Supply Chains Strive to Be Secure, Smart, and Sustainable in 2021
A global pandemic tests supply chains like nothing else. For many companies, COVID-19 exposed glaring gaps and weaknesses in their supply chains and management systems, especially regarding agility. Most manufacturers and supply chain companies would agree that a top goal for 2021 is to continue to implement Industry 4.0 technologies that improve transparency and efficiency throughout their supply chain processes and operations, such as automation, robotics, machine learning, Internet of Things (IoT), and blockchain.
As much as these technologies deserve full attention and significant investment, four other supply chain trends are emerging for 2021 that will have significant impacts on the supply chain—cold storage capacity, cybersecurity, sustainability, and artificial intelligence (AI).
Cold Storage Growth
2021 is seeing increased global demand for refrigerated foods, beverages, vaccines, and other pharmaceuticals. The global cold storage market size, valued at USD $107 billion in 2020, is expected to grow at a compound annual growth rate of 13.5% through 2028.
This demand is driven by several factors—the pandemic, supply chain disruptions, shelter-in-place orders, and the explosion of e-commerce for purchasing food. The lack of cold storage facilities in rural areas is of particular concern in delivering food supplies and reflects the need for local, smaller cold storage facilities in these areas.
To keep pace, distributors need to expand their number of trucks, shipping containers, and climate-controlled distribution facilities. The lack of infrastructure, especially in rural areas, required to sustain the cold chain, will cause shipping challenges—however “single-envelope construction technology, a recent development in composite panel construction, can help reduce overall construction time and costs of building these facilities, which have a smaller footprint and lesser height without compromising the internal volume,” states Grand View Research.
Like many other industries, distribution/logistics is also susceptible to cyberattacks due to the interconnected nature of their supply chains. IoT, blockchain, and cloud-based computing services have led a huge surge in data-driven processes that drive improvements in production and efficiency; however, the downside is that these IoT-based technologies have created more vulnerability within systems and tools, and created more points of entry for hackers.
According to BlueVoyant, a cybersecurity services company, ransomware is the number one cyber threat to the supply chain today. The company’s Supply Chain Disruptions and Cybersecurity in Logistics report indicates the number of ransomware attacks on shipping and logistics firms tripled from 2019 to 2020. Almost all the cyber attackers gained entrance through open remote desktop ports. Despite these risks, nearly 90% of the respondents reported vulnerabilities such as open remote desktop or administration ports and insufficient email security, the primary routes of attack for ransomware.
To defend against ransomware, Danny Swanger, IT network administrator for Stone Technologies which recently announced a merger agreement with Gray Solutions, a Gray company recommends encrypting all sensitive customer information, device drives, and data and using multi-factor authentication whenever possible. “I also highly recommend ongoing training and testing using KnowBe4 security platform for all users and following best practices at all times,” says Swanger.
Despite the more pressing concerns of repairing and upgrading supply chains during the pandemic and deploying new technologies, supply chain companies are serious about sustainability. For example, Capgemini Research Institute revealed that more than three-quarters of the companies it recently interviewed are committed to improving supply chain sustainability over the coming years.
Not only does sustainability support the environment, it also reduces operational costs and material waste, increases customer and employee loyalty, boosts growth, and builds brand image. In fact, the Harvard Business Review reports that companies that are focused on sustainability grow almost six times faster than those who do not.
Electricity and transportation are big contributors to greenhouse gas emissions. Many logistics companies are transforming their facilities into eco-friendly warehouses, deploying advanced energy management systems and electric and solar-powered vehicles to lower their overall carbon footprint by managing their usage of electricity, heat, water, and gas.
Artificial Intelligence and Machine Learning
Perhaps the most impactful supply chain improvement in coming years will be artificial intelligence (AI) and machine learning, especially for predictive and prescriptive analytics. Embedded AI systems that provide real-time data streams, interactive data visualization, and advanced analytics will help detect operational weaknesses within a company’s supply chain. A recent report showed that “61% of executives reported reduced costs, and 53% stated increased revenues after implementing AI into their supply chains.” Further, Deloitte reported that about one-third of supply chain leaders utilize robotic technology for warehouse automation.
As AI and machine learning continue to prove themselves in the supply chain world, a growing number of companies will delegate more tasks and higher-level decision making “to intelligent applications, physical robots, and software service assistants,” predicts Gartner, a research and advisory firm.
A healthy recovery requires healthy supply chains. Some companies started investing in automation, AI, and other Industry 4.0 technologies before the pandemic and are innovative leaders; others are just starting now. “Enhanced supply-chain management and adoption of digitalization have never been more important,” says Anne Petterd, technology, communications, and commercial partner with Baker McKenzie. “Companies with well-considered supply-chain risk management processes will be better placed to identify the impact of disruptive events on their supply-chain and product offering, providing them with an opportunity to assess how to best respond in tough circumstances.”
Some opinions expressed in this article may be those of a contributing author and not necessarily Gray.