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Blue Yonder survey - enterprises increase supply chain spend as disruption persists

Derek du Preez Profile picture for user ddpreez May 22, 2024
Summary:
The annual Blue Yonder Supply Chain Executive Survey also finds that AI is being prioritized as key to helping identify and resolve disruptions.

Logistics, supply chain and delivery service concept : Fork-lift truck moves a pallet with box carton. Van on a laptop computer, depicts wide spread of products around globe © William Potter - Shutterstock
(© William Potter - Shutterstock)

Supply chain continues to be a headache for organizations, which have had to grapple with significant disruption in recent years. Between the impact of COVID-19, to inflation, the war in Ukraine and the blockade of the Suez Canal, it’s been well reported how enterprises are rethinking not only the structure of their supply chains, but also their management. Diversification and agility are high on the priority list, as the fear of the unknown remains pervasive. 

Given this backdrop, it’s with interest we take a look at the results of Blue Yonder’s annual Supply Chain Executive Survey, which collects responses from more than 600 C-suite and senior executives across manufacturing, retail, third-party logistics, and government in the US, UK, DACH and France/BENELUX regions. 

The results paint a picture of organizations that are mired by problems that have persisted for a number of years, but are now seeking new solutions (particularly as it relates to AI) and are seriously upping investment compared in the hope that answers can be provided. 

Part of this is being driven by the desire to diversify supply chains, according to Andrea Morgan-Vandome, Chief Innovation Officer at Blue Yonder: 

People are looking at investing in diversifying their supply chain. Whereas before, they might have been thinking about consolidating and how they could get their supply from one place - now we are seeing diversification. 

If you think about it, that plays into everything that we are seeing, because if they are diversifying in where they are getting things from, they have to invest in transportation management as the problem is more complex. As you do that, you also have to plan differently, because you’re working out where things are coming from and where you want them to go. 

The results

This year’s results show that the number one challenge facing the world’s supply chain teams continues to be managing disruptions. Some 84% of respondents said their organization has experienced supply chain disruptions over the previous 12 months, which is just slightly down on 87% in 2023 and 88% in 2022. Somewhat of an improvement, but not much. 

According to the findings, the primary causes of these disruptions included lack of availability of raw materials (48%), extended delivery times from materials suppliers (47%), lack of labor (44%), lack of availability of shipping vessels (41%), weather related events/climate change (32%), changes to shipping routes (25%) and finally geopolitical unrest (16%). 

What’s clear from those results is that the top challenges are all quite consistent in their competition for top spot, with just a few percentage points in it. And these disruptions, unsurprisingly, resulted mostly in customer delays (42%), stalled production (42%), regulatory compliance issues (39%), reputational and monetary damage (38%) and an inability to meet customer demand (38%). Again, pretty consistent across the board. 

Coupled with all of the above, organizations are also facing rising costs - across transportation, material, labor, and inventory - due to increased inflation. This perfect storm means that companies’ profit margins are shrinking, with 46% of those surveyed saying they’d fallen over the past year. 

Unsurprisingly, this is all forcing companies to invest in technology, in the hope that greater insights into their supply chain data and new advancements in tools (such as artificial intelligence) can help weather any future problems. Eight out of ten companies (79%) increased their investments over the past year, with over half of those surveyed (51%) investing more than $10 million in supply chain improvements. 

The pace of change in this investment is noticeable. In Blue Yonder’s 2022 survey, only 24% of US companies were investing more than $10 million - two years later that number has more than doubled to 49%. 

Hope in AI

Blue Yonder found that these investments are being prioritized in implementing technology to support their end-to-end supply chains. Notably, priority is being given to AI-based technologies (41% of companies spending money in this area), with the hope being it can improve efficiencies, drive revenue growth, lead to fewer disruptions and increase profitability. 

Organizations appear to be in support of the view that a complex, diversified and disruptive supply chain landscape means that manual processes and human interventions aren’t enough to effectively manage this. 

Over half of the companies surveyed are already applying AI and ML to improve their performance in supply chain planning (56%), transportation management (53%) and order management (50%). And astonishingly, given how early the technology is to market, some 80% of respondents said their companies have organized initiatives to implement generative AI - where among those 91% siad generative AI has proven “moderately” or “highly” effective in optimizing supply chain decision making. 

According to Morgan-Vandome, the hope for AI is that it will be able to take a holistic view of the problems at hand and provide executable solutions for those managing to consider: 

This is why we are also seeing investment in AI, because the problem is becoming much more complex. You can’t fix it by doing it manually anymore. 

I think in general a lot of what we’ve seen with AI is that it’s being used to help solve disruption problems, whether that’s forecasting, planning, helping with insufficient supply and managing demand. But I think where generative AI will be helpful is when it brings all this together. Our customers want to apply generative AI to business problems. 

My take

A few years ago companies had the hope that some of this disruption and complexity would ease - but every knock on supply chains since has forced companies to reconsider their strategies more holistically. And with increased complexity, a deeper understanding of data is needed to make decisions not only to support smoother operations, but also for other priorities, such as sustainability. That being said, the use of AI is going to be challenging in this area - data sources are fragmented and often held by third parties. Lots of work will be required up front for organizations to fully take advantage of this rapidly developing technology. 

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