2022 Supply Chain Predictions from the Analysts Part 3

Over the last two weeks, I began my annual look at what leading analysts have in their crystal balls in terms of predictions for 2022 and and beyond, both columns looking at predictions from Gartner. (See 2022 Supply Chain Predictions from the Analysts Part 1 and Part 2.)

This week, I will summarize and comment on predictions from Simon Ellis and the other analyts from IDC, noting before I do that IDC's research is focused on manufacturing supply chains.

Before going into their 10 supply chain predictions for 2022 and beyond, the IDC analysts offer some introductory comments, including this:

"The importance of the supply chain to business success in the modern, digital economy means transitioning from a functional area that has traditionally been viewed as 'cost center' to a functional area that must be leveraged as an 'opportunity center,'" IDC writes, adding that "In addition to functional excellence, this means having the ability to collect, consume, and disseminate data-driven insights in real time both within the supply chain and to adjacent functions such as sales and marketing."

They also note the heavy emphasis in the last nearly two years on supply chain resilience in the face of great dynamics and frequent disruptions should not invalidate the supply chain transformation journey that so many companies are pursuing - "in fact, we think it validates it," IDC says.

So I picked three of the ten predictions to summarize here, starting with number 2: "By 2023, 50% of all supply chain forecasts will be automated through the use of artificial intelligence, improving accuracy by 5 percentage points."

After noting the challenges of traditional forecasting, IDC has this to say: "As data sets become more commonplace and accurate, from traditional sources like ERP and emerging ones like social media and sensors (IoT), it is conceivable that short-term forecasting will give way completely to replenishment based on actual demand."

Now that is not a new concept (see the notion of "Flowcasting" two decades back), but provocative nevertheless. IDC notes demand visibility has improved dramatically recently and that that will likely continue.

Along the same lines, IDC notes that "The components are increasingly in place, we believe, to transform demand replenishment from one that is primarily forecast based to one that is response based."

That's all good, but oddly, after including artificial intelligence as key to the prediction, there is no discussion of it at all in the related commentary.

Is the 5 percentage point improvement in forecast accuracy from AI being realized today? How? Do you acquire AI forecasting or build it in house? The write-up that in effect is saying short term forecasting is going away seems at odds with prediction.

So let's move on to number 3: "By 2024, to improve long-term supply chain profitability, 70% of manufacturers in global supply chains will invest in software tools to support sustainability and circular economy business models."

IDC starts by throwing down a marker, writing that "Manufacturers that digitally transform and implement initiatives that support sustainability should see a clear advantage reflected in revenue and profit performance compared with their non-digital and non-sustainable peers."

The growing corporate focus on "green" is not just for corporate social responsibility "posters" but fundamentally about the way that supply chains operate, IDC says, adding that there is an increase in corporate policies driving sustainable practices now as a strategic imperative for organizations.

IDC also notes that sustainability is becoming an increasing factor in where people live and what companies they may work for.

So I generally agree and think the prediction for lots of investment in technology tools to at minimum capture and report on so-called ESG (environmental, social and governance) performance is almost a no brainer.

I am less certain on the growth of the circular economy, at least if taken to calls by many where companies and consumers would actually not own the products they buy, but rather would be obligated to return them to the manufacturer for re-use, refurbishment, material harvesting, etc., at end-of-life.

But as I write this I agree companies will be pushed to take a more full lifecycle view as to what happens to the products they sell - and it will take a whole lot of software to well track that lifecycle data. Someone will make a lot of money on such technology.

"IT will need to incorporate environmental sustainability into technology decision making, management, and investment actions," IDC says.

Finally, let's move on to prediction 7: "To improve delivery speed, agility, and visibility for B2B and B2C customers, 35% of manufacturers will invest in order management software by 2024, resulting in a 25% improvement in OTIF fulfillment." OTIF is "on-time, in-full."

My first reaction was, well, most every company has Order Management capabilities, often from their ERP providers. But I will also note there has been a lot of growth in something called Distributed Order Management (DOM), a cousin of traditional OMS, but more focused on optimal sourcing logic, especially but not exclusively for ecommerce fulfillment.

Companies relying on ERP or legacy homegrown systems for "order orchestration" are finding that "Those systems were not built to handle complex orders that consist of hundreds of lines, which might require unique purchase orders and work orders and bills of materials," IDC writes.

IDC adds that "Contingent rules and restrictions, returns, and pricing rules can overload these systems."

I agree, but think it's more than that. The challenge is the need to frequently change optimal sourcing rules, and how to easily allocate inventory across different channels and demand scenarios. For example, I recently spoke with a major equipment maker that had this challenge: knowing when is it OK to take an order from a dealer that has already reached its allocation for a given month.

"With visibility into orders and inventory, B2B organizations can more quickly and intelligently make decisions about whom to favor with merchandise and send product on its way faster and more efficiently" IDC says.

Although not using this term, IDC references what I have always called an "order hub" and which involves the "need to split orders and send to different ERPs," - this is something DOM can do, sitting over top of multiple traditional OMSs.

IDC also recommends that B2B companies should "start to think of serving the customer from a B2C perspective (i.e., strive for seamless digital experiences, easy to navigate interfaces, and speed, efficiency, and flexibility)."

I agree with that.

So there you have it, a summary of three of the ten 2022 supply chain predictions from IDC. They are very much a different type than those from Gartner.

I will close by noting just how difficult it is to develop those predictions. Try to come up with a few interesting ones yourself for 2022 to see just how hard. But if you have any we'd love to see them.

Any reaction to the IDC predictions? Have any of your own? Let us know your thoughts at the Feedback button (email) or section below.