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A lack of supply chain standards is driving up costs, undermining efficiency and killing the environment.
In the era of next day delivery, one might imagine that global supply chains are tight, efficient and aligned. Yet that is not the case. In fact, the reality is that most elements of global supply chains are fractured, unstandardized and misaligned. And that is creating massive commercial and environmental challenges for companies, suppliers and customers around the world.
Looking across global supply chains, we see three key areas of misalignment. The first is infrastructure. It's not just the quality and consistency of roads, rails and ports which differ significantly (and impact the efficiency of supply chains) across markets and regions, it's also things like warehouses, trucks, pallets and operating systems. Every switch caused by inconsistent standards adds cost and carbon.
Regulation is another area of increasing friction. On the one hand, organizations need to comply with a myriad of different regulations related to transportation, logistics and trade. At the same time, governments are promulgating new regulations (like CBAM in the EU) to regulate supply chain sustainability. Even something as simple as different nomenclatures can add friction to the supply chain.
Most elements of global supply chains are fractured, unstandardized and misaligned.
The third area of misalignment relates to processes – reporting processes, operational processes, supply chain processes and system processes, for example. These tend to be locally-derived, often tailored by customer and shipment, and contain significant variations. These can add cost, carbon and risk to the supply chain as vendors try to align to different processes across their customer pool.
What supply chain leaders are increasingly recognizing is that these friction points are creating massive challenges for their business operations. Friction and inconsistency can drive up costs, create more carbon, increase risks and reduce efficiency. It can make planning and investment more complex and challenging. It can reduce flexibility and agility. And it impacts supply chain transparency. Standardization would allow supply chain leaders to create more efficient and resilient operations.
The problem is that there are no central authorities responsible for supply chain standardization. In most cases, supply chain processes and operations are defined by customers. Big retailers, for example, often dictate the rules of engagement to their suppliers, both for commercial and sustainability reasons. Global industry bodies have been slow or reluctant to drive change. Regulators are moving at different speeds and, often, with different objectives. National governments are wary of overstepping their bounds.
Nobody is really focused on driving standardization across global supply chains.
Which means nobody is really focused on driving standardization across global supply chains.
Reset 2025
This year, expect to see supply chains come under massive pressure as trade wars start to heat up and new tariffs and regulations are imposed in key markets. Indeed, based on recent rhetoric from politicians globally, all signs suggest we are entering a dynamic period characterized by the implementation of tariffs and counter-tariffs. Agility will be key.
At the same time, expect to see rising demand on companies to assess and manage their Scope 3 emissions within their supply chain. In part, this will be driven by new (and likely inconsistent) regulations on supply chain sustainability. It will also be in response to growing demand for transparent carbon reporting from investors and customers. Supply chains will be under the microscope.
The combination should force supply chain efficiency up the corporate agenda as organizations seek to create more flexible, efficient and resilient supply chains. That, in turn, should encourage governments and industry bodies to more carefully study the issue and — in an ideal world — start collaborating with organizations to lead the charge towards supply chain standardization.
Our prediction and advice
To be clear, this trend is more about a change in mindsets rather than measurable action on the ground. It takes years for standards to be promulgated, socialized and finalized. It takes even longer for them to be implemented consistently around the world. Indeed, this will be a year of conviction versus action.
These friction points are creating massive challenges for their business operations
What we will see, however, is a clear recognition that something must be done. We expect to see much greater attention on this issue from regulators keen to create greater alignment across markets in order to reduce the burden on businesses and unlock new growth. Industry bodies, led by port, air and transport groups, will likely start to build consensus around a case for change. OEMs and other giant purchasing organizations should jump on board recognizing the immense value that standardization can deliver.
For infrastructure owners, developers, operators and investors, the drive for standardization will likely bring significant long-term value. But the shift should happen fairly quickly (in relative terms). Infrastructure players should be seriously considering how they can start helping to shape and drive standards within their spheres of influence. And they should be carefully examining how the implementation of standards might influence their current plans, designs and investments.
Supply chain standardization will be a boon for companies, consumers and the climate. Infrastructure players should embrace it wholeheartedly.
"Supply chain standardization will be a boon for companies, consumers and the climate."
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