Currently, the global industrial and supply chains are undergoing profound restructuring. What are the latest development trends in China’s supply chain in 2024 worth paying attention to? What opportunities and challenges will they bring to us?
The five development trends discussed in this article were contributed and selected by the Procurement and Supply Chain Expert Committee of the China Federation of Logistics & Purchasing, and were finally determined after discussion by the editorial committee of the “China Supply Chain Development Report (2023-2024).” These five trends have also been identified as the themes of the five chapters of the “China Supply Chain Development Report (2023-2024).”
Value Creation through Supply Chain Collaboration
The global political and economic environment is complex, and supply chain management faces multi-dimensional goals of “needing to, wanting to, and having to” achieve. Collaboration within the supply chain is becoming increasingly important. Creating new value and new advantages through organic collaboration within and outside the supply chain has become a key factor in the success of modern supply chains.
Supply chains need to ensure coordination between internal and external parts, maximizing overall benefits and achieving more than the sum of their parts. Leading companies eliminate barriers, build trust, and significantly improve supply chain collaboration efficiency through flat organizational structures, process reengineering, ecosystem cooperation mechanisms, and intelligent collaborative platforms.
Deep collaboration and evolution within ecosystems will bring new value to businesses and society as a whole.
Macro-Policy Level: The country is promoting a higher level of open economic development by advancing the Belt and Road Initiative, expanding free trade zones, strengthening the construction of industrial and supply chain interconnectivity infrastructure, increasing efforts to attract foreign investment, accelerating the alignment with international high-standard economic and trade rules, and building a community with a shared future for mankind. By fully utilizing the resource endowments and industrial characteristics of various countries, the efficiency and value position of transnational industrial chains are enhanced, driving overall economic benefits.
Meso-Industrial Chain Level: The industry chain leader system is continuously developed and improved by scientifically formulating industrial development strategies, implementing major industrial tasks, and fostering an innovative industrial ecosystem, thereby promoting orderly linkage and resource sharing within the industry chain, enhancing new industrial productivity, and strengthening international competitiveness. Additionally, industry associations will further enhance their platform role, promoting high-level industry chain exchanges and cooperation among nodes of the industry ecosystem, including companies and research institutions.
Micro-Enterprise Level: The types and subjects of inter-organizational collaboration are becoming increasingly diversified, and the depth of collaboration is also increasing. Successful collaboration will help organizations enhance their supply chain resilience, explore new markets, reduce costs and increase efficiency, improve customer satisfaction, and achieve sustainability goals. For example, buyers and suppliers can innovate together to find new cost-reduction methods and strategies, break through internal competition; companies and universities can collaborate deeply to promote the organic connection between education, talent, industry, and innovation chains, and tackle major challenges.
In the coming years, the external environment will become even more complex. From macroeconomic to industrial environments, change will be the new norm. Only by fully leveraging the collaborative effects of industrial and supply chains can greater synergies be formed to gain new advantages and create new paradigms in an uncertain business environment, thereby exploring new growth.
Growth in Supply Chain Resilience
Currently, the world is experiencing major changes not seen in a century, with economic globalization facing resistance, a rise in trade protectionism, profound changes in the global governance system, and a significant increase in uncertain, unstable, and unpredictable events. Globally, supply chain disruptions are becoming increasingly frequent. Supply chain resilience, as the capacity to respond to and recover from supply chain disruptions, has received unprecedented attention from the Chinese government and industries in recent years. However, some companies currently ensure supply chain resilience by blindly stockpiling large amounts of redundant inventory and diversifying the distribution of all raw material suppliers, sacrificing cost and efficiency for resilience. Therefore, in 2024, more attention should be paid to balanced growth in supply chain resilience, including the following key points:
Minimalist Supply Chain Resilience: Balancing redundancy and cost while maintaining a simple supply chain that can withstand external shocks and internal changes. By real-time sensing of supply network changes, accurately predicting demand and risk, and scientifically finding the balance between cost and redundancy, healthy growth in supply chain resilience is achieved.
Lean Supply Chain Resilience: Balancing risk control and operational efficiency by integrating the advantages of JIT (Just-In-Time) and JIC (Just-In-Case) models and choosing differentiated models for different categories of products. This not only controls risks but also ensures operational efficiency and reduces waste.
Growing Supply Chain Resilience: It’s essential to enhance resilience and learn from experiences. Supply chain resilience, in addition to reflecting the capacity to react to and recover from risk events, will also embody growth after recovery, i.e., acquiring knowledge and experience in the process of dealing with risk disturbances, achieving new improvements. Thus, after experiencing risk impacts, companies can perform better than before.
Intelligent Supply Chain Resilience: Emphasizing technological innovation and empowerment. Global developments in artificial intelligence, digital twins, the Internet of Things, and blockchain are rapidly advancing. Chinese enterprises should fully engage in technological innovation, empower the construction and application of intelligent supply chains, achieve real-time risk perception and early warning, cross-enterprise risk transmission visibility, and different response strategy simulations, promoting high-quality growth in supply chain resilience.
Intelligent Upgrade of Supply Chain
The intelligent upgrade of the supply chain generally refers to the use of advanced information technology and appropriate management methods to achieve digitalization, visualization, and collaboration of the supply chain, aiming to improve the efficiency of the supply chain. Compared to traditional supply chains, the intelligent upgrade has advantages such as visual perception, intelligent decision-making, and rapid feedback.
Although the intelligent upgrade of the supply chain has a broad development prospect, it also faces significant challenges. In upgrading the intelligent supply chain, companies should actively grasp trends and start from the following three key elements:
From the perspective of a top-priority project, company leaders must understand why the supply chain needs an intelligent upgrade and the strategic goals of the upgrade. If the top management can personally lead the company in organizational and cultural transformation, then the upgrade work is half successful at the start.
Finding the entry point in the entire process of intelligent supply chain upgrade is crucial. Whether it starts from data collection and analysis, supply chain process optimization, or intelligent decision support, companies need to analyze and decide based on their circumstances. The intelligent upgrade of the supply chain is not a matter of whether to do it, but how deeply and broadly to implement it.
Choosing the tools, methods, and talent team for implementing the supply chain intelligent upgrade work is also crucial. The upgrade ultimately leads not to intelligent outcomes in a single point of the supply chain but to securely and effectively connecting various links within the company’s supply chain to achieve business process and organizational structure reengineering. However, in the upgrade process, the most critical are not those who only understand digital technology but those who understand the supply chain and can integrate technical talents with supply chain experts to form a team effort, making the intelligent upgrade of the supply chain truly successful.
The future is here, and as an inevitable choice for enterprises to enhance competitiveness in the digital age, enterprises should actively embrace development, strengthen the training and introduction of relevant knowledge and skills, enhance data security awareness, establish data management systems, promote cultural transformation, and improve the organization’s overall innovation consciousness and data-driven decision-making mindset.
ESG Development in Supply Chains
As society’s attention to environmental, social, and governance (ESG) issues increases, ESG development in corporate supply chains has become an important issue that cannot be ignored. More attention should be given from the following perspectives:
The Rise of Sustainable Supply Chains: As consumers pay more attention to environmental and social issues, companies are striving to ensure the sustainability of their supply chains. This includes reducing carbon emissions, improving energy efficiency, adopting renewable energy, and ensuring fair labor treatment.
Increased Transparency in Supply Chains: Against the backdrop of increased expectations from the public and regulatory bodies, companies need to disclose more comprehensively about their supply chains. This includes the operational conditions of suppliers, product quality, and labor treatment.
Growth in ESG Investment: More and more investors are incorporating ESG factors into their investment decisions, prompting companies to pay more attention to the ESG performance of their supply chains. This not only helps improve the financial performance of companies but also contributes to building a good corporate reputation.
At the same time, companies will face many challenges in responding to the development of supply chain ESG in 2024, including:
Challenges in Data Collection and Integration: Companies need to collect and integrate data from various links in the supply chain to assess their ESG performance. However, due to the complexity of the supply chain, data collection and integration can be challenging tasks.
Risk of Increased Costs: Implementing sustainable supply chain management and increasing supply chain transparency may increase companies’ costs. Companies need to find a balance between ensuring ESG compliance and controlling costs.
Diversity of Regulations and Standards: ESG regulations and standards vary around the world, posing challenges for companies to implement consistent supply chain ESG policies globally. Companies need to understand and comply with local regulations and standards to ensure compliance with the supply chain.
Differences in Stakeholder Expectations: Different stakeholders may have different focuses on ESG issues. Companies need to communicate with stakeholders, understand their expectations, and strive to meet their needs.
Supply chain ESG development is a complex and important issue that requires comprehensive strategic planning and implementation by companies. By understanding and responding to these trends and challenges, companies can establish sustainable and transparent supply chains that match their industry characteristics and attributes, thereby gaining advantages in a competitive market.
Construction of Supply Chain Standards
Currently, the International Organization for Standardization focuses on safety management and risk in supply chain standards research, while domestic supply chain standardization work focuses on safety, green, and digital directions. In 2024, the development of related standardization in the supply chain field will mainly show the following trends:
Active Participation in International Standardization Activities Countries attach great importance to their status in international standardization and are actively promoting international standardization work, increasing participation in international standardization activities. China’s “National Standards Development Outline” proposes to enhance standardization openness, deepen international standardization exchanges and cooperation, and promote the coordinated development of standardization. The report of the 20th National Congress emphasized “promoting high-level opening up, steadily expanding the institutional opening up of rules, regulations, management, and standards.” The internationalization of supply chain standards will undoubtedly be a key direction of development.
Supporting Sustainable Development Goals The development goals of the International Organization for Standardization echo the United Nations’ “2030 Agenda for Sustainable Development,” using international standardization as a key factor and catalyst for sustainable development. In December 2023, the Central Economic Work Conference pointed out the need to improve the new national system, implement high-quality development actions for key industries in manufacturing, strengthen quality support and standard leadership, enhance the resilience and security level of industrial and supply chains, and cautiously and steadily promote peak carbon and carbon neutrality, accelerating the construction of green and low-carbon supply chains.
Developing Standards for Emerging Technologies The development of emerging technology standards cannot be separated from high standards. China proposes to strengthen standard research in key technology fields such as artificial intelligence and biotechnology. The Ministry of Industry and Information Technology, the National Development and Reform Commission, the Ministry of Finance, the State-owned Assets Supervision and Administration Commission, and the State Administration for Market Regulation jointly announced the launch of the 2023 Intelligent Manufacturing Pilot Demonstration Action. This action aims to select and build a number of benchmark intelligent manufacturing factories and smart supply chains through a competitive selection process, establishing a group of leading enterprises in various industries and fields to promote intelligent manufacturing towards higher quality and higher levels of development. The National Standardization Management Committee and the Ministry of Industry and Information Technology selected and issued national-level intelligent manufacturing standard application pilot projects (including supply chain direction), implementing standardization work in pilot enterprises to form a set of replicable and promotable standard application experiences, providing reference and guidance for manufacturing enterprises nationwide. The experiences and technological accumulations of these national-level supply chain pilot and demonstration projects will inevitably be transformed into standards, leading high-quality development.
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