Global Market Trends #3: Industry Forecasts and Predictions
At Component Sense, we value the importance of following global market trends and presenting up-to-date analyses to our customers. Parts One and Two of our Global Market Trends editorial series have investigated the reasons for current market trends, and detailed responses from our global industrial partners. In this third instalment, we are focusing on the most frequent forecasts and predictions for the future of supply chain management. Global industry leaders and analysts maintain that we are living in a period of “calm before the storm” — so what future is on the horizon for the international supply chain?
Industry experts are united in predicting an increase in the role of artificial intelligence (AI) in supply chain management. Susan Galer, writing for Forbes, cites International Data Group (IDC) research in her article on ‘Industry 4.0,’ stating that “IDC analysts predicted that by 2023, 50% of all supply chain forecasts will be automated through the use of artificial intelligence […] Two years after that, IDC saw 40% of G2000 organizations using AI, data governance, and a transformed organization to develop a resilient and distributed operational decision-making framework, driving 25% faster change execution.” To combat snarled up shipping ports and delivery delays, it is predicted that AI will be a central player in optimising supply routes. Embedded bespoke AI systems are also expected to be crucial in forecasting demand rates and avoiding future supply-demand discrepancies.
Another way in which AI is predicted to become critical is in the strengthening of a sense of community and connectivity between companies. Forbes contributor Muqsit Ashraf has outlined that “collective pain calls for collective action” and urges businesses to work together to maximise their resilience against external pressures. AI can connect supply chains and share resources between companies, allowing for real-time updates and immediate inventory management. This emphasis on collective agility, according to Raf Peeters (Forbes), “helps companies get ahead of problems, instead of putting out fires.” The pandemic has already strengthened OEM-EMS relations, as we discussed in Part Two of this series, but the inclusion of AI further strengthens these relationships. This increased multi-player resource optimisation is set to be a key trend in the coming years, and Grant Rutherford, Component Sense’s Chief Technological Officer, is excited about this increased use of AI in supply chain management. Grant knows that traditional inventory management systems are inflexible when it comes to changes in the market, and says that “the rise of AI is crucial for managing supply chain issues and creating industry-wide innovations.”
US and European industry predictions have been influenced by recent international trade agreements. Most recently on May 16th, the US-EU Trade and Technology Council pledged to deepen transatlantic cooperation to strengthen chip supply chains, curb non-market trade prices, and take a more unified approach to firm regulation. US President Joe Biden also aims to invest heavily in American chipmaking capabilities, which would dramatically influence the global supply chain. Furthermore, key US trade bodies have pledged to recruit approximately one million drivers to close the supply-demand gap. However, these proposals and agreements are no cure-all to the ongoing issues. Such vast changes — whilst potentially transformative — will also present significant teething issues for the whole industry.
Forecasting for inventory management is less simple. Whilst most analysts admit that “none of this is likely to end soon,” they cannot seem to agree on how best to approach stock acquisition and management. Prices are expected to continue escalating across the supply chain. We are also advised to plan for discounted “fire sales [as] companies sort through inventory obsolescence.” Many companies are opting for a ‘just-in-case’ approach to inventory management instead of the traditional ‘just-in-time’ method, meaning that suppliers are buying in much larger quantities than needed to avoid future supply disruptions. Writing for Z2 Data, Chase Correll warns of the dangers of surplus acquisition of microchips, stating that “the current demand and panic buying of chips is amplifying the projected need for chips down the supply chain […] manufacturers are expanding capacity for a potential demand that is much higher than it actually is.” These high inventory practices also “risk setting up the industry for bloat if demand sours,” according to Bloomberg contributor Brooke Sutherland. This fluctuation between over-forecasting and industry bloat has been highlighted as a recurring trend by our CEO, Kenny McGee. In a blog post from 2017, he underlined that “[inflating] your forecast 10-fold is a very risky business.” Kenny witnessed one company make this mistake and receive a bill for “10 years’ worth of production on some very expensive lines! The company struggled on for a few years but eventually died off.”
These forecasts highlight the difficulty in accurately predicting the future of the global supply chain. Such a vast amount of information can present an overwhelming picture for manufacturers and suppliers to analyse. This is where we can help: Part Four of this series will offer Component Sense’s advice to help our customers navigate the turbulent present and future of supply chain and inventory management. How can our customers avoid industry bloat? How can you stay on top of future bills and rising prices? If you want to keep on top of our analysis and bolster your company’s success in such a fluctuating market, you can follow us on social media and receive notifications of our forthcoming editorial pieces for this series.