Supply Chain 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.

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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.

Are you struggling with balancing inventory? Today, many Nordic businesses face major challenges in matching their inflated stock levels and assortment of products with changing customer demands. The quest to maintain a high service level while minimizing costs remains a top priority, although now it seems more difficult than ever. Fortunately, smart supply chain planning can unleash the potential of your inventory and pave the way for supply chain success.

Why do businesses struggle to balance inventory?

In the midst of a global pandemic that profoundly disrupted the global supply chain, our current macroeconomic landscape has taken shape. With significantly reduced shipping capacity and prolonged lead times from Asia, businesses faced the challenge of meeting customer demands by placing substantial orders to stock up on inventory.

Fast forward a few years, and we now find ourselves grappling with high-interest rates and inflation. These economic forces have propelled a significant change in consumer behavior. Consumers are now favoring more affordable products over their pricier counterparts. Consequently, businesses have also adapted their supply chain strategies, stocking more inexpensive items to cater to these changing customer needs.

High inventory levels and the wrong product mix

This shift, however, has unwittingly given rise to a particular problem – the overstocking of higher-priced items. The current product mix is simply mismatched and does not align with the new customer needs. This is now causing large financial strains on businesses.

Previously, when interest rates remained low, companies focused on providing a high service level, and they could maintain extensive product inventory without incurring significant costs. Now the scenario is vastly different. Obtaining desired stock has become increasingly expensive, and the bottom line is directly impacted by percentages.

To cope with this, many businesses find themselves resorting to significant discounts to reduce their inventories, or they simply hit the brakes in an attempt to handle the situation. However, this scenario may eventually lead companies to face a ”bullwhip effect”, resulting in empty shelves and disorganization throughout the supply chain.

Discover the potential of your inventory

Instead, this situation calls for careful consideration of inventories to ensure a balanced mix of products. The more complex the supply chain, the more critical the inventory management. And as the complexity grows, so does the need for digitization, robust system support, and control.

For today’s companies, it is important to understand where the forecast lies. Keeping tabs on demand has always been valid, but it has now reached a new level of importance. The large expenses of maintaining product inventory heighten the need to align stock levels precisely with customer preferences.

Despite this, a vast majority of supply chain data correction is still today handled manually in Excel or via rigid and rule-based processes in ERP systems. These traditional systems are primarily designed for data input rather than supply chain optimization. This often leads to an accumulation of slow-moving items with irregular and sporadic demand patterns. As a result, businesses face increased costs and inefficiencies.

To maximize the true potential of your inventory, a System of Differentiation (applications dedicated to handling specific business needs to reach a competitive edge) – rather than a System of Record (applications and ERP systems dedicated to handling the most basic and critical data need and processes) – is required.

Use a smart supply chain planning platform

A smart supply chain planning platform can be tailored to optimize a company’s specific supply chain operations. It leverages advanced algorithms and intelligent automation to provide the insights needed to make informed decisions and take proactive actions.

A modern supply chain planning system will provide a high service level for the end customers by securing the right product mix, while still keeping inventory levels low.

Companies can maintain a high service level not only during peak periods or with high-volume items but also with products sold sporadically. It ensures an efficient operation while keeping inventory levels low or at their optimal point.

By implementing the right system support, businesses can experience remarkable cost savings. On average, stock levels can be reduced by as much as 30%. Imagine the impact that saving such a significant amount of money can have on your bottom line.

Moreover, a smart supply chain planning platform eliminates the need for manual work. Automating time-consuming tasks liberates planners to focus on more rewarding activities, such as proactive risk assessments. This allows them to contribute strategically to the company’s success and drive growth.

To sum it up, your company will benefit from a higher level of service, ensuring customer satisfaction and loyalty. Simultaneously, inventory levels will be optimized, enabling you to strike the delicate balance between meeting demand and minimizing excess stock. Furthermore, the automation provided reduces operational inefficiencies and streamlines your processes, paving the way for increased productivity and profitability.

A large network of supply chain experts at your service

At Optilon, our expertise stems from a rich 30-year integration heritage, empowering us to seamlessly integrate solutions for production planning, demand forecasting, inventory optimization, and replenishment. With a vast network of 50 supply chain experts in the Nordics, we offer unparalleled support to our clients.

Don’t settle for outdated methods. Contact us today and discover how we can help you transform your business. It is time to step into the future of supply chain planning.

Let us help you unleash the potential of your inventory. Book a meeting today!

Is your supply chain a growth driver for your business? If not, it is time to take a closer look at supply chain design. A well-designed supply chain can transform your business by increasing efficiency, reducing costs, improving customer satisfaction, and providing a competitive edge. In this blog post, we will explore 7 ways supply chain design can transform your business and turn challenges into opportunities.

What is supply chain design?

Supply chain design is the process of creating an optimal strategy for moving goods from suppliers to end customers. It involves building an optimal network of organizations, people, activities, information, and resources involved in the production, handling, and transportation of goods. It includes a range of tactical as well as strategic decisions.

Some examples are defining the optimal warehouse footprint or where to invest in production capacity based on a point-of-gravity or greenfield analysis. Other decisions involve optimizing sourcing based on total landed cost, analyzing the transportation system, or managing resources throughout the supply chain. Additional examples are balancing supply and demand based on lowest cost or highest profit or conducting a cost-to-serve analysis to gain insight into the actual cost of reaching each customer.

Now that we have sorted out what supply chain design is, let us explore 7 ways supply chain design can transform your business.

1. Become proactive rather than reactive

One common misconception about implementing supply chain design is that it is a large and complicated task that only needs to be done occasionally. This cannot be any further from the truth. Yet, many companies engage in supply chain design reactively, after a crisis, or repetitively but too rarely.

By using a structured supply chain data model, companies can empower their supply chain design process and become proactive rather than reactive. By testing different strategies in a sandbox environment, companies can improve their supply chain design and be better prepared when crises occur – or avoid them altogether.

2. Effectively balance supply chain key factors

While supply chains are becoming increasingly complex and data volumes continue to rise, businesses are facing greater challenges in achieving the optimal balance between cost, service, risk, and sustainability. Making the best decisions in this context requires a delicate equilibrium between all these dimensions.

Fortunately, advanced algorithms offer a way for companies to continually review and adapt their strategies, ensuring they are making the most informed decisions that effectively balance these key factors. By leveraging the power of data-driven insights, businesses can fine-tune their operations to reduce cost, deliver exceptional service, minimize risk, and promote sustainability.

3. Respond more effectively to changes

The current macroeconomic situation has created a pressing need for businesses to reduce the time it takes to answer critical business questions. Supply chain leaders are exposed to more questions in shorter time spans than ever before.

A robust supply chain design process that incorporates an end-to-end data model and purpose-built applications empowers leaders to take control of their data and develop strategies to respond more effectively to changes. By adopting new technologies and a continuous supply chain design process, companies can respond more effectively to changes and turn their supply chain challenges into competitive advantages.

4. Make fact-based supply chain decisions

Given the complexity of supply chain and the increasing demand for fast decisions, it can sometimes be challenging for companies to find the time to get the facts on the table and conduct a thorough analysis. Many companies still rely on spreadsheets, which often lead to hasty shortcuts and inaccuracies.

To stay ahead of the competition, leading companies are turning to modern technologies to fundamentally rethink and transform their supply chain processes. By using advanced tools and techniques, they are able to gain a deeper understanding of the complexities of their supply chain networks and leverage continuous scenario planning.

Companies that successfully incorporate network optimization applications into their decision-making processes gain insights that were previously impossible to obtain solely through experience. Furthermore, these tools provide an objective view of the data, which can challenge long-held assumptions and lead to more accurate decision-making.

5. Increase long-term supply chain resiliency

In supply chain design, the traditional trade-offs have been focused on cost, service, and risk. In recent years, also sustainability has been taken into account while ESG (Environmental, Social, and Governance) has become increasingly important. However, the prevailing approach has still prioritized cost, giving it a higher weight in decision-making. This has led to trade-offs that prioritize short-term cost savings over long-term resilience. But fact remains that a resilient supply chain is critical not only during times of crisis but also in everyday business operations.

To address this challenge, it is essential for companies to balance resilient thinking with the need for faster decision-making. This requires having alternative options already in place and maintaining them over time, so that reactive decision-making can be avoided in favor of strategic analysis. By adopting a long-term perspective, companies can ensure that cost-efficient decisions are also resilient and sustainable over time.

6. Allow for multiple users of supply chain technology

Historically, advanced technology in supply chain design has only been accessible to a select few. This has resulted in bottlenecks and prevented companies from realizing the full potential of running multiple scenarios in a short time span. But with today’s technology, it is possible to create personalized user experiences and bespoke applications that cater to the needs of a much larger pool of users. This allows for tailored solutions where more stakeholders can conduct the scenario analysis.

7. Improve collaboration through increased visibility

The supply chain design process plays a crucial role in increasing supply chain visibility. It not only offers a holistic view of the end-to-end supply chain. It also includes potential future supply chains generated by what-if scenarios. This enables companies to establish a common analytic platform and view of data, rather than creating silos with multiple versions of the same information.

By adopting this approach, all analytical tasks within the supply chain can be based on the same data and assumptions. These can be governed and maintained in a cross-functional arena, promoting collaboration and enhancing efficiency.

Are you ready to take your supply chain to the next level?

I hope this article gave you some useful knowledge and insights into how supply chain design can transform your business and turn challenges into opportunities. At Optilon, we know that navigating the complexities of supply chain design can be challenging. But the rewards are truly game-changing. By implementing sustainable supply chain design strategies, you increase your chances of beating the competition.

Are you ready to take the leap and revolutionize the way you do business? Our team of experts is here to guide you every step of the way. Don’t let your competitors get ahead – contact us today and let us embark on this exciting journey together.

Yes, I am ready to beat the competition. Let us book a meeting today!

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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!