With the world’s supply chains under more scrutiny than perhaps ever before, companies are working to improve resilience, boost efficiency and continue delivering for customers. Supply chains have always been critical, but they often operated behind the scenes. The COVID-19 pandemic and ensuing disruption changed that, revealing the importance of supply chains to a much wider audience.
The pandemic also accelerated the need to update and upgrade supply chains in an increasingly digital world. As companies navigate inflationary pressures and a volatile economy, growing geopolitical uncertainty and the persistent pandemic, our PwC Digital Trends in Supply Chain Survey 2022 shows that many challenges remain to fully optimize supply chains. Here are some of our key findings:
While companies focus on supply chain basics like increasing efficiency and managing costs, they’re missing value creation opportunities in digitization, sustainability and transformation.
A majority of respondents cite multiple supply attributes as moderate or major risks, yet few see increasing the number of suppliers, transforming procurement practices or increasing responsiveness and resilience as priorities—a significant disconnect.
How emerging tech is used in supply chain operations varies greatly, as do future investment plans. But 80% of respondents say technology investments haven’t fully delivered expected results, and many reasons are to blame.
In digitizing their supply chains, companies need the most help stretching their budgets, but having the right talent and the right tech are issues as well.
Many companies—58% of respondents—are seeing higher-than-normal turnover among supply chain employees, and only 23% fully agree that they have the necessary digital skills to meet future goals. Most also expect to make changes to their operational systems in the next year.
Responding to regulatory changes and identifying supplier risks are top environmental, social and governance (ESG) challenges, but fewer companies are focusing on ESG reporting and metrics.
The 244 operations and information technology leaders, C-suite executives and other supply chain officers we surveyed clearly have full plates as they manage current disruptions. But as important as it is to win day-to-day battles, companies also need to take advantage of opportunities revealed in our survey that can help improve their chances for long-term success.
Increasing efficiency and managing or reducing costs in supply chain operations top the list of priorities over the next 12 to 18 months by far, with a substantial majority of survey respondents ranking both among their top priorities. Both items are named as a number-one priority much more often than all others. For instance, managing costs is named as the number-one priority five times more than digital upskilling, seven times more than increasing sustainability and corporate social responsibility and nine times more than manufacturing digitization and automation. This suggests that many companies are focusing more on the bottom line in the short term but have yet to make some of these potentially transformative actions a bigger focus.
As a testament to the ongoing disruption, a majority of survey respondents say that many attributes of their supply chains and suppliers pose moderate or major risk for their companies. Securing raw materials and supplier operational issues top the list, but other areas still are cause for concern. The overall response on risk is a stark contrast to how supply chain issues have influenced priorities, indicating that many companies are still in a defensive posture and are not yet leaning into such actions as increasing supplier diversity and transforming procurement practices.
As companies continue to digitize supply chains, budget constraints remain the biggest hurdle, with nearly half of respondents ranking it among their top three challenges. But beyond dollars and cents, both talent and technology have posed problems with digitization in various ways, indicating room for improvement on both fronts.
Three out of ten respondents cite difficulty getting employees and teams to work differently as a top-three challenge, while nearly a quarter point to difficulties with the “digital native” talent needed to transform supply chains. On the tech side, a lack of understanding of business and technical capabilities, alongside software and hardware shortcomings with analytical and process capabilities also were top challenges.
With data becoming a more critical part of supply chain operations, companies generally didn’t report major challenges with their systems. But where there have been data-related issues, they haven’t been confined to any one area. Responses range from data management and data quality to data acquisition and manual data manipulation, with many other areas in between.
Emerging tech adoption in supply chain operations varies greatly, with cloud outpacing other technologies on the whole. Cloud also leads in planned investment, with more than a third of respondents saying their companies are planning to invest at least $1 million. But technologies such as third-party analytics, scan and intelligent data capture, radio frequency identification (RFID) and the internet of things (IoT) are competitive at lower levels of investment.
While investments in supply chain technology have had benefits, four out of five respondents say they didn’t fully deliver the expected results. That’s a clear sign that more gains—whether in efficiency, productivity or customer experience—are possible. According to respondents, not getting the expected capabilities and needing more time to implement the technology are the top obstacles to full delivery of results, but other reasons are also cited.
Most companies report being satisfied with the talent in their supply chain operations and their investment in digital skills. However, as in other parts of the workforce, supply chain operations are seeing more employee turnover than before. That aligns with our recent PwC Pulse Survey in which 44% of chief operating officers and other operations leaders say worker shortages and employee turnover will be one of their biggest operations challenges in 2022.
In addition, less than two-thirds of respondents say they have the necessary digital skills within their supply chain teams to meet future goals. Half say they anticipate the need for significant training and upskilling in digital, and two out of five say their companies will need to add more employees overall than they have now. As for operational systems changes, a substantial majority of companies—about 65% to 70% across different supply chain areas—aren’t standing pat, and any changes are much more likely to be upgrades as opposed to replacing existing systems.
As ESG becomes more critical in business strategies, supply chain teams see certain aspects as more challenging than others. Awareness of legislative and regulatory issues and identifying supplier risks are ranked as the top challenges, suggesting that many companies are still playing defense when it comes to ESG. That’s supported by a substantial majority of respondents who consider ESG issues either a minor challenge or not a current challenge at all.
Some respondents do say that ESG issues that aren’t a challenge today will become challenges in the coming years. But the current lack of prioritization of such areas as addressing stakeholder groups in ESG reporting, prioritizing racial and ethnic diversity in suppliers and deciding on an ESG framework and key metrics could leave those companies trailing competitors that are more proactive on purpose and sustainability.
The PwC Digital Trends in Supply Chain Survey, fielded November 2021 to January 2022, surveyed 244 operations and information technology leaders, C-suite executives and other supply chain officers from companies in select supply chain-intensive sectors to assess how they are addressing supply chain management operating models, including use of enterprise and emerging technologies. Sectors surveyed include aerospace, automotive, chemicals and other manufacturing and industrial products, consumer markets and retail, energy, utilities and mining, pharmaceuticals and life sciences and technology, media and telecommunications.
Sourcing & Procurement Leader, PwC US
Brian Matthew Houck
Connected Supply Chain Leader, PwC US
Principal, Pharma Life Sciences Supply Chain, PwC US