration feasible.
One thing is clear. Supply chains have had major challenges and been in the spotlight for the past 20 months, and they will continue to do so well into 2022.
To learn more about how organizations can drive resilient and sustainable supply chains in times of disruption, check out this recent Oxford Economics research: The Sustainable Supply Chain Paradox.