As the global economy evolves, procurement and supply chain management faces unique challenges. 2024 is no exception, with various factors, such as geopolitical tensions, labour and raw material shortages, environmental concerns and technological advancements, shaping the landscape for global commerce.
This article explores the key challenges of supply chain management that organisations face in 2024, providing insights into their implications and suggesting strategies for overcoming them.
Global Trade Uncertainties
One of the major challenges faced by supply chain managers is the cloud of uncertainty that hovers over global supply chains. In 2024, this volatility is rooted in traditional economic factors and further impaired by raw material shortages, unexpected delays, regulatory shifts and pandemic aftershocks.
The clash of financial giants, the rise of protectionism, and the unpredictable nature of export-import regulations continue to cast a shadow over the stability of global supply chains and global commerce.
In response to the ebb and flow of international relations, tariffs and sanctions are employed as strategic tools, which causes supply chain disruptions and inflating costs. Understanding the immediate and long-term implications of such measures and devising agile strategies to mitigate their impact is essential.
Compliance with evolving trade regulations is an ever-evolving challenge. Supply chain professionals must understand trade laws comprehensively and adapt their processes and technology to ensure compliance.
Geopolitical Instability
The United Nations reported that in 2023 there were more violent conflicts globally since World War II. This led to 110 million people being forced to leave their homes due to danger, fighting, or severe societal disruptions.
The situation worldwide is concerning and causes problems in the moving and delivering of goods. In addition to already ongoing conflicts, experts are keeping a close eye on the tensions between China and Taiwan, because it could lead to significant challenges and economic uncertainties.
New rules might make sending things like computer chips, farm products, drones and other technology out of these areas harder. If the situation worsens, industries that produce electronics, clothes, rubber and various metals in that region might face serious difficulties.
Sanctions imposed on Russia are stopping goods from being sent to and from Russia. In addition, Russia themselves have been blocking the transport of goods from Ukraine. These issues bring about serious supply chain challenges and increasing freight prices.
Ocean Freight Bottlenecks
Ocean freight bottlenecks are more than a momentary inconvenience; they are a symptom of more profound systemic challenges. These bottlenecks will continue to pinch global supply chains, slowing down the movement of goods.
For Example, in 2021, the Suez Canal was blocked for six days, causing a massive traffic jam that stopped over 60,000 containers of products from reaching their destinations. This was a rare event, but experts suggest that similar sea traffic jams are bound to happen again in the future.
These bottlenecks occur when too many ships try to move through the sea at once, leading to transportation delays and overcrowded ports.
The shortage of containers, exacerbated by the demand surge post-pandemic, highlights the fragility of supply chain infrastructure. Developing strategies to secure the needed container volume at an acceptable price and time continues to frustrate supply chain managers.
Leveraging technology, including advanced tracking and scheduling systems, can be the digital decongestant for ocean freight. Supply chain professionals are turning to technological solutions for traceability and predictability.
Red Sea Crisis
The Red Sea Crisis in 2024 has disrupted global supply chains, forcing ships to avoid the Suez Canal and detour around Africa. Iran-backed Houthi rebels have been attacking ships in the Red Sea since October 2023, demanding an end to the invasion of the Gaza Strip. This has increased shipping costs and altered trade routes, impacting international economies and ultimately leading to increased freight prices.
Due to this supply chain crisis, the cost of shipping has gone up significantly. Some routes are longer and almost five times more expensive, severely affecting the trade path from Asia to Europe. These higher transportation costs are carried over to the consumers and lead to accelerated inflation. The crisis has also made it necessary to move a huge amount of cargo, worth over $80 billion, through different trade routes.
This also shows how easily global supply chains can be affected by political problems. Businesses must have a plan B ready for such unwelcome surprises.
Global Port Congestion
All around the world, big ships are stuck waiting at ports, creating traffic jams and leading to unexpected delays in container shipping. Simply put, getting products and raw materials on time to their destination has become a major headache for supply chain specialists.
The congestion and delays seen at major global ports are reverberating throughout the supply chain, from raw material procurement to final delivery. Compounded by shortages of warehouse space, these issues present formidable obstacles and supply chain disruptions to smooth operations.
In the face of port congestion, last-mile delivery strategies are reopening. Innovations in urban logistics, such as micro-fulfilment centres and autonomous delivery vehicles, are being deployed to minimise the impact of upstream delays on critical customer deadlines.
Labor Shortages and Workforce Management
The trucking industry in Europe is facing major challenges because of a lack of drivers. About 17% of driving jobs are empty and few young people want to become truck drivers – only 9% of them are under 30 years old. With increasing customer demand, the need for drivers to deliver these goods is growing. This shortage is becoming a crisis, affecting existing supply chain operations of major businesses, and the situation doesn’t seem to be improving any time soon.
In fact, it’s expected that the shortages will get twice as bad by 2028. Finding enough drivers who can work at the right time for appropriate pay continues to pose a significant challenge. Driving manager Jason Mueller from A1 Auto Transport states: “With the shortage of drivers worldwide, there is a need for better work conditions for drivers. With no interest from the younger generation to become drivers, it’s paramount that the industry incentivises better work conditions so drivers are satisfied and the supply chain continues to work properly.”
Strategic Sourcing Puzzles
Strategic sourcing is about more than just finding the cheapest supplier. It’s a complex juggling act that weighs cost against rising risks, quality and reliability. It helps organisations to extract maximum value from their purchasing decisions and aligns their operational strategies with their purchasing strategy.
In addition, strategic sourcing helps to reduce supply chain risks, secure the timely availability of raw materials, balance inventory levels, manage consumer demand efficiently, and run existing supply chain operations more effectively.
In 2024, sourcing has become a complex puzzle, with many pieces that must be carefully fitted together for maximum benefit. To reduce those risks, having a clear and up-to-date supplier tiering strategy can help manage these complexities more effectively.
Environmental and Sustainability Pressures
The green wave washing over global consumer trends has put sustainability at the forefront. Supply chains must align with heightened environmental consciousness, not only as a corporate social responsibility but as a business imperative.
People are paying more attention to environmental, social and governance (ESG) issues, which are changing how goods are produced. Laws on unfair practices are getting tougher every day. Here’s a few examples of what’s happening:
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The US has made rules that stop the sale of goods from Xinjiang in China because of concerns that the Uyghur people there are being used as forced labour.
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Norway and Germany have laws that hold companies responsible if they engage in human rights abuses in their supply chains.
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New rules are being made to reduce pollution from transporting goods worldwide.
The Impact of Brexit and Other Trade Agreements
The ripple effects of Brexit and other burgeoning trade agreements continue to echo through the global supply chain network. These agreements, designed to redraw trade maps, come with a host of changes that significantly affect supply chain operations.
Brexit, for instance, has ushered in a new era of regulatory divergence, rendering the UK an independent entity in customs and trade laws. Supply chains, particularly those with UK exposure, must be remodelled to align with the latest regulatory requirements.
The implications of these trade agreements reach far beyond trade compliance; they affect everything from sourcing decisions to consumer trends. Attracting and retaining talents with region-specific expertise is now a strategic priority in order to ensure that supply chains are optimally adapted to new trade realities.
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Resurgence of COVID-19
As businesses get back on their feet and countries ease up on restrictions, there’s still a chance COVID-19 could throw a spanner in the works. A new, tougher strain could mean more lockdowns, making it tough to get products to people. This is a huge stumbling block for companies trying to figure out what to stock up on, especially with changing consumer demand.
Forecasting what customers will want is tricky at the best of times, but the addition of a pandemic makes things even harder. Companies used to rely on past trends, but now guesswork is needed, sometimes with little information to base their guesses on. This makes demand forecasting in the supply chain a big challenge.
Therefore, people dealing with supply chain management are trying to get better at forecasting rapidly changing customer needs to meet customer demand. They must communicate more with their suppliers to stay on top and constantly look for fresh information to make better estimates.
Raw Material Shortages
Raw material shortages have left us short on the necessities that businesses rely on. This means companies can’t produce as much as they want and customers might have to wait longer for their goods. These shortages are a byproduct of many of the other challenges discussed in this article, for example, geopolitical tensions and port congestion.
By nurturing and keeping great relationships with your suppliers, the impact of these shortages can be lessened. Maintaining strong relationships with suppliers ensures that when materials are scarce, suppliers are more likely to prioritise your orders to maintain the good relationship. Furthermore, a solid partnership can lead to better communication and early warnings about potential shortages, allowing for more effective contingency planning.
Rising Costs and Inflation
Inflation looms over 2024, driving up the cost of raw materials and production. These increased costs are now sending ripples through the supply chain, challenging professionals to adapt their practices to maintain profitability.
Faced with rising costs, a comprehensive approach to cost containment is essential. This could include optimising inventory levels and strategic sourcing for more cost-effective suppliers.
Harnessing the power of data analytics, supply chain managers are now more equipped than ever to predict and plan for cost fluctuations. They can develop pricing strategies that insulate their supply chains from unexpected shocks by analysing historical trends and market data.
Generative AI
Generative artificial intelligence could boost the global economy by $2.6 to $4.4 trillion annually, with supply chains and production seeing a 25% improvement. In 2024, advancements in AI are key in supply chain data management, improving supply chain operations and supplier integration.
Artificial intelligence will handle tasks, such as transcribing speech, analysing supply chain data, and inventory management. However, key challenges include automating processes and machine learning for data analysis and data management to harness the full potential of AI.
Overcoming the Challenges
Overcoming the multifaceted challenges facing global supply chains in 2024 requires a blend of innovation, agility and strategic foresight. Supply chain industry leaders must proactively turn these supply chain challenges into opportunities inspired by the insights and technologies available.
Initiatives, such as investing in resilient infrastructure, fostering partnerships for greater efficiency, and embedding sustainability at every level can pave the way for more robust supply chains.
Furthermore, a continuous commitment to data-driven decision-making and the adoption of a mindset of lifelong learning will ensure that supply chain professionals are primed to manage and anticipate the dynamics of a rapidly evolving global commerce landscape.
Putting thought into your supply chain operations early on can significantly reduce costs. By following Design for Supply Chain principles, you can optimise product design to seamlessly integrate with the supply chain, ensuring efficiency and cost-effectiveness.
Addressing these challenges head-on, procurement leaders can mitigate supply chain risks and build a future where supply chains are more responsive, resilient, and aligned with goals of economic sustainability.