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Accomplished procurement veteran and author Tom Linton provides valuable insights into the supply chain risk management landscape in 2024 in this exclusive Q&A.
As we move into the new year, there are many questions on our minds about the future of the supply chain. What are the biggest supply chain trends we will see in 2024, and how can managers prepare for those trends? How is AI optimizing supply chains and improving visibility?
To answer these questions, we sat down with long-time procurement veteran, Resilinc advisory board member, and supply chain author Tom Linton (in fact, Tom appears twice on our list of must-read supply chain books). In this Q&A, Tom shares insightful stories from his over 20 years in procurement and tells us what should be top of mind for supply chain managers in 2024.
Resilinc: Resilinc’s CEO, Bindiya Vakil, named these as the five supply chain megatrends of 2024: geopolitics, climate change, cyber attacks, ESG, and labor disruptions. Which megatrend is top of mind for you going into 2024?
Tom: For me, it’s geopolitical. The unpredictable nature of global conflicts offers the largest immediate issue in 2024. Some of the other megatrends will be more important in the longer term. However, when someone drops a bomb or attacks somebody, those events tend to be highly disruptive in a very short period. We’re seeing this happen in the Red Sea, in Ukraine, and most recently in Gaza. Geopolitical disruptions could impact the year more than other long-term trends this year.
Resilinc: Are there any specific regions we should pay attention to?
Tom: We always have to keep an eye on North Korea. I lived in Seoul, Korea, for almost four years. Even back in 2008, North Korea was shooting missiles into the Sea of Japan, and that has not really changed. If you look at the events over the last couple of months, it’s clear that even if South Korea and North Korea have a truce, it will always be a real and present danger. Then, there are conflicts in the Middle East and Ukraine. These types of conflicts immediately affect the supply chain. For example, when the conflict started to move outside of Gaza and into the Middle East, Yemen attacked ships in the Red Sea. This is now impacting the Suez Canal and causing ships to reroute.
Supply chain leaders need to think about what has a higher probability of going wrong and how they will limit the risk of those events. When you run a company supply chain, you must think more about your present danger than dangers that are far away. Your job depends on it, and your company depends on it.
Resilinc: One of the megatrends is labor disruptions. Due to a lack of skilled labor and an overall younger workforce, labor shortages are predicted in the coming years. What suggestions do you have for businesses that will face worker shortages?
Tom: Before the pandemic, everyone was worried about tariffs and looking at automation. Since then, AI has come back in focus and is more developed than before. To address issues around labor, the biggest thing that managers can do is figure out how the latest AI tools and technologies that have become available over the last five years can be deployed and orchestrated to do work differently. There are three outcomes of applying AI to labor issues. Those tools will either eliminate work, change work, or automate work. When that happens, managers will have to figure out how to adjust. For example, they may have to retrain talent or upskill employees to automate a job.
Resilinc: You talked about how AI could be used to fix labor issues. How is AI shaping the supply chain landscape in other ways?
Tom: Everyone knows ChatGPT. It is a language model that deals with words. However, for supply chain managers, the AI models they use are data models dealing with numbers. Using AI for numbers, data, and analytics is going to transform supply chain risk management. We are going to see huge breakthroughs. Processes that are currently transactional and have a lot of manual content will disappear because they’ll be done by artificial intelligence.
Learn more in our blog: How AI is Revolutionizing Supply Chain Management.
Resilinc: What is your advice for supply chain managers considering incorporating AI into their supply chain risk management program?
Tom: Supply chains are about time. When you speed things up, balance sheets improve, costs decrease, and revenue increases. Most supply chains are two-dimensional. They only think about transactions. What’s most exciting about Resilinc is the ground-penetrating radar that provides three-dimensional views. For example, it’s like if you are driving a car at night. If you have headlights, you can see further and drive faster than if you don’t. Another way to think about it is before doctors had X-rays, they had to say, ‘We think your arm is broken.’ Now, x-rays show them exactly where the break is. Insights lead to action. Resilinc becomes your headlights and your x-ray into the supply chain to give you actionable insights that create value for your company.
In the world of supply chain, managers must constantly optimize. If there’s a bottleneck in one place, it tends to cause problems elsewhere. In manufacturing, you are ‘clear to build’ when you have everything you need to make a product, but if one part is missing (often referred to as a ‘gold screw’), you can’t build. Then, everything else becomes inventory. However, if you can understand where risk exists, you can de-risk the entire corporation’s product portfolio. For example, if a small cancer grows and an MRI catches it—you can act. The same is true for the supply chain. Technology gives managers actionable insights and allows them to pinpoint a problem before it causes the whole system to fail.
Resilinc: You’ve written many well-received supply chain books, and your last book was titled “Flow: How the Best Supply Chains Thrive.” Could you tell us more about the concept of flow?
Tom: ‘Flow’ is about movement. Supply chains are material in motion, or, to put it in a financial way, it’s cash in motion. In the book, we encourage people to think about what makes excellent supply chains thrive and flow. Think about airplane congestion at the airport over the holidays – it causes flights to get canceled, it causes delays, etc. This happens because of a lack of flow. Supply chains are the same. Supply chain managers need to look at the entire supply chain from design all the way through execution and do whatever they can to facilitate, accelerate, and manipulate the movements of flow. Supply chain managers in many industries often forget that their job is to speed things up.
Resilinc: What is top of mind for you going into 2024?
Tom: The big unknown as we went into 2019 was whether we would have a recession. Well, it didn’t happen. Now that 2024 has returned to pre-pandemic conditions, the big question is: have we postponed that recession? Or has the recession been spread out over three years? If so, we may be on a glide path back up. Since markets tend to lead the economy by about six months, and markets are assuming it’s going back up, does that mean 2024 will be okay?
The U.S. election will have a significant impact because things tend to be flatter in an election year. The five megatrends will be critical, too. How will they play out? I’m always more on the glass half-full side. If you constantly have your eyes on the rearview mirror, you can’t keep going forward. This goes back to what I said about speed. I don’t think tapping the brakes is the right approach. We must make sure supply chains stay inside of the rails, but at the same time, managers can’t be so conservative that they miss an opportunity if the economy doesn’t slow down. Make sure you’re not the one who says, ‘Wait, we didn’t order enough parts. We didn’t think there was going to be enough demand.’
Resilinc: Do you think we will see semiconductor companies step on the gas with the potential recession coming? Or will they pull back?
Tom: I spent ten years as an executive at a semiconductor company. The lead time for the capital equipment is so long, and the investments are so big that you have to make those decisions well in advance—years in advance—so those investments have already been made or not made. The reality is that a full wafer fab is much more productive and economically viable than one that’s half full or less. If they lose money, it’s because they’re depreciating that huge capital equipment cost over that base of production, so I think whatever is going to come out of semiconductors in the next year or two is already baked in. The question is, what is the price going to be? It’s really going to depend on demand.
Resilinc: Related to semiconductors, there has been a lot of legislation around electric vehicles in the past few years, but it’s not moving forward as quickly as projected. Did we jump the gun on EV legislation?
Tom: There’s always euphoria around new technology. Businesses thought people would buy more personal computers than they did back in the 1990s. But if the dog chases the car long enough, it will catch it eventually. As that occurs, the cars you can buy will be more electric. Right now, there are gas stations everywhere, but little by little, there will be more electrical refueling stations. Think about it: how many CD-ROMs do you own today? Technology changes things. Sometimes, technology pushes itself forward, and sometimes, consumers or governments pull it forward. Right now, it’s halfway between pull and push.
I’ve talked to many automotive companies over the last few years. Basically, every major car manufacturer has said they are switching to 100% electric, and the internal combustion engine will phase out. Now, they must think very differently about their entire culture because if you’re an internal combustion car company and have been for the last 100 years, everything in your culture is built upon that basis. However, those companies are now competing with Samsung, LG, and Apple for supply because a car is now a computer on wheels.
Resilinc: Any final thoughts on the supply chain outlook for 2024?
Tom: You know the line from Jurassic Park? ‘Life finds a way.’ Supply chains will always adjust and find ways to succeed. If it’s not easy to do business in China, companies will shift to Vietnam, India, or other countries that are easier to do business with. Supply chains are not living, breathing things, but they behave in very predictable ways. If there’s resistance and issues, they’ll move.
China’s economic miracle between 1980 and the early 2000s was driven by investment from Western supply chains. I was an executive at IBM, and I pumped billions of dollars into China to make parts for the emerging PC at the time. That market thrived because of its openness and willingness. But if supply chains meet resistance, they shift. That’s what’s happening now. It’s nothing new. It’s not personal. It’s not political. It’s just the nature of a supply chain.
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Learn more about Resilinc’s predictions for the supply chain in 2024. Check out our blog: The Top 5 Supply Chain Megatrends of 2024.
