Top 10 2024 Supply Chain Trends: 4. Supply Chain Investment (systems and people)

If you’re just tuning in — and as evidenced by our title — we’re in the midst of a 10-week series covering the Association for Supply Chain Management’s (ASCM) top ten 2024 supply chain trends that were announced in September. Each week, we’ve been digging into a topic to see how it’s being applied to supply chain management (SCM).

Here’s what we’ve covered so far:

This week, we’re covering #4 on the list: Supply Chain Investment (systems and people).

Over the six weeks to follow, we’ll do something similar with each of the remaining categories in the top ten, which are:

To tackle this week’s topic, we’re going to dig into a report from the Capgemini Research Institute released earlier this year about how organizations are taking a strategic approach to investing for business success. Although every finding may not be described in the context of supply chain management, those that aren’t may be applicable there, as well.

“Advancing Through Headwinds”

For the report, Advancing Through Headwinds: Where Are Organizations Investing?, the Capgemini Research Institute surveyed 2,000 respondents from unique organizations with more than $1 billion in annual revenue, across 15 countries, in Nov and Dec 2022.

Researchers analyzed their investment strategies in areas such as digital transformation, supply chain, talent and skills, and sustainability for the next 12-18 months.

Results indicated that “economic headwinds” are causing organizations to embrace caution when it comes to investments and that supply chain disruption is a major concern — with 89% of those polled citing it as the “top risk to business growth,” outpacing the rising price of raw materials and the “energy crisis.”

Check out these four key takeaways from the report.

1. Supply chain disruptions: investment in technologies and diversification are top priorities

With supply chain disruption perceived as the top threat, organizations are ramping up related investments to mitigate the potential.

Among the executives surveyed, 43% said they planned to increase supply chain investments by an average of 10.4% over this year and into the future. Direct investments will focus on supply chain technologies that enable supply chain agility, transparency, and visibility — as well as diversification of supplier bases, production, and transportation partners.

“Priority actions to achieve supply chain diversification will include onshoring or near-shoring to boost production bases closer to demand, regionalizing supplier bases, and diversifying the manufacturing base (i.e., reducing reliance on a single geographic region),” the announcement said. “Western European countries plan to invest more in supply chain diversification, whereas APAC countries plan to invest more in supply chain technologies.”

2. Technology investments: perceived as a lever to drive cost reductions and business transformation

It may come as no surprise that many of the leaders polled said they would lean on technology to help “weather the economic storm,” with 39% saying they planned to boost tech investments over the next 12-18 months, with “a similar proportion…planning to maintain it.”

As far as the ROI they’re hoping to achieve, executives said they aim to use technology primarily to reduce costs and speed up decision making, “leveraging cloud, data and analytics.”

And wisely, nearly half said they planned to increase cybersecurity spend in the next year to better protect their businesses.

3. Sustainability investments: increase in US and China, less so in Western Europe

Due to “adverse market conditions,” participants indicated that spending on environmental sustainability had already taken a hit, and just 33% of those polled indicated related investments would be increased in the next 12-18 months.

However, businesses in the US and China indicated plans to increase investments (41% and 53% of organizations respectively) over the next 18 months.

Researchers postulated that the drop in sustainability spending may be partly due to the fact that it’s often viewed as a “costly obligation” instead of an “investment in the future.”

Additionally, 74% of the executives polled said that the “current macroeconomic landscape” had dampened consumer demand for sustainable products and services, since many aren’t willing to pay the higher price tag to get them.

4. Biggest talent spend: on hybrid and remote working policies

With a dearth of skilled workers, it seems a bit surprising that investing in hybrid and remote work strategies held such priority for the leaders polled.

“As hybrid work models become the norm and more employees expect flexibility and balance in their day-to-day, business leaders plan to put their biggest talent spend on such strategies and policies in 2023,” the announcement said. “In fact, 65% of executives plan to invest and implement hybrid-working options for employees, and 61% for permanent remote-work options for roles that require less supervision and teamwork.”

The head-scratcher is that for many “critical areas,” the executives surveyed indicated plans to make spending cuts in the next 12-18 months:

As the Capgemini Research Institute pointed out, “As the competition for talent continues to limit organizations’ growth prospects, the brands that aim to remain attractive should double down on these aspects.”

Cited in the announcement, Capgemini CEO Aiman Ezzat emphasized the importance of investing in both technology and talent to optimize business success.

“Global business leaders are focusing their investments on the areas that will continue to drive their business transformation,” Ezzat said. “They should seize the opportunity that technology offers, not only to make their business more efficient, sustainable, and resilient, but more importantly to enable long-term growth opportunities. It is also essential to invest in the talent that will be able to deliver on these business model and value chain transformations, without sacrificing overall employee experience. These areas of investment are vital for organizations to not only weather the uncertain environment but emerge stronger and more resilient in the future.”

For more, please access the full report.