Inflation continues to have a wide-ranging impact on supply chains

Inflation’s impact is easing, but disruptions are not. Those are two of the high-level highlights from Blue Yonder’s 2024 Supply Chain Executive survey, released this morning.

According to respondents, only 36% of U.S. organizations cited cost of materials as the area most impacted by inflation, down from 43% in 2023. Globally, respondents cited transportation (38%) and cost of materials (34%) as the business areas most impacted.

 Disruptions remain the biggest concern, cited by 84% of global businesses, and 85% of U.S. organizations, although the U.S. number continues to drop from 87% last year and 88% in 2022.

“Supply chain disruptions are still a major challenge for businesses,” said Andrea Morgan-Vandome, chief innovation officer for Blue Yonder. “With a majority of global organizations reporting disruptions in the last year, it’s clearer than ever that we need innovative technology solutions to respond to those disruptions and enable businesses to adapt with lasting resiliency.”

Blue Yonder’s 2024 Supply Chain Executive Survey was fielded by a third-party provider and conducted from March 1-15. Responses were collected from more than 600 C-suite and senior executives across manufacturing, retail, third-party logistics, and government, with responsibility for supply chain strategy, planning, logistics and manufacturing operations in the U.S., UK, DACH (which includes Germany, Austria and Switzerland), and France/BENELUX (which includes Belgium, the Netherlands, and Luxembourg).

Supply chain disruption challenges remain

With supply chain disruptions continuing to impact businesses, organizations were asked to cite particular challenges they are facing. Respondents most often cited:

• Availability of raw materials (48%)
• Extended delivery times from material suppliers (47%)
• Lack of labor (44%)
• Lack of availability on shipping vessels (41%)

When asked to identify the impact of these disruptions, global respondents said:

• Delays for customers (42%)
• Stalled production (42%)
• Loss of compliance with new regulations (39%)

A plurality of U.S. respondents (43%) said delays for customers were the biggest impact, although that is down from 52% a year ago and 58% in 2022.

The combination of disruptions and inflation has resulted in lower profit margins for many businesses. Most organizations (60%) in the U.S. reported decreased profit margins over the last year, the highest percentage of any of the regions surveyed. Globally, 46% of organizations’ profit margins fell amid rising costs.

AI investments

To combat the above-mentioned challenges, Blue Yonder queried respondents on what approach they were taking to address them.

Nearly 8 out of 10 global organizations (79%) increased their investments in supply chain operations while only 4% reduced investments. Globally, 51% invested more than $10 million. In the U.S., these investments are growing at a quick rate, with 49% of organizations investing more than $10 million in supply chains, compared to 38% in 2023 and 24% in 2022.

Related Resources

 

Talking Supply Chain: Embracing VUCA

VUCA, or volatility, uncertainty, complexity and ambiguity, can be traced to the mid-1980s. Most accounts attribute it to the American military, but it certainly can apply to almost any situation dealing with disruption, including the supply chain. The problem with VUCA is that it can be a crutch. Why didn’t the product arrive on time? Well, a ship got stuck in the Suez Canal. A hurricane shut down production for a week. There was a union strike at the plant. In other words, VUCA happened. So how do we manage around VUCA? Former Gartner supply chain analyst and current vice president of industry solutions for GAINS Amber Salley joined Talking Supply Chain host Brian Straight to discuss how businesses can manage in a VUCA environment.

Listen

 

Sustainability is a key area for investment, with 48% of global organizations putting their money into these efforts, followed closely by AI-based technology (41%), developing new strategies (40%), additional workforce (39%), and digital transformation (37%).

As the second-most common supply chain investment, AI has been widely adopted by organizations around the world. Over half of global organizations are applying AI to supply chain planning (56%), transportation (53%), and order management (50%). And amid the rise of generative AI, most global organizations (80%) have implemented this technology in their supply chains at some level, whether fully (12%), partially (33%), or piloted (35%). Generative AI is also having an overwhelmingly positive impact: 91% of global organizations find generative AI to be effective in optimizing supply chain processes and decision-making.

“Companies are realizing the power of AI and generative AI on their supply chains. This technology is changing the way companies plan their supply, react to changes in demand, and pivot through disruptions. To truly digitally transform your supply chain means incorporating AI to stay ahead and meet your business objectives,” said Morgan-Vandome.

Sustainability’s impact

The U.S. leads global sustainability investment, with 55% (up from 42% in 2023 and 43% in 2022) of organizations focused on improving efforts in that area. This is compared to 27% for UK companies, 49% for DACH countries, and 46% for France/BENELUX. For U.S. organizations, the key areas of focus for maximizing sustainability throughout the supply chain are improving transportation efficiency (59%), reducing waste and excess (57%), and improving supplier sustainability and reporting (53%).

“It’s encouraging to see the upward trend of sustainability investment in the U.S. over the last two years,” said Saskia van Gendt, chief sustainability officer at Blue Yonder. “This trend is reflective of increased global demand for improved sustainability, especially in the U.S., where sustainability hasn’t been as much of a key focus compared to other regions.”

The investment in sustainability is taking place even though few supply chain executives are tasked with sustainability roles.

“Only 2% of respondents identified sustainability as their primary role within their company, but sustainability still rose to the top as a key investment,” said van Gendt. “This is likely a signal that supply chain roles are increasingly responsible for driving the sustainability of the overall business.”

The full breakdown of the survey is available in the 2024 Supply Chain Executive Survey eBook.

SC
MR