TAKEAWAYS
QUICK WINS VS. LONGTERM GAINS Supply chain managers frequently need to make a choice between decisions that oer quick wins and those aimed at long-term gains. Making decisions throughout the pandemic and amidst recent supply chain disruptions like the Red Sea attacks and the wars in Ukraine and the Middle East can take a toll on long-term planning. This balancing act isn’t always easy, and only 55% of chief operating ocers (COOs) feel that they are eectively operating regenerative supply chains after the past few years of turmoil, according to The Kearney COO Study 2024 from global management consulting firm Kearney and Amazon Web Services. The second annual report is based on a survey of senior operations leaders across more than 10 industries and provides both a retrospective of the accuracy of their forecasts from last year and a look ahead to what to expect throughout 2024. Here’s what they had to say: 2022 Forecast vs. 2023 Reality: • 63% of COOs forecast growth of 10% to 19% in 2023; actually it averaged out at 3% to 4% globally. • COOs singled out innovation and new products as two of the three top growth drivers for their companies; this held true, especially in the United States. • 85% of COOs said they would make changes to their manufacturing footprint; this proved accurate, particularly in the United States. • COOs overestimated their expected digitalization progress in every area, most notably o by 13 percentage points in sourcing and procurement and by 10 points in manufacturing. • 66% of COOs said energy savings/renewables and climate change mitigation were top priorities in 2022; only 25% had achieved their energy consumption and eciency goals and 19% their carbon footprint goals in 2023. Forecast for 2024: • More optimism about growth: 38% of COOs anticipate growth of 10% to 19%; 15% believe growth will exceed 15%. • Belt tightening: 30% want to cut 8% or more from their expenditure; another 51% are targeting 5% to 7%; only 1% foresee cost cuts of 0% to 2%. • Prioritizing investments with quick ROI: 7% to 10% of COOs will pursue eciencies in maintenance and equipment eectiveness; 5% to 7% driver- based statistical forecasting; and 4% to 6% distribution optimization. • Innovation as a joint venture: 76% of COOs are looking for joint innovation with suppliers; 87% expect this to be a key criterion in choosing suppliers; 86% said collaboration was key to operating a regenerative supply chain. • More progress in the ‘E’ of ESG: 76% of COOs are leaning heavily on energy savings; 60% on carbon pricing mechanisms to evaluate their sustainability performance. • A cautious approach on GenAI: 78% of these companies have invested in GenAI, but for the majority it’s for a single use case. • Workforce of the future: 82% said labor cost was the most important factor in sourcing; 28% of COOs are concerned about their ability to upskill employees; 23% worry about the ability to retain talent; 21% worry about labor shortages.
LAW & ORDER: WAREHOUSE UNIT Failures or errors in warehouse software can cause logistics headaches for users—and for the providers oering the technology. But in one recent case, the software snafu turned into a multi-million-dollar court case that has the supply chain sector buzzing. Logistics company GXO Warehouse Co. (formerly XPO Logistics) was recently ordered to pay more than $33 million to chocolate maker Lindt & Sprüngli as a result of failures in a warehouse distribution software system. Lindt & Sprüngli, a major chocolatier that owns brands such as Russell Stover and Ghirardelli, brought the lawsuit against GXO due to issues occurring during Lindt’s 2014 acquisition of Russell Stover amidst eorts to consolidate warehousing for its chocolate brands. The software failure in December 2018 and early 2019 led to what Lindt described as “massive harm” from sales losses and additional costs during the peak chocolate sales season. The jury awarded Lindt $18.3 million for lost profits and $15.1 million for extraordinary expenses after a trial in the Western District of Missouri. The case included claims of fraudulent and negligent misrepresentation, breaches of contract, and professional negligence, all of which the jury found in favor of Lindt. “We strongly disagree with the verdict, which relates to a legacy issue from 2017 under prior management, and intend to appeal,” noted a GXO spokesperson.
May 2024 • Inbound Logistics 15
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