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The new year inspires growth on scales big and small, but it’s uncommon that issues from the previous year magically resolve themselves as we cross that threshold. In 2019, the global economy faced many changes, most of which are still being sorted out, and the bigger picture reveals that almost no sector has been completely invulnerable. Therefore, even though we’re only one month into the new year, there’s already much to consider as companies worldwide apply risk analysis to their 2020 business roadmaps.

Your business may have an idea of where it’s headed, but without taking a look at the larger trends that are changing the playing field, you won’t get far. In order to help you stay ahead of the game, ProcurementIQ has identified the three biggest disruptors that are currently trending in the world’s supply chains.

Geopolitical Unrest & Uncertainty

Geopolitical unrest resulting from a number of disruptive events will continue to plague supply chains in 2020. One such event is the trade war between the United States and China, the world’s two biggest economies. Although the tariffs stemming from this dispute apply to just 3% of global trade, or $550 billion of goods, according to Supply Chain Management Review, the repercussions on supply chains and trade flows around the world have caused many businesses to struggle. Not all businesses can pass down the increase in costs that these tariffs have provoked; thus, many businesses are either absorbing the increased prices by cutting into their revenue or scrambling to rearrange their supply chains.

Growing uncertainty surrounding the Brexit deal is another trend plaguing supply chains. In October, the EU announced its acceptance of the U.K.’s request for a Brexit delay until January 31. While it’s unclear exactly how U.K.-EU relations will look in the long term, the transitional period from February 1 to December 31 will provide a buffer. During this time, trade agreements will remain unchanged and the U.K. will continue operating under the EU’s rules, for the most part.

Once the changes begin to take effect, however, supply chains could be greatly impacted. For example, new legislation in the U.K. post Brexit will alter duties and taxes on different goods and services. Thus, new trade agreements will be necessary, and the logistics of shipping goods to the region will be modified, thereby potentially risking the financial health of the shipping companies that U.S. buyers rely on. Despite speculations, though, Brexit has already caused a decline in business confidence as businesses forgo fixed investments.

Sustainable Procurement & Shifts Toward a Circular Economy

As the concern over climate change intensifies, more consumers and businesses are demanding sustainably sourced products. Consequently, because manufacturing and logistics processes are responsible for a large percentage of greenhouse gas emissions, sustainable supply chains are becoming increasingly prioritized among businesses across the economy.

Also, the world’s population is growing, thereby challenging consumers and companies to shift towards a circular economy by minimizing waste and recycling products and materials as they reach the end of their life cycle. Of course, these movements are beneficial when looking at the bigger picture; however, this doesn’t mean that the amassing pressure to implement these overhauls is not disruptive. These efforts require changes to supply chain processes from design to operation that necessitate up-front costs and may feel overwhelming to many businesses.

In fact, in a recent study from Economist Intelligence Unit and LLamasoft, 38% of companies said that higher costs make it harder for them to adopt sustainable supply chains. Still, to remain competitive, build goodwill with customers and comply with changing regulations, shifting towards sustainability is becoming less of an option and more of a requirement.

New Technologies & Smart Supply Chains

Technology is always evolving. While these advancements usually improve business, they can also bring up challenges, especially as companies adjust to new upgrades or contend with competitors that have already successfully integrated them. Artificial intelligence (AI) is one such upgrade that is predicted to improve supply chain forecasts and optimize logistics. Internet of Things (IoT) devices are also being used to track items, thereby reducing loss in the supply chain and increasing accuracy in predicting when shipments will arrive, among other benefits.

Because these new technologies are focused on making business processes more streamlined, accurate and efficient, they come with new expectations and standards. Consequently, companies are being forced to adapt or fall behind. Not only is the competition between businesses fierce, but the pressure from buyers is also intense as consumers increasingly expect faster shipping and delivery times.

Lastly, as these technologies continue to evolve, supply chains will become progressively automated, which means more and more lower-skilled positions will be eliminated. This doesn’t mean that human roles will cease to exist, but it does mean that many roles will need to be transformed and refitted into the new framework.

 

As we wrap up the first month of 2020 and look to the year ahead, it’s obvious that there are some challenges waiting. However, there are plenty of silver linings to focus on, too. The United States’ recent trade agreements with Canada, Mexico and Japan will create some new business opportunities, and even amongst the trade war, China’s economy prevails. Furthermore, India’s economy is growing at an accelerated rate, thus providing even more opportunity for worldwide business ventures. Finally, the consumer outlook, against all odds, remains positive for now, as household consumption in North America and Europe continues to be strong amidst low unemployment. These trends point to exciting things ahead, despite the challenges. Thus, with proper planning and a willingness to adapt, there is no reason why your business can’t meet those challenges head on.

By: Mara Michael

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