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GT Nexus: The State of the Global Supply Chain

Coming off of a challenging 2015, supply chain executives don’t seem to think 2016 will be a breeze either.

Explosions, strikes, fires and weather were just some of the things that roiled supply chains last year, and according to the latest “State of the Global Supply Chain” report released Wednesday by supply chain platform GT Nexus and market research firm YouGov, 40 percent of manufacturers said one disruption or another impacted their business in the last year.

Another study by Zurich and the Business Continuity Institute found that as many as 74 percent of respondents experienced at least one supply chain disruption last year.

“Virtually no business involved in producing or selling products is immune to supply chain disruption,” the report noted. “As supply chains become increasingly complex and susceptible to disruption, an agile supply chain that enables seamless adjustments to be made on the fly is critical.”

Visibility will be key, too, but not enough companies have the level of transparency built into their supply chains that’s necessary for business today. Seventy percent of those surveyed in the Zurich study said they lack visibility over their entire supply chain.

Beyond visibility, companies are worried about three things: keeping up with ever-changing consumer demand, the high level of risk in global markets and diversifying their network of partners.

“Supply chains today are more lengthy—and fragile—than ever, and that’s unlikely to change in the near future,” according to the report. To face that fact, companies will have to stay agile and be quick to respond to risk.

This year, 29 percent of supply chain executives think currency fluctuations and geo-political risk will have the most notable impact on the supply chain, followed by 14 percent who point to labor strikes and 8 percent who say the looming Trans-Pacific Partnership (TPP) trade agreement will play a role.

“Geopolitical risk drives market volatility and currency fluctuations, posing challenges for global trade,” the report noted. “Having access to technology that can provide a high-definition picture of the supply chain, change suppliers and sourcing regions on the fly, and navigate natural disasters and other disruptions fluidly is critical.”

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Advanced analytics, the Internet of Things and 3-D printing are the top technologies respondents see as most likely to impact supply chains this year. But despite technology’s already obvious impact on the supply chain—from new enterprise software solutions to RFID technology and even talk of incorporating drones for various tasks—17 percent of respondents said they have no idea what technology will impact their supply chain in 2016 and 38 percent don’t think technology will impact their supply chain at all.

“There remains a need for education around supply chain technology,” the report noted. “If supply chain managers aren’t aware of the latest innovations within the industry and the benefits they provide, they risk falling behind.”

Most companies (64 percent) are using an inventory management system, 35 percent have factory management technologies in place and 34 percent are using technology to aid transportation management.

“It is no surprise manufacturers still direct their resources to inventory, factory and transportation management solutions,” according to the report. But in looking to the future, companies will have to look beyond execution-based solutions to planning-based solutions like inventory and network optimization.

A Material Handling Institute report, titled “Supply Chain Innovation—Making the impossible possible,” found that 80 to 90 percent of supply chain executives plan to put these tools in place by 2019.

“The adoption rate for growth technologies such as predictive analytics, wearables and mobile technologies is also expected to rise, reaching 70 percent in the next three-to-five years,” the Material Handling Institute report noted. “Further, emerging technologies like driverless vehicles, drone and 3-D printing are also expected to become more prevalent in supply chain.”

Whether 2016 will be a year marked with major supply chain challenges remains to be seen, but more than anything else, manufacturing executives will be working to reduce costs this year—though, according to GT Nexus and YouGov, focusing on cost-cutting over working toward a strategic supply chain vision could be a misalignment of priorities.

“Supply chains are more expansive—and expensive—than they’ve been in years past, but complexity can be kept in check by having a supply chain strategy, and C-level leader, in place,” according to the report.

To do this, companies need to: have connected partners end-to-end, drive decisions based on operational information, establish deep executional visibility and control, and collaborate among trading partners—which, in turn, will help cut costs anyway.

“Operating as a network does away with reactiveness, breaks down the silos of information and facilitates a transparent, efficient environment,” the report noted.