Thought Leadership Archives

A lot is happening in the world right now. Understanding these changes, how they affect our businesses, and the critical role the supply chain plays, is necessary to navigate the future and maintain competitiveness in the market. This article outlines 5 supply chain trends in 2024 by supply chain experts Anders Remnebäck and Fredrik Jersby that you shouldn’t ignore.

1. Robotics and autonomous vehicles will revolutionize last-mile delivery

There is a huge wave of technological progress underway, leading to advancements and breakthroughs. Robotics and autonomous vehicles are at the forefront of this transformation, although it has taken longer and proven to be far more challenging than anticipated.

The ultimate challenge lies in achieving fully autonomous vehicles capable of navigating entirely new urban environments without prior training or constraints in that particular area. This involves more than simply getting from point A to point B; it is about mastering complex real-world scenarios.

Similarly, integrating robotics into human environments presents its own set of challenges. But if we can create bots with human-like abilities, from ordinary tasks to understanding nuanced contexts, and combine this with fully autonomous vehicles, last-mile deliveries will be revolutionized.

Having a vehicle that efficiently travels from point A to point B is one thing. Still, the last 20 meters present a unique challenge: delivering the package, navigating to the building, ringing the doorbell, or leaving the package securely. Without solving this final leg, the efficiency of reaching point B is diminished.

It is evident that we are steadily progressing in this direction, leveraging technologies like reinforced learning, and neural networks. Once all the necessary components align, the impact on the entire supply chain will be profound.

As one of the founders of Skype pointed out, this could even make delivering something as small as a single toothbrush profitable. The question is: How long will it take to fully realize this vision?

2. AI and automated decisions will replace humans

In the past year, there has been explosive growth in reinforced learning and neural networks, opening new possibilities for supply chain planning. We foresee that this advancement will pave the way for digital supply chain planners and autonomous supply chains capable of making decisions based on sophisticated models.

We are moving towards a future where human involvement in decision-making becomes less prominent, mirroring previous transitions in technology adoption. Historically, we transitioned from manual processes to automation with the introduction of industrial robots, followed by the integration of Enterprise Resource Planning (ERP) and advanced planning tools.

As more decisions become automated, this shift may lead to a reduction in the roles of middle managers. However, humans will continue to play a pivotal role, becoming more involved in dialogue and collaboration with automated systems. Human expertise will remain essential in guiding and fine-tuning these automated processes to align with strategic objectives and evolving market dynamics.

3. Electrification will impact industries unable to transition fast enough

The transition to electrification is a critical trend that calls for urgency. The scale and complexity of shifting the world from fossil fuels to renewable energy are immense but inevitable. It won’t happen overnight; rather, it will unfold gradually, with hybrid solutions emerging before complete electrification.

And there will be winners and losers. For companies reliant on fossil fuel-driven transportation, understanding and planning for this transition is paramount. However, this requires a certain scale and capability. Companies with legacy investments in outdated technologies will struggle, while others, like Tesla, are poised to accelerate this transition through vertical integration.

In Europe, the failure of car manufacturers to adapt to electrification could have significant consequences on jobs and compliance with new regulations, such as bans on gasoline and diesel cars.

In essence, the electrification trend represents not only a technological but also a geopolitical shift with far-reaching consequences. Only companies that proactively plan and innovate will thrive in this new era of sustainable energy.

4. The transition from on-premise software to cloud will bring challenges

There has been a noticeable shift towards cloud services, with companies increasingly favoring web-based solutions over traditional on-premises setups. Initially driven by consumer-oriented needs, this trend has extended to the entire Enterprise Resource Planning (ERP).

Moving critical transactions and data to the cloud offers significant cost benefits. However, this transition may also introduce limitations on flexibility and adaptability, raising concerns about potential lock-in effects, integration costs, and data accessibility.

One pressing question is whether cloud systems will become more closed and rigid or if customers will demand greater access and interoperability. As companies navigate this transition, it is important to carefully evaluate the trade-offs and consider their long-term strategic objectives.

5. A turbulent world will demand a shift in supply chain strategy

We find ourselves in a new era marked by significant turbulence globally. From war and conflicts to climate change and new legislation. This increased unpredictability has underscored the importance of supply chain and the ability to withstand disruptions.

As a result, the interest in scenario modeling and understanding the consequences of events is rapidly growing. More companies recognize the need to invest in people who understand supply chains and systems that can help them swiftly react to events when they happen – and more importantly – proactively anticipate and mitigate risks.

To reduce risk exposure, many are moving towards more regional and local supply chains. This shift represents a departure from the previous focus solely on cost optimization. While centralizing operations can offer cost savings, there are risks associated with a single point of failure. The expenses of redundancy are now outweighed by the potential consequences of its absence.

At the same time, new sustainability legislation is reshaping supply chains, mandating not just reporting but also restructuring supply chain operations for compliance. This means companies will want to balance sustainability with cost and risk as well as service levels to make trade-offs and conclude when to use which strategy.

To navigate these changes effectively, companies must establish robust foundations for decision-making. Planning is key, and continuously exploring alternatives and scenarios and developing action plans are crucial to meet future challenges.

Authors Fredrik Jersby and Anders Remnebäck have deep knowledge and vast experience in the supply chain field.

Do you need the help of a supply chain expert?

Understanding the ramifications of these changes and trends is paramount. Remaining stagnant is not an option; instead, embracing a forward-leaning approach is essential for adaptation and success. The goal is to create supply chains that are resilient, adaptable, and sustainable, capable of weathering the storms of an increasingly turbulent world.

At Optilon, we are experts in efficient supply chain decision-making. Our solutions help businesses design and optimize their supply chains through well-proven processes and technology. We can help you create a future-state roadmap with scenario comparisons and analyses. We can assist in articulating supply chain complexity and relevant actions, evaluate the consequences and risks, and make decision recommendations. Sounds interesting?

Book a meeting today.

The past eventful years have had a profound impact on global supply chains. It has exposed vulnerabilities in the system and highlighted the need for resiliency. In this context, supply chain design has become increasingly critical. For many businesses, it may seem like a massive challenge lies ahead. But the reality is the time to embrace supply chain is now. Companies that see and make good use of the opportunities presented in this new supply chain era we are entering can achieve significant competitive advantages now and in the future.

Macroeconomic effects on the global supply chain

A lot has happened in the world lately. We are now living with the legacy of a transformation that has taken place in the past few years. It started with the coronavirus outbreak leading to shutdowns of factories as well as ports worldwide. This had a massive impact on global supply chains and challenged many businesses worldwide. Then, as we all hoped the pandemic would be the worst hit of the decade, the invasion of Ukraine happened. Sanctions against Russia, increased inflation rate, and higher global commodity prices, among other consequences, caused further disruptions in global supply chains.

We now find ourselves in a macroeconomic situation where geopolitical events and new economic conditions are forcing companies to really think about their supply chains: How resilient are they? And what is the best strategy to stay competitive in the global market?

The focus has shifted

Five years ago, few raised an eyebrow when businesses decided to source energy from countries such as Russia or move production to low-cost countries such as China. But now, due to the current state of the world and increased vulnerability, priorities have changed. The focus has shifted from keeping costs down to minimizing risk exposure, shortening lead times, improving service levels, and ensuring supply chain sustainability.

Businesses are no longer willing to take the risks involved in long-distance sourcing, and they are becoming more selective in which countries they choose to do business with. At the same time, supply chain sustainability has emerged as a key corporate goal. Due to stricter laws and regulations but also increased consumer demands, businesses must now navigate a new regulatory landscape and manage both supply chain risks and opportunities related to environmental, social, and governance criteria.

Are local supply chains the answer to vulnerability?

As a response, many companies are considering shifting from a global to a regional supply chain setup. While this has quickly become somewhat of a global megatrend, it is, however, important not to jump on the bandwagon just for the sake of it.

Here is an example: A global medtech company provides the European market with hearing aids. They produce their products in China to keep costs down. But now they decide to move their production closer to their customers in Europe. By moving the production to Europe, they hope to reduce vulnerability in the supply chain. However, in Europe, there are no suppliers that can provide the medtech Company with the material they need to produce their hearing devices. The medtech company ends up having to still source the material from suppliers in China. Although production is now closer to their European customers, the problem remains.

Add to the equation the complexity of a much broader product portfolio with multiple suppliers, production sites, distribution points, logistics partners, network nodes, customer segments, and markets – and you can imagine the challenge.

How to design an optimal supply chain

Shifting from a global to a local supply chain setup is not a universal solution that fits all. In fact, there is no “one size fits all” solution for optimal supply chain design. Each company needs to thoroughly analyze their current supply chain setup to design the best solution for their business. The first question to ask is: What is the most important for my business? Is it reducing cost, minimizing risk exposure, shortening lead times, improving service levels, or ensuring a sustainable supply chain?

The answer will be different for every company. Here are a few examples:

For a company that produces standard products, keeping costs down is probably central as their customers are only willing to pay so much. A company that sells spare parts probably prioritizes fast delivery times over cost as their customers will immediately turn to competitors if they have to wait for the products – and they are probably prepared to pay extra for that. A retail company with high requirements for recycling materials and lowering CO2 emissions probably has sustainability on top of its agenda – and so on.

Most companies are likely to seek a balance between all the dimensions – cost, risk, lead time, service level, and sustainability to make trade-offs between risks and gains and conclude when to use which supply chain strategy or setup.

In addition, today’s debate is very much centered around supply chain from a supply perspective. But equally important is the customer perspective. Businesses need to think not only about what provides orders but also what provides customers: What requirements do customers have in terms of cost, time, service, and sustainability? And what are the consequences of these requirements on the supply chain?

The new supply chain era brings possibilities

For many businesses, it may seem like a massive challenge lies ahead. But the reality is the time to embrace supply chain is now. Supply chain has gone from being a decentralized issue to becoming a CEO issue and a boardroom-level topic. In fact, the willingness to invest in supply chain has never been stronger. Now, post-pandemic, we are entering an era full of opportunities – and now is the time to make good use of them.

Do you want your supply chain to be a growth driver and engine for your business? Don’t just go with the flow and follow the next big trend. Ensure you put time and effort into analyzing your current setup in order to create a more agile, customer-focused, and resilient supply chain.

Do you need help from an expert?

Are you considering redesigning your supply chain to stay competitive in the global market? Perhaps, you are unsure what setup is the best for your company or what options or possibilities there are? At Optilon, we are experts in efficient supply chain decision-making. We help businesses build, strengthen, and optimize supply chain design through well-proven processes and technology. We can help you create a future-state roadmap with scenario comparisons and analyses, articulate supply chain complexity and relevant actions, evaluate the consequences and risks, and make decision recommendations. Sounds interesting?

Let Optilon unlock the potential of your supply chain. Book a meeting today!

Today, supply chain is not only an integral part of most businesses. In the wake of the pandemic, it has proven to be crucial to company success and customer satisfaction. Here are 12 supply chain phrases every company needs to know in the 21st century.

1. Supply Chain

Let us start with the basics: What is Supply Chain? A Supply Chain is a network of organizations, people, activities, information, and resources involved in the production, handling, and distribution of goods and services. It includes all the steps required to create and deliver a product or service – from purchasing raw materials and components – to manufacturing, distribution, and delivery to the end customer.

2. Supply Chain Management (SCM)

Supply chain management (SCM) refers to the planning, coordination, and execution of activities involved in the production and delivery of goods and services from the supplier to the end customer. SCM involves managing the flow of goods, information, and finances across the entire supply chain. The goal of SCM is to optimize the supply chain to maximize efficiency, minimize costs, and improve customer satisfaction. Activities include procurement, production, inventory management, logistics, transportation, and distribution. SCM also involves collaborating with suppliers and other partners in the supply chain to ensure that all parties are working towards a common goal.

3. Value Chain

Value Chain is a concept used in corporate management and strategic planning to describe the various activities carried out within an organization to create value for their customers. A Value Chain consists of several activities. They range from the start of the production process to the delivery of the final product to the customer. The activities in a Value Chain can be divided into primary and secondary activities. Primary activities are those directly involved in the production of a product or service, such as purchasing, manufacturing, marketing, and sales. Secondary activities are those that support primary activities, such as logistics, technical support, and personnel management.

4. Supply Chain Planning

Supply Chain Planning involves forecasting demand, determining purchasing volumes for safety stock, and scheduling production, transport, and distribution of goods and services. It is an important part of Supply Chain Management, as it helps to ensure that the right products are in the right place, at the right time, and in the right quantities.

Learn more about Supply Chain Planning here.

5. Supply Chain Design

Supply Chain Design involves building an optimal network of organizations, people, activities, information, and resources involved in the production, handling, and distribution of goods and services. It includes strategic decisions for where to place warehouses and manufacturing facilities, how to transport goods, and how to handle the flow of information and resources throughout the supply chain.

Learn more about Supply Chain Design here.

6. Supply Chain Sustainability

Supply Chain Sustainability aims to reduce the environmental impact and improve the social and economic performance of the supply chain. It includes activities such as reducing waste and emissions, promoting ethical and responsible purchasing, and supporting the well-being of employees and communities. Supply Chain Planning & Supply Chain Design are effective methods for minimizing the environmental impact of waste and emissions.

Learn more about Supply Chain Sustainability here.

7. Sales & Operations Planning (S&OP)

Sales & Operations Planning, also known as S&OP, is a process that involves the coordination of sales and operating functions within a company. It involves creating a long-term plan for sales, production, and warehousing and identifying and solving any conflicts or problems that may arise. S&OP helps to ensure that the company can meet customer demand while maximizing efficiency and profitability.

Learn more about Sales & Operations Planning here.

8. Supply Chain Optimization

Supply Chain Optimization is the process of improving and simplifying the supply chain by identifying and eliminating inefficiency and improving the flows of goods, services, and information. This can be done through various techniques such as forecasting, warehouse management, logistics, and transport management. The ultimate goal is to increase efficiency, reduce costs, and improve customer service.

9. Supply Chain Digital Twin

A Digital Twin is a virtual representation of real-world supply chain operations. The live data can be used in everything from quality control to inventory management. A Digital Twin can be used by engineering, production, and maintenance teams to experiment with new approaches and what-if scenarios without disrupting the actual production. The data can be fed to Machine Learning predictive models to discover previously unknown operational patterns and aberrations. It can also be automatically input into decision models. A Digital Twin will ultimately help teams explore and understand the key drivers and trade-offs in optimized plans and decisions.

10. Supply Chain Visibility

Supply Chain Visibility means having control and insight into the entire supply chain, from suppliers to customers, to make informed decisions and handle any problems or deviations. Businesses can achieve through technology that collects data from relevant sources, such as Enterprise Resource Planning (ERP) Systems, Transport Management Systems (TMS), or Warehouse Management Systems. These can provide real-time data on key figures, such as warehouse product flows and estimated delivery times.

11. Scenario Planning

Supply Chain Scenario Planning aims to identify and analyze possible future events and their impact on the supply chain. This involves creating different hypotheses and evaluating how the supply chain would respond to each one. It helps organizations predict and prepare for any disruptions or changes in demand and make well-informed decisions on how to reduce risks and optimize the supply chain. Scenario Planning can also help organizations identify opportunities for improvement and develop backup plans for unexpected events. It is a proactive method for managing uncertainty and risks in the supply chain.

12. Demand Forecasting

Demand Forecasting is the process of estimating the amount of a product or service that customers will buy. Companies use Demand Forecasting to make well-informed business decisions about how much stock they need, how much they should produce, and what prices to set. It also helps companies identify trends and patterns in consumer behavior and predict changes in demand.

Is your supply chain resilient enough?

I hope you found these supply chain phrases helpful. In the past few years, supply chain resilience has become a hot topic – and with good reason. To ensure business continuity, mitigate risks, enhance customer satisfaction, improve operational efficiency, and meet regulatory and social expectations, today’s companies need to create future-proof supply chains. How resilient is yours?

Optilon focuses on helping customers utilize their resources where they generate the most value. We are a company founded by engineers that combine world-leading technology with Nordic expertise in supply chain.

Let one of our dedicated supply chain experts help you. Book a meeting today!

That supply chains are not only the backbone of any business, but fundamental for success, has become evident in the past few years. Staying up to date with trends is imperative for any Nordic business to plan for the future and stay competitive in the global market. In this article, I share 7 global supply chain trends in 2023 to help you out.

1. Shifting focus from only cost to also risk

Looking back at the past decade, the majority of companies in Scandinavia and Northern Europe have been characterized by outsourcing their production to low-cost countries such as China. The same goes for sourcing raw materials and components. But in the past few years, the world as we know it was turned upside down. The dramatic events of the COVID-19 pandemic, the Suez Canal blockage, and the invasion of Ukraine all caused significant disruption to global supply chains.

As a result, Scandinavia and Northern European companies have started to realize that although cost-efficient, single sourcing from Asia is not very resilient to changes – regardless of size – may they be massive, like a pandemic, or small, such as fluctuation in market demand. This has now led to more companies shifting focus from only cost to also risk. And minimizing those risks has rapidly risen to the top of their agendas.

2. Reshoring – bringing production home

As part of this shift, Scandinavian and Northern European companies that are outsourcing from Asia are considering buying a return ticket. In fact, we are already starting to see examples of reshoring in Scandinavia and the Nordic countries where businesses are bringing their entire or parts of their production home.

By moving their entire production home or sourcing from both Asia and Europe, they are looking to increase their chances of withstanding failure in the primary supply chain and reduce their overall supply chain vulnerability. However, to do that, it is important to have the right tools in place for efficient supply chain planning and smart use of resources.

3. Moving towards differentiation

In the aftermath of the pandemic and invasion of Ukraine, we are also seeing an increased focus on differentiation, where companies are looking to set themselves apart from the competition through new price points and inventory strategies.

With inflation pressures, consumer behaviors and customer demands are shifting from high-end products to more affordable ones. At the same time, businesses are focusing on cost efficiency to prevent their capital from going through the roof.

To meet the demands for availability and service level – while at the same time keeping inventory costs under control – companies realize they need to become more granular and specific in how they control and optimize their inventories.

As a result, we are now seeing more businesses moving away from manual and semi-manual processes and using “one size fits all” types of rules toward differentiation, digitalization, and automation.

4. Prioritising supply chain design

Another strong trend that has emerged as a result of the increased supply chain awareness is the need for companies to improve their supply chain design. This is particularly noticeable in companies with high supply chain complexity.

Supply chain complexity can arise from several sources – network nodes and links, internal and external processes, product and service range, product design and development, supplier integration, and information and organizational complexity.

While companies are adding the cost and risk dimensions into their supply chain design, two more dimensions need to be considered to secure resiliency. The first is service level, which includes the ability to offer short lead time to customers. The second is sustainability, which includes the ability to map the current CO2 footprint and find new supply chain set-ups that will reduce CO2 emissions without a large negative impact – or even reduction – on cost or other dimensions. As the global market for emissions credits matures, this will also be part of the equation.

Companies must review their supply chain based on all four dimensions to create a shared view of the supply chain and find their trade-off. If companies can do that, their chances of securing continued competitiveness and obtaining sales will increase.

5. Creating a digital twin of the supply chain

More companies are embracing digital technologies to help them design their supply chains and outsmart disruption. One critical component of this shift is using a digital twin. A digital twin is a digital representation of a company’s end-to-end supply chain network.

You can look at it as a sandbox extension of your supply chain: By recreating your real supply chain in a virtual world, you can apply what-if scenarios and create versions of the future to model alternative scenarios for uncertain areas within your business. This enables you to efficiently make trade-offs between risks and potential gains and conclude under which pre-conditions to use which supply chain setup or strategy.

Instead of assessing your supply chain every third year, you can use your digital twin to review your setup annually, semi-annually, or even quarterly, as well as ad-hoc. Slowly but surely, the digital twin is becoming a key component of future supply chains. It will be the common playground for sales, sourcing, supply chain, and sustainability to gather around. It will also help companies break silos and adopt a more holistic approach.

6. Supply chain automation, robotics, and AI

Tapping into digitalization and technology, the use of automation, robotics, and AI in supply chains continues to be a strong trend. Automated solutions for supply chain tracking, inventory and warehouse management, and back-office tasks have allowed for leaps forward in labor productivity performance. The shortage of truck drivers has catapulted the transport industry into the forefront of AI and autonomous vehicles.

Although these new technologies have the potential to reshape the entire supply chain, many of them, especially AI, haven’t fully matured and reached their full potential yet. Inserting AI into a data system (ERP or similar) will not automatically generate a ready-made business strategy. As with any other data analysis, it still takes a lot of work to collect the data, transform it, and ensure it is high-quality and connected. Once that is done, you can start accessing all the business value AI can bring.

While there are efficient AI solutions today for forecasting, promotion planning, and data correction, for example, we will see more and better applications of AI, machine learning, and reinforcement learning for various supply chain problems in the future.

7. Sustainability and transparency in focus

The future consumer market will be shaped by millennials and Gen Z. If a business wants to survive in the next century, its strategies must align with the priorities and values of these consumers. Millennials and Gen Z expect companies to be more visible, active, and transparent. They don’t settle for less than proof and demand sustainable supply chain practices addressing climate change, human rights, and corruption.

As a result, the tracking trend is intensifying. More companies are using RFID tags, QR codes, and blockchain technology to identify and track the entire chain of movement on the way to the end consumer. Tracking also provides companies with better data for improving supply chain operations, reducing costs, and proving a product’s origin.

With the increasing demand from millennials and Gen Z, we are also seeing companies shifting from linear supply chains to circular supply chains to minimize waste and environmental impact. This shift is a no-brainer for some companies, while others struggle to find a suitable circular supply chain model.

How efficiently do you use your resources?

Supply chains are no longer a marginal concern for businesses. Today, supply chain knowledge and experience should have a given place in the boardroom as more companies realize supply chain is about much more than merely cost reduction. It is a possibility to differentiate, create strong offers, and stand out from the competition. At Optilon, we believe Nordic companies have the potential to be the most competitive in the world. They just need to use their recourses more efficiently than their competitors to get there.

Do you need the help of a supply chain expert? Book a meeting today!

Welcome to a Recap of The Optilon Supply Chain conference 2022, held on September 8, 2021.

Disruptions come in many forms, and in recent years Supply Chains have faced numerous highly disruptive risk events. Supply Chains are also influenced by sustainability, customer demand precision, and customization in delivery.

A proactive response requires visibility, adaptability, and agility. For many companies, this means re-imagining the Supply Chain and balancing the tradeoffs in new and effective ways.

This year’s topics

SUSTAINABILITY
DATA-DRIVEN
DISRUPTION
TALENT DEVELOPMENT
COLLABORATION

About the event

This premium event is dedicated to helping optimize the business through the Supply Chain. Our emphasis is on enhancing experiences and embracing disruption and innovation to re-imagine the Supply Chain and build competitive advantages.

Join leading thinkers and practitioners at the Optilon Supply Chain conference to explore best practices, opportunities, and challenges of optimizing the business through the Supply Chain.

Why watch the recording?

You will get an insight into:

How do Nordic companies perform compared to others in terms of sustainability?
How mature are my organization’s current capabilities?
What could I gain by better collaborating with my network?
How is customer behavior changing, and how do my relationships with customers need to change due to disruption?

Key-Take-Aways

While trying to re-imagine the future Supply Chain – at this conference, Optilon would like to support your journey with inspiration on:

Why is there a need to disrupt our current way of living, working, and being
How you can harness the power of data and create competitive advantages
How can you empower and engage your employees in the sustainable agenda and ensure progress
Why collaborating with the broader ecosystem is key to responding to the broader ecosystem

This year’s conference was again carried out in a dynamic environment with inspirational speakers worldwide. Come and join us. It is free and online!

Who should watch it?

Supply Chain Managers
COOs
Production Managers
S&OP Managers
Planning Managers
Planning Professionals
Supply Chain Data Analysts
IT Managers
Sustainability Managers and Professionals
CEOs and CFOs
Head of Digital Transformation8

Watch all of the recordings here

Covid-19, labor shortages, and disruptions, in general, have created global Supply Chain nightmares and revealed a need to modernize the Supply Chain with modern technologies and data-driven approaches, especially within the planning area. The utilization of AI and machine learning is helping to modernize the Supply Chain. More can though be done. A recent report is stating that only 8% (1) of the companies are able to mitigate Supply Chain disruptions due to their maturity.
The key question is: How does the leader succeed with technology and a data-driven approach when maturity is low?

Cultural change is critical

Companies and Supply Chains have been working to become more data-driven for many years. Some have done this with mixed results. Everyone understands by now that those that are able to utilize data to make more informed decisions will stand out in the competition compared to those who do not.
The biggest challenge for organizations working on their data-driven approach might not have to do with technology at all. Cultural change is the most critical business imperative. Becoming data-driven is about the ability of people and organizations to adapt to change.
Long-established companies, which have been successful over generations or centuries, are unlikely to change overnight. Becoming data-driven represents a business transformation that is playing out over the course of a generation.

Barriers to becoming data-driven

Achieving data-driven leadership remains an aspiration for most organizations — just 26.5% of organizations report having established a data-driven organization (1). Second, becoming data-driven requires an organizational focus on cultural change. According to the report, 91.9% of executives cite cultural obstacles as the greatest barrier to becoming data-driven.

1. Understand the stakeholders

It is not a technology issue. It is a people challenge. The task of being data-driven keeps getting harder. Today, companies encounter vast new volumes of data, as well as new sources of data. Data cuts across traditional organizational boundaries, often without clear ownership. The fluidity of data compounds the complexity of managing this asset in a way that consistently delivers business value.

2. Adopt a new mental mindset

Becoming a data-driven organization is a journey, which unfolds over time, measured in years, and sometimes decades. Becoming data-driven requires a different mindset. Organizations must be prepared to think differently. There is no shortage of analytic algorithms. These need to be matched by critical thinking, human judgment, as well as creative innovation.

3. Fail fast, learn faster

Leaders must understand that individuals and organizations learn through experience, which often entails trial and error. It has been said that failure is a foundation of innovation. Companies that are prepared for faster iterative learning — fail fast, learn faster — will gain insight and knowledge before their competitors.

4. Focus on the long-term

Data leaders appreciate that the data journey is a transformation effort that unfolds over time. Becoming data-driven is a process. The French writer Voltaire famously said, “Perfect is the enemy of good.” (2) Perfection is rarely achievable. Data-driven companies recognize that success is achieved iteratively. Successful organizations expect to be at this for a while. They focus on the long-term.

As many as 85% of companies want to have a digital Supply Chain in place within five years. But companies’ roadmaps often only have a three-year horizon. And all the disruptions of the past few years have only intensified the short-term focus (3).

5. Decide whether it is optimization or transformation

Many companies confuse digital optimization with digital transformation. As an example of digital optimization, you have retailers which implement technologies where you can shop without physically having to pay at checkout. Instead, smart technology registers what they take off the shelves and the amount is debited automatically. This is not a new business model, so it’s not a digital transformation.

Companies that enable consumers to use an app to order groceries for home delivery have introduced a new value proposition that can help them to attract new customers. This could even be linked to a new revenue model, such as a subscription. This is indeed a new business model, and it also has a major impact on the Supply Chain. The key question here is, what do you want to achieve – digital optimization or digital transformation?

New technologies can help to reduce costs because they allow for example planners to create a schedule faster. They can also be used to improve the quality of decisions or to plan things that were impossible to plan in the past. The key thing to do though is to determine where you currently stand in terms of maturity and which steps you need to take to improve it.

With inspiration from:

Reducing Emissions in the Supply Chain is Crucial to Tackle Climate Change

Climate change is the biggest challenge of our time. To meet the Paris Agreement and limit global warming to well below 1.5 degrees, there is an urgent need to decarbonize global emissions. This has been a well-established fact for several years. And when it comes to driving global change, companies of all sizes have an important role to play.

As a result of the increased focus on sustainability in recent years, expectations on companies to monitor and reduce their environmental impact have also increased drastically. We have, therefore, asked 400 Nordic companies how they work with these issues. Our study shows that most companies (two out of three) already measure and report at least one out of the three Scopes of greenhouse gas emissions. But many seem to underestimate the share of emissions from their value chain (Scope 3 emissions).

Emissions from the value chain account for more than 70 percent of a company’s total greenhouse gas emissions. Underestimating the share of Scope 3 emissions thus imply a risk in a company’s way towards reduced emissions. This is something that needs to be highlighted to drive change on a large scale. Focusing only on emissions from the own operation is not enough. Rather, companies can improve their climate footprint substantially by optimizing their supply chain.

In our first-of-a-kind report, we have taken a closer look at how Nordic small and medium-sized companies (SME:s) and large companies within different sectors work with targets for eliminating greenhouse gas emissions, what Scopes of emissions they measure and report, and how they work to reduce emissions from their value chain. We have also collected our best advice on how to create a more sustainable supply chain.

Some of our Key Takeaways from the report

More than four out of five Nordic companies have set sustainability goals that they work towards.
Up to half of Nordic companies have set a target for eliminating emissions.
Four out of five Nordic companies with a target for eliminating emissions plan on doing so within the next ten years.
Large companies are more likely than SME:s to set targets for eliminating emissions
There is a clear similarity among the Nordic countries although they all vary in mindset and focus.

Read about all the findings and more from the report below.

Download the report here

The industrial economy is coming to an end and a very different economy is emerging – with new technologies, new business models, new roles, and a new mindset. The next economy will be focused on solutions, that are constantly changing and reconfigured in response to end users’ changing needs. A shift that is also driven by a mixture of the necessity to become sustainable and rapid technological development. What will this mean to the Supply Chain?

A new underlying logic for running the business

In the 19^th and 20^th centuries, the machine was a metaphor for society. Industrialization was based on automated, mechanical mass production, and capitalism with its focus on money and growth was the underlying logic of the economy. Then came computers, and with digitization came an economy that was based on bits and information – increasingly virtual and detached from the limitations of the physical world. The next transformation is moving toward a technological paradigm characterized by living systems and biology, which can support our well-being in the future in a stable and sustainable way. We will mobilize biology to deliver what we currently produce with fossil energy, chemistry, and mechanics.

Three connected transitions

According to Peter Hesseldahl, journalist, and author of the book “When technology comes alive, and life becomes technology” we will see three connected transitions when transitioning to the future.

Our relationship with technology: New powerful technologies like artificial intelligence and biotechnology will change humans’ relationships with technology.
Our relationship with nature: Our relationship with nature and the ecosystem must change from domination to partnership.
Our relationship with each other: At the same time, we are leaving the industrial society and logic and moving towards a new economy based on other values than just money, and in which the distribution of power and wealth must be renegotiated.

The whole idea or basis for the above three transitions is, that they must turn out well for the entire transition to succeed in creating a thriving world.

Supply Chain to be seen as a living system

Digitization is reshaping the fundamentals of the Supply Chain. It changes the culture to one which is more adaptive, resilient, innovative, and customer-centric. The organization must be seen and function as a living system – not just a mechanical one.

Living systems are ecosystems. There must be a balanced interaction between the many different parts of the system, otherwise, it will collapse. If one wants to thrive in the long run, one must ensure that all other elements of the system thrive as well. Therefore, concepts such as circularity, resilience, and regeneration become essential. There is a wide range of characteristics and principles that recur in all living systems. Often, they are almost the opposite of the rules of the game we have created in the mechanical and digital economy. Also in the Supply Chain, as well as in the business in general, we must start acting in accordance with the principles of ecosystems.

Principles for re-imagining

How can we learn from how living systems work and use them as principles that are relevant to guiding and shaping the future approach? Here are a couple of examples that can help you re-imagine the Supply Chain in the living economy:

Example 1: Resources kept within the limitations of the ecosystem

An organization cannot function in isolation. It is supposed to be in constant interaction with the environment. The world consists of interconnected and interacting systems. Just disassembling and examining individual components will not provide an understanding of the relations and interactions. That could potentially mean that the Supply Chain must be configured within the limitations of the ecosystem. As opposed to today where resources are seen as abundant and inexhaustible.

Example 2: Ecosystems are circular

The waste from one process becomes raw material in other processes. An ecosystem consists of a multitude of creatures and organisms, each evolved to play a specific part in the vast streams that transform materials and energy into everchanging forms. It is a balanced interaction where everyone plays a part so as not to break the chain.

It would most likely mean an end to mass production and standardized solutions. Instead, it is time to invent instances- solutions for specific contexts. It will also mean an end to scaling and providing similar solutions to the whole world. We will see more diverse, decentralized, and local solutions. Manufacturing, and running of the operations in general, will be done on flexible platforms as opposed to fixed platforms, as we see it today.

Example 3: Reconnecting with each other is key

On the more social side, we will see an urge to reconnect with each other – and nature. An economic model where one simply gobbles up nature and spits out the waste is not sustainable- and likewise, an economy that consumes people to create money is not a durable strategy. The system needs to be balanced to create long-term well-being for everyone. We will hence see an urge to regain individual freedom to compete and create but in a new format expressed as responsibility and accountability. Humanity, empathy, and creativity are crucial competencies.

Welcome to the living economy

So, as mentioned in the beginning: The industrial economy is coming to an end and a very different economy is emerging – with new technologies, new business models, new roles, and a new mindset. The next economy will be focused on solutions, that are constantly changing and reconfigured in response to end users’ changing needs. It is also an economy shaped by very strong demands to reduce CO2 emissions and impact on the environment. It is a highly complex economy, which connects large numbers of players by using extreme amounts of data.

Interestingly, all of this leads to solutions that can best be described using mechanisms and concepts found in biology and living systems: Ecosystems, circularity, balance, feedback and tipping points, and adaptability. This has implications for Supply Chains, production, retail, and recycling: Atoms – physical products and materials will increasingly become local. Bits and data will be global.

Source: With inspiration from Peter Hesseldahl’s “When technology comes alive, and life becomes technology” published in Mandag Morgen and as a book.

Peter Hesseldahl is a journalist and editor of digital transformation at Ugebrevet Mandag Morgen – a weekly Danish business magazine. As an in-house futurist, Hesseldahl has previously worked with trends, scenarios, and strategies for LEGO and Danfoss. He has also consulted extensively on future issues for ministries and large companies such as BNP Paribas and Shell. Hesseldahl is the author of 7 books, most recently “Transition to the Future. When technology comes alive, and life becomes technology”.

For many decades we have understood disruption from technology and feared the changes disruption requires of us. For only a couple of years, however, have we understood that disruptions today, happen faster and faster, and from places, we never even knew existed. The question is: what are we disrupting for?

Supply Chain volatility has increased

It is obvious to everyone. The Supply Chain is changing. Changes that have the potential to change the entire business. The technological advances that we have seen over the past several decades have finally driven us to a tipping point. We are now on the precipice of a fourth industrial revolution that will truly transform business and all stakeholder relationships. The push toward the fourth industrial revolution has accelerated over the past two years. Not only are technological advances occurring at a fast and furious rate, but the level of volatility in the Supply Chain has also increased.

Persistent challenges from increasing customer demands, disruptive competitors, and economic fluctuations make the optimization of Supply Chain designs harder. Various megatrends mean that Supply Chain complexity and risk are growing. Decision-making speed and quality need to increase to enable faster recovery from disruptions. At the same time, there is a need to handle real-time data and complex business requirements across multiple networks – and balance risks and trade-offs.

Need for new capabilities across all timeframes

In the face of these raised levels of volatility, we have no choice option but to lead transformative changes to reach a Supply Chain Future-Fit stage. Simply going through the motions of change is no longer an option. Companies that make changes simply to make them – without having the desired endpoint in mind or following a systematic process will never achieve success.

The only way forward is to change most if not all the settings in the company at both the human and technical levels. Achieving a highly resilient company that can grow and prosper in todays’ uncertain environment will require new advanced capabilities across both the strategic (two to five years), tactical (one to 24 months), and operational (one to 30 days out) timeframes.

Reimagining the Supply Chain is key

The challenge is to achieve the ideals of fully integrated, efficient, and effective Supply Chains capable of creating and sustaining competitive advantages. Downward cost pressures must be balanced as well as the need to manage effective ways to manage the demands of market-driven service requirements. At the same time, there is a need for a resilient and transparent Supply Chain.

It could potentially mean reimagining and reconfiguring the network in terms of capacity, sourcing mix and location, manufacturing capacity, and location. It could potentially also mean adding to their classical S&OP processes a tactical scenario testing capability to be used during times of serious disruption. In other words, when conventional forecasting processes become unworkable and unreliable, it will allow the company to become more agile and resilient. Supported by end-to-end visibility and the ability to make decisions fast. Fast decision-making enhances the resilience of the entire company.

Technologies such as AI are transforming how decisions are made. More people no matter what their roles are can now have real-time access to the information and perspectives that they need to do their job. As a result, individuals and teams will be better able to manage themselves, work together, and the types of decisions without the involvement of management. Companies will not need to organize themselves in the traditional way. I.e., there is no need to ensure that decisions are aligned around its goals because that happens automatically.

The Supply Chain to be seen as a living system

Digitization is re-shaping the Future-Fit Supply Chain. It changes the culture to one which is more adaptive, resilient, innovative, and customer-centric. In other words, an organization that functions as a living system – not just a mechanical one. What’s standing in the way?

According to an article written by John Gattorna and Pat Mclagan in Supply Chain Quarterly, under the title: Supply Chain, the platform for driving true business transformation, three powerful mindsets continue to sustain the norms and behaviors that drive old cultures. Command and control relationships, silo identities, and the application of engineering approach. These powerful mindsets work against creating an environment that fosters initiative-taking, creativity, cooperation, and rapid problem-solving. These mindsets belong to the early 1900’s when the goals were efficiency and control, and people were viewed as machines whose behavior had to be controlled.

Supply Chain executives must change their mindsets

Supply Chains are in a powerful position to drive this deep transformation in both the hard (structural and technical) as well as the soft (human and cultural) dimensions of the business. This is because they are the focal point for the artificial intelligence/digital/internet of things disruption. They contain and control the main activities that add value for the customers, and account for about 80% of the business costs and associated risks.

The challenge is often that Supply Chains are marginalized, lacking representation in the c-suite. Supply Chain leaders must become active change agents for both their end-to-end value streams and the overall business that supports them. Supply Chain leaders will need to develop new decision-making capabilities, transform their Supply Chain organizational structures, and get rid of old, non-productive mindsets. Most importantly though they must make sure to understand what they are disrupting for.

With inspiration from: Supply Chains, the platform for driving true business transformation brought in Supply Chain Quarterly Q4, 2021. Page 44 and onwards.

This year Earth Overshoot Day will be (or was) July 28th. Every day after, we’re stealing from future generations. 156 days. That’s how many days, this year, we are going to be stealing from future generations, unless we have the courage to do something about it.

This year’s (2022) overshoot day will fall a day earlier than last year. This is the day by which humanity has used up all of the biological resources that the Earth generates during the whole year. So every day after – 156 in 2022 – we are in planetary deficit, using up resources that won’t be regenerated. Put in a different way, in 2022 we’re on track to use 75% more resources than the world’s eco-systems can regenerate, equivalent to “1.75 Earths”. This deficit spending is the biggest it’s been since the world entered into ecological overshoot in the early 1970s.

What can and should be done? A fundamental mindset shift is needed to build Supply Chains and businesses that are fit for the future. It does also require a different mindset in terms of leadership to get us there. In this blogpost, we will have a look at how you develop your approach to Supply Chain Sustainable Leadership.

Let’s start by having a look at what we know about the Nordic companies.

What we know about Nordic Supply Chains

Around 80% of all Nordic firms have sustainability goals that they work towards.

Danish firms are best in the Nordics on setting a target on eliminating GHG emissions from their businesses (64%), followed by Sweden (57%), Finland (47%) and Norway (42%).

Although Norway lags behind when it comes to setting a target for reducing GHG emissions, the Norwegian firms that have a target also have the most ambitious time frame. 83% aim to reach their target within the coming ten years. The corresponding number in Denmark and Sweden is 81%. Finland lags behind on 64%.

It is most common that Nordic companies measures and report Scope 1, 2, and 3 emissions. Nordic companies include GHG emissions from transport and distribution, purchase of goods and services, waste management, and fuel and energy when measuring and reporting Scope 3. Companies that do not measure and report Scope 3 state that it is too costly and time-consuming, that they lack knowledge of how to do it, that their value chains are too complex with many suppliers, and that their customers do not demand it.

The key question is: How do Nordic companies make sustainable progress?

Ambitions are key

We have come a long way since 1970 when Milton Friedman became known for saying “The business of business is business”. We have by now acknowledged that companies play a vital role in social, political, environmental, and economic aspects of society and in the development of planet earth.

The hard truth is that the CSR and net-zero initiatives simply don’t go far enough. We now know that climate change is exponential: the worse it gets, the faster it goes. And when these approaches have the unintended consequence of lowering ambitions, masking incrementalism and letting companies off the hook for the speed and scale of change truly needed, they are actually part of the problem.

It’s time we stop satisfying ourselves with insufficient and frankly timid ambitions that don’t meet the challenges at hand. If we are to once again live within our planetary boundaries we must divert the best of human ingenuity and collaboration towards transforming the systems by which we produce, use and consume.

Top leadership commitment is key

A company can plan for sustainable development and can continue to do with and without the consent of everyone working for the company. For sustainability really to have an impact it must be fully integrated into the company. This means that it must be a core part of the company’s DNA. The employees must, at the end of the day also need to understand and want to work with the integration of sustainability, otherwise, nothing happens.

A survey completed in 2010 made by the Network for Business Sustainability showed, that the top leadership engagement is the key factor for integrating sustainability. The employees are much more reluctant to show sustainable performance or act sustainably if the top leadership is driving the change. The survey showed that it outweighed personal values or individual environmental interests.

Purpose plays a vital role

Over the past 50 years, the predominant purpose of running a business has been to generate financial returns for the benefit of shareholders. When customers, resources, and the society that companies depend on suffer from inequality and environmental impact, the only right thing to do is to create a purpose-driven business.

Purpose-driven companies create value, not only for the shareholders but also for the stakeholder groups, including customers, suppliers, local communities, and employees who are engaged in the company. Does this mean that companies do not have to make money? No. The company can only thrive in a strong society, but that also applies the other way around.

Supply Chain plays a significant role in executing the strategy both in terms of employee involvement and commitment, cooperation with the ecosystem, and processing of the product portfolio. Supply Chain has historically been measured by its ability to keep costs as low as possible while providing profitable customer service.

Quite impractical, being purpose-driven means that additional stakeholders must be taken into account in the decision-making processes. This also means that the Supply Chain must not only think about delivering the product but they must to a large extent also think about how the product is delivered throughout the value chain.

Employees demand purpose. Questions like: Why is the company working with sustainability? Supply Chain sustainability? How is it or will it be integrated into the business as well as what it exactly means for the company to achieve sustainable business results? Which activities will the company initiate and how will the company honor progress?

Key questions guiding your sustainable leadership approach

What are the company’s visions for employee engagement in the sustainable agenda? What are the key targets internally as well as the key story externally?
Where is the company’s vision for sustainability born and who owns it in the company – and perhaps also in the Supply Chain organization?
How can the employees take on responsibility for driving the sustainability agenda? What would the company like to achieve by their engagement?
How do you ensure that all relevant employees get engaged in the agenda?
Which governance processes and structures would need to be put in place to motivate and structure employee engagement in the sustainability agenda?
Who is responsible for securing progress?
Which tools could possibly support us in supporting employee engagement?
How do you ensure that the effort the employees contribute with is turned into something more tangible?

With inspiration from: Forretning for fremtiden, Succes med verdensmålene, Kristoffer Nilaus Tarp and Erik Thomas Johnsen, page 204