Global disruptions have led decision-makers to recognize the importance of revamping of value chains to stay resilient. However, consultations with executives reveal a gap between awareness and action, creating a false sense of readiness. Research by the World Economic Forum, in partnership with Kearney, identified five standout trends, discussed as part of the World Economic Forum Annual Meeting.
The recent survey by Kearney and the World Economic Forum, conducted with over 300 senior global operations executives, reveals that the transformation of global value chains is progressing slower than expected. Despite frequent disruptions due to geopolitical tensions, labor shortages, inflation, and cyber risks, leading supply chains are focusing on resilience, adaptation, and reinvention. However, a significant gap remains between what companies plan and what they actually achieve.
The survey raises important questions: How well are companies balancing immediate cost efficiency with long-term risk management? Are they making the necessary changes quickly enough to handle future disruptions?
The World Economic Forum’s report, A Global Rewiring: Redefining Global Value Chains for the Future (2023), identifies five key themes shaping future value chains:
1. From Global to Regional
Despite 92% of supply chain leaders prioritizing regionalization, only 28% plan to achieve full in-region operations by 2030. While reshoring is trending, its scope is limited by trade, infrastructure, and regulatory factors. Dual sourcing, though seen as a resilience strategy, is fully adopted by only 7% of companies due to the complexities and costs involved. Balancing supply security with cost management remains a significant challenge.
2. ‘Doing’ Digital to ‘Being’ Digital
Although 64% view AI as key to improving supply chains, only 1% have eliminated manual processes, hindered by legacy systems and cultural resistance. Few companies have achieved full upstream visibility of suppliers at scale. Those succeeding use AI to manage supply chain risks, but legacy systems still pose a major barrier to comprehensive visibility.
3. Economies of Scale to Economies of Skill
While 85% of companies believe new technologies will drive transformation, only 23% have prepared their workforce for 2030. Nearly 60% of the global workforce needs significant upskilling, particularly in sectors vulnerable to technological disruption like industrials and transport. With only 9% expected to be fully skilled by 2030, companies face a critical challenge in accelerating upskilling without disrupting organizational culture.
4. From Regulatory Compliance to Innovative Sustainability
Only 14% of companies are redesigning their networks to eliminate Scope 3 emissions, despite sustainability being a high priority. The necessary changes often conflict with traditional cost and service objectives, leading to diluted sustainability efforts at the operational level. Enhancing project-level accountability is essential to meet sustainability goals.
5. From Cost-Centric to Customer-Centric
Over 60% of companies see improving value chain performance for customers as a key driver, but only 15% have concrete examples of actions that meet customer expectations. This reflects a struggle to adopt new decision-making processes and balance trade-offs. Collaboration across stakeholders is crucial to address these challenges and prioritize long-term growth.
The Future of Global Value Chains
Global value chains face ongoing challenges, including geopolitical uncertainties, climate change, technological advancements, and workforce shortages. The survey highlights that successful supply chain leaders are those who understand the interconnected nature of risks and opportunities, adopting a holistic approach to resilience and investment decisions. Leadership must stay ahead of the latest industry trends through immersive capability development and a forward-thinking mindset.
Click below to read more: https://www.weforum.org/agenda/2024/01/trends-global-value-chains/ or view the full report as PDF https://www3.weforum.org/docs/WEF_A_Global_Rewiring_Global_Value_Chains_2022.pdf
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