Supply Chain Predictions 2023 Part 2

Last week, we summarized predictions on supply chain technology from Gartner. (See Supply Chain Predictions 2023.)

In some years, Gartner has offered predictions for other supply chain topics, such as global logistics and plannng, but just the one set this year.

But there were some related "predicts" from Gartner, including a set for manufactuing CIOs, and also for the retail sector.

Let's take a look, starting with manufacturing.

Gartner's Simon Jacobson predicts that "by 2025, three out of five smart factory initiatives will fail due to a lack of supply chain integration, resulting in significant cost constraints and customer service issues"

Wow, a 60% failure rate? What is going on?

Gartner does see value in "smart factories," which "are essential to transforming manufacturing's role in value networks."

The risk is that a failure to connect smart factory initiatives with the rest of the supply chain will lead to site-level optimization of production only, instead of addressing costly constraints across the network.

"High-performing smart factory programs prioritize the harmonization and integration of production data, both historical and real-time, from multiple sites," Gartner adds.

What to do? First, Gartner says, "stop treating smart factories as IT projects designed to remove site-level variability."

Instead, start treating them as enterprise strategies that can eliminate variability elsewhere in the supply chain or at the customer's point of use.

Companies should also capitalize on the additionally benefits that new sources of data offer, Gartner adds, such as by using it "for more than factory-level improvements - it can also help extend production processes and integrate them with planning and logistics functions."

Next up, Sohard Aggarwal and Lillian Oyen-Ustad, who predict that "by 2026, supply chain regionalization efforts will more than halve the time it takes manufacturers to source, produce and ship products."

Gartner notes that global models will continue to be disrupted as the supply chain landscape remains dynamic.

"As supply chain leaders face pressure to reduce costs, emissions and complexity, the business case for regionalization is becoming increasingly clear," Gartner adds,

That should push companies to implement technologies that offer increased visibility into costs and processes on a global basis.

What is the impact? Gartner says that strategies to incorporate regionalized models into global supply chains will play a growing role in building tomorrow's supply chain networks - with sustainability an increasingly important factor.

This drive to regional is because "long and complex global supply chains are fragile," Gartner notes.

However, regionalization models will increasingly be enabled by technology that allows for real-time data monitoring and enable manufacturers to make informed decisions that promote operational excellence.

What to do?

Gartner recommends in part that companies commit to short-term and long-term IT investments after identifying the most impactful approaches to achieving supply chain visibility, such as introducing IoT platforms and traceability data governance.

"This will enable companies to determine the feasibility of regionalization," Gartner concludes.

Switching to the retail sector, Jonathan Kutner and Robert Hetu predict that "through 2025, fashion and apparel gross margins for multichannel retailers will drop by as much as 10 percentage points from 2022 levels."

Why? Among the factors:

• Retailers will be impacted by the global labor shortage that is restricting manufacturing output and increasing costs.

• The colossal changes in production practices from the advancement of the circular economy, and solutions for a sustainable future, will add new costs to the manufacturing of clothing.

Also, the World Bank Group estimates that global food, fuel, and fertilizer prices will remain elevated up to 2024, forcing fashion manufacturing costs up and customers' disposable incomes down.

"Fashion and apparel retailers have benefited from secure and cut-price global supply chains for the last five decades. More recently, they have grown new revenue streams from expanding digital and social channels," Gartner notes, adding that "These two factors are now plateauing in maturity and retailers that operate unified commerce strategies urgently need new approaches to protect margin and preserve profitability."

What can retailers do? Urgent action is needed Gartner says, including the following:

• Utilize tools that support a cost and profitability analysis by touchpoint to understand the contribution of each to the total organization's profit and loss.

• Implement AI merchandising to optimize margin across channels, including the physical store and touchpoints.

So there you have it in terms of predictions from Gartner for 2023. Will be back with one last set od predictions from other analysts next week.

What is your reaction to these Gartner predicts part 2? What numbers would you add? Let us know your thought at the Feedback section below.