Organisations are looking to their supply chains for solutions as they confront new challenges and opportunities in an increasingly frenetic global marketplace. In the wake of four turbulent years, risk and resilience dovetail with tech and sustainability as the focal points for agile and modern supply chains, which are now seen as a competitive differentiator.
As the primary touch point with the supply base, procurement is tasked with redressing the balance created by disruption, while simultaneously driving innovation and delivering on a pressing ESG mandate. It is no mean feat, nor is it any wonder that the department is viewed as both a strategic powerhouse and innovation hub.
For its part, logistics has a crucial role to play. Modern procurement strategies rely on advanced logistics capabilities to deliver the agility, efficiency and responsiveness required of dynamic supply chains. So, as procurement becomes more strategic, data-driven and sustainability focused it is logistics that enables that across the supply network.
Three key trends are shaping that.
Integration of AI and advanced tech
Every business process is leveraging advanced tech, and procurement is no different. AI, machine learning and data are optimising everything from sourcing strategy and demand forecasting, through to risk mitigation and route planning. That in turn is dictating the services logistics providers offer. Those that can meet and match the demand for flexible, tech driven solutions will shape and lead the sector over the next decade.
We can already see the likes of UPS, DHL, FedEx, and Amazon using AI-powered demand forecasting to help procurement teams anticipate market needs more accurately. Equally, they’re leveraging AI and IoT to provide real-time visibility, giving procurement departments greater transparency over supplier performance, delivery times and disruptions. In an era of heightened risk and demand for efficiency, those services are crucial.
Over the next five years we’ll see AI-driven logistics continue to enhance procurement departments, offering more accurate forecasting and prediction capabilities. And, as sustainability becomes even more pressing, AI-driven logistics platforms will help procurement teams to track Scope 3 emissions and optimise routes and warehousing with greater efficiency. The net result is smarter, more agile procurement processes.
Resilience and diversification
Post pandemic disruptions keep on coming, and it’s forcing procurement teams to prioritise resilience and diversification. Many are reducing their dependence on single-source suppliers or shifting towards local or regional sourcing strategies to protect key lines. In fact, 43% of global companies are taking this approach.
This shift is reshaping logistics networks, with suppliers now spread across multiple regions, companies investing in more decentralised logistics hubs and regional distribution centres. This reduces lead time and improves responsiveness in the event of disruption.
Over the next five years we can expect to see logistics become more agile, aided by AI-powered routing systems. These systems will enhance resilience by adapting to real-time changes and rerouting shipments or adjusting transport in response to risk. This increased flexibility will be a critical aspect of maintaining supply continuity.
Sustainability as an imperative
Sustainability is the central focus for procurement, with a direct impact on logistics. Ethical sourcing, carbon reduction and circular economy principles are increasingly prevalent.
As procurement pushes on those fronts, logistics providers are adopting greener tech and more sustainable practices. The push for low-carbon operations, for example, is leading to the adoption of electric vehicles, with 30% of new freight orders predicted to be electric trucks by 2027. Sustainable aviation and marine fuels are also gaining traction, helping both industries reduce the impact of long-haul logistics.
Sustainability in procurement extends beyond environmental concern for procurement to include ethical sourcing and social responsibility. As such, procurement is selecting suppliers and logistics partners that comply with fair labour practices, resource conservation and waste minimisation.
The latter is prompting many to integrate circular economy principles into their operations and/or services. This is leading to a rise in reverse logistics, which is pushing providers to adapt by developing systems for returns, recycling, and sustainable disposal. Globally, that market is projected to reach $4.5trn1/2 in economic output by 2030. Off the back of that, the reverse logistics market is forecast to grow 15% annually.
As we look to 2030, logistics will play a vital role in enabling modern procurement strategies. As the latter embraces AI, resilience and sustainability, logistics must adapt with agile, tech-driven solutions. The future of procurement is therefore reliant on logistics to provide solutions that mitigate risk, meet ESG goals and ensure competitive advantage in a dynamic market.
Refs:
https://www.weforum.org/agenda/2023/08/data-standards-supply-chains-circular-economy/
https://www.weforum.org/impact/helping-the-circular-economy-become-a-reality/
Source: Ti Insight
Author: Tom Holmes
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