Artificial intelligence. Machine learning. Digital transformation. Omnichannel. Automation. Predictive analytics. These were the buzzwords that dominated 2021 and will still likely be in every business’s radar for quite some time. Lingaro’s experts weigh in on the trends that business leaders and decision-makers will most likely see in supply chain, procurement, and consumer sector, and how analytics will shape their trajectories in 2022 and beyond — if they haven’t already.
Disruptions persisted in 2021 and continued to upend the ever-volatile market. Meanwhile, customers, clients, and employees demand more: complete, cross-channel experience, commitment to the environment, and more options for procuring resources or consuming tailored products and services upfront, wherever and whenever they want. The list will grow longer, as do the obstacles that decision-makers need to overcome.
The ability to make informed business decisions while acting quickly and proactively has never been more crucial. Organizations need to find a way to creatively and efficiently use their data to fuel their short- and long-term strategies. The past two years gave decision-makers the impetus to digitally transform, and 2022 will see them further embrace analytics not because they want to, but because they need to.
Sustainability: From publicity to business outcome
Take sustainability, for example: 84% of surveyed chief supply chain officers said they’re planning to invest in capabilities that will help their companies adapt to and mitigate climate change.
“Sustainability is here to stay — not just for publicity, but because the business demands it,” said Mateusz Panek, supply chain expert and Lingaro’s enterprise and business solutions architect. “What we’re seeing among our clients and the other organizations that we work with is an increased shift from doing something that looks or sounds good for the brand to adopting a holistic approach driven by business outcomes.”
Organizations heavily rely on linear supply chains to keep the business churning, but circular and sustainable supply chains are recently gaining ground in the consumer goods, retail, high-tech, healthcare, and logistics industries. The additional value and efficiency that reclaimed, reused, or recycled resources deliver are significant, particularly in complex, globalized supply chains whose fragility and bottlenecks were exposed by the pandemic.
Setting targets to reduce Scope 3 emissions will be a new business norm. Asset-heavy industries — manufacturing, telecommunications, transportation, and aviation, to name a few — are projected to take the lead in 2022, particularly in reducing their carbon footprint. This isn’t a surprise, as the steel industry alone emits at least 7% of global CO2 emissions.
Panek cautioned that these ambitions will remain aimless without the data and tools to support them. “Companies cannot reduce what they can’t measure. Their aspirations should align with their action. Many organizations fail in their sustainability programs because they don’t tangibly measure and track their environmental impact over time. Advanced analytics can help by analyzing data to identify areas in the supply chain where resources can be optimized, or where emissions should be reduced.”
Strategic effort is also required to achieve these targets, Panek added. Despite good intentions, many organizations still struggle in making their sustainability initiatives meaningful. In fact, only 38% of 8,000 big, global companies were aligned with the UN’s Sustainable Development Goals (SDGs). “It’s great that you’re recycling, but if the recycled materials you use to package a new product will end up becoming trash again, then you’re defeating your purpose. These often overlooked and tricky details are what analytics can shed light on,” he said.
The same principles apply to procurement.
Igor Vasquez, Lingaro’s head of practice for sourcing and procurement analytics, added that laws and regulations are also underscoring sustainability’s significance for years ahead. “Inaction poses legal risks for companies as more governments incorporate sustainability in their policies. These regulations are compelling companies to embed sustainable practices in their supply chains. The COP26 in Glasgow further fueled the conversation on the vital role of businesses in achieving sustainability. We expect that more of these conversations will be backed by legal and transnational frameworks that will directly affect global supply chains. We’re already seeing it in the procurement space,” Vasquez said.
For example, assessing suppliers and vendors with environmental, social, and governance (ESG) criteria is part of the UN’s SDGs. The EU, meanwhile, is mulling to levy taxes to nonrecycled plastic packaging and raise the price of rights to emit CO2. It also proposed a directive on due diligence and corporate accountability, which will require companies to identify, report, and remedy ESG risks in their supply chains.
Consumers are also sparking these conversations. Shopping preferences are increasingly leaning toward eco-friendly and socially conscious products. In fact, 72% of global consumers are willing to pay a premium for sustainable products. They expect businesses to do their part, especially consumer-packaged goods (CPG) and fast-moving consumer goods (FMCG) companies.
Bridging gaps with supplier diversity/inclusive procurement
Sustainability is also enabling decision-makers to see supply chains through the lens of inclusion and diversity, particularly in procurement. “Back then, laws and regulations were the single force that pressured companies to engage with underserved groups, at least in the US. Now, they’re recognizing the potential of supplier diversity programs in helping their businesses grow — whether through increased market share, enhanced brand awareness, or improved innovation cycles,” Vasquez shared.
Supplier diversity, or inclusive procurement, proactively encourages engagement with businesses that are at least 51% owned and managed by historically underrepresented and underserved individuals or groups.
Supplier diversity programs aren’t new — they’ve already been implemented by the likes of Coca-Cola, Mastercard, Ford, and Target. UPS for instance, annually spends US$2.6 billion on 6,000 diverse suppliers.
Its prominence today has many dynamics at play. For one, it’s a mounting response to social issues. Organizations are also exploring additional procurement channels to give their supply chains agility and resilience. Case in point: In the EU, 40% of manufacturers note the lack of materials and equipment as a factor that restricts their production.
Supplier diversity also presents opportunities for businesses to engage with new customer bases and tap new markets. In the US alone, the combined buying power of multicultural, underrepresented groups is estimated to be US$3.9 trillion. In 2019, women-owned businesses in the US generated at least $1.9 trillion in revenue.
The shifts are promising. Enterprises in the US are expected to expand their diversity spend goals by 50% within the next four years. Currently, these companies are allocating US$72 million per billion dollars of their total spend.
Vasquez said, “An inclusive procurement strategy widens the pool of suppliers. It fosters competition and innovation, which have the domino effect of improving the quality of products and driving down costs. Having this wide pool of suppliers means a lot in today’s unprecedented times.”
It also builds credibility among today’s vocal and socially aware consumers, who are increasingly trusting brands to step up where governments fall short.
The challenge, Vasquez added, is how to move beyond tokenism. Only 43% of surveyed enterprises in the US are using data-driven and evidence-based approaches to validate their diverse spend. “To truly reap benefits from supplier diversity programs, leaders need to give them rigor. They shouldn’t be tucked away in the procurement process. They must be in the center stage. That’s where analytics comes in — it can help automate the process of reporting and measuring the company’s sourcing or procurement spend with diverse suppliers. This paves a road map for achieving diverse representation in the supply chain,” Vasquez said.
Personalization that cuts out the middleman
Sustainability and supplier diversity both affect the business’s bottom line, but there’s a key element that’s driving an increasing impact on decision-making in the value chain — today’s consumers themselves. Their expectations, needs, and behaviors are compelling businesses to rethink and reshape the ways they operate.
“Nowadays, experience and convenience are must-haves that matter most in this generation, and this has been reinforced by the pandemic,” said Michal Jablonski, Lingaro’s data strategist and head of consumer analytics practice. “Under these realities, more and more companies are reconsidering how they can get closer to their consumers beyond personalization. One of the trends we constantly see among FMCG and other product-based market players is how they’re trying get closer to the final consumer in both understanding and commercialization.”
A direct-to-consumer (D2C) sales model enables companies to shorten the producer and consumer value chain by building or activating their own digital and e-commerce channels while also selling to different marketplaces.
In the US, D2C e-commerce sales grew by 46% and generated US$111.5 billion in 2020. It’s projected to balloon to US$152 billion next year. By 2023, it’ll reach US$175 billion. More global brands and retail giants will join the D2C bandwagon and will invest in order management, payment, and inventory control capabilities to draw the customers’ attention from marketplaces to their own. This has been the case for the likes of Nike, Levi’s, Walmart, and even brands from Nestle, Colgate-Palmolive, and Unilever.
Personalization will always be in the equation, Jablonski clarified, but a D2C approach gives it another dimension. Because the brands themselves own the entire consumer journey, they can transact with consumers in ways where the products, business processes, and communications are optimized precisely for their audience. The buyers’ relationships can be better personalized, which delivers more value and improves the overall experience. Surveyed consumers in Europe, for example, cite product authenticity as the second most important reason for purchasing beauty or home goods directly from the brand, and more so for luxury items.
Adopting a D2C model, however, doesn’t just mean bringing your products online. Jablonski advised, “Brands, particularly brick-and-mortar businesses, will face stiff competition in establishing their online presence to a larger audience. Because intermediaries are removed from the equation, businesses will shoulder more responsibilities — from marketing, inventory management, and logistics to cybersecurity. For some consumer goods companies, the allure and boon of D2C might involve more prerequisites than their resources can handle.”
One of these prerequisites is data. But not just any data: Brands should have the right data to understand who their consumers are — their buying behaviors and demographics, for instance — and what message will nudge them to make purchases and get them to come back. Brands also need data on what their buyers think about their products so they can improve them. Having robust e-commerce capabilities is one thing, but analytics can help brands develop a solid D2C strategy — from targeting the right audience, creating personalized marketing campaigns, defining KPIs, and using advanced techniques like AI and machine learning to get closer to the consumers.
A cloud-native, digital-first approach
A company’s success on sustainability, supplier diversity, and D2C model will depend on how proactively it can invest in and use technology. Digital transformation will still be top-of-mind among many organizations, but to bring it to fruition, they must be able to navigate today and tomorrow’s technological landscape.
This echoes a sentiment that will be prevalent among 80% of consumers in 2022: an all-digital world where most of transactions, interactions, and experiences will take place. It’s predicted that by 2022, 35% of production apps and 90% of new digital services will be cloud-native.
A cloud-native and digital-first mindset reimagines and future-proofs people, processes, and workflows. It’s no longer about migrating applications, data, and business functionalities to the cloud. Now, it’s about orchestrating business strategies around the cloud. In the next two years, for instance, 70% of enterprises will use cloud-based infrastructure to operationalize AI.
The cloud helped global businesses mitigate and respond to disruptions, particularly during a pandemic when resources are distributed, and the workforce had to be remote. Organizations will further capitalize on the cloud to quickly create solutions, scale their implementation, and enable automation. By 2025, more than 90% of apps will be cloud-native, while 95% of digital workloads will be deployed on cloud-native platforms.
These technological paradigms will open new opportunities for organizations brave enough to be early adopters:
Composability will be the name of the game: Modularity won’t just be a principle for dealing with disruptions — it will encompass corporate culture, analytics, and IT infrastructure, all of which will hinge on the cloud. By 2022, 75% of enterprises will be running containerized applications. In analytics, the democratization of data will empower employees — through low- or no-code platforms — to build solutions that package discrete business capabilities into composable applications.
From data warehouses and data lakes to data fabrics: A new approach to data management will be weaved into the enterprises’ data ecosystems. This isn’t to say that data warehouses and data lakes will go away — they are separate but necessary and complementary solutions for storing, moving, processing, and reporting data. Data fabrics, on the other hand, are distinctly designed to provide a unified, consistent, and seamless access to data from multiple sources. Data fabrics are poised to reduce data management efforts and costs by up to 70%.
If necessity is the mother of invention, the disruptions over the past two years forced organizations to reimagine the way it does business and fast-tracked their plan and need to digitally transform. This momentum will be maintained in the years to come. Businesses are moving faster, and analytics will be the fuel that can sustain this speed.
In a time of uncertainty, however, every decision counts. Emerging trends and new technologies will open opportunities, but their hype and risk might outweigh their real-world use and value. It’s not enough to know what’s coming. Organizations need to look at their data to tackle their own priorities and use analytics to bridge the gaps between their vision and impact.