Future-proofing the supply chain (2023)

(8 pages)

Supply chains matter. The plumbing of globalcommerce has rarely been a topic of much discussion in newsrooms or boardrooms, but the past two years have pushed the subject to the topof the agenda. The COVID-19 crisis, postpandemic economic effects, and the ongoing conflict in Ukrainehave exposed the vulnerabilities of today’s global supply chains. They have also made heroes of the teams that keep products flowing in a complex, uncertain, and fast-changing environment. Supply chain leaders now find themselves in an unfamiliarposition: they have the attention of top management and a mandate to make real change.

Forward-thinking chief supply chain officers (CSCOs) now have a once-in-a-generation opportunity to future-proof their supply chains.And they can do that by recognizing the three new priorities alongside the function’s traditional objectives of cost/capital, quality, and service1Employee safety, food safety, and employee retention are considered operational preconditions, not supply chain objectives. and redesigning their supply chains accordingly.

The first of these new priorities, resilience, addresses the challenges that have made supply chain a widespread topic of conversation. The second, agility, will equip companies with theability to meet rapidly evolving, and increasingly volatile, customer and consumer needs. The third, sustainability, recognizes the key role that supply chains will play in the transition to a clean and socially just economy (Exhibit 1).


Future-proofing the supply chain (1)
(Video) Future-Proofing the Supply Chain - GEP

Boosting supply chain resilience

Supply chains have always been vulnerable to disruption. Prepandemic research by the McKinsey Global Institute found that, on average, companies experience a disruption of one to two monthsin duration every 3.7 years. In the consumer goods sector, for example, the financial fallout of these disruptions over a decade is likely to equal 30 percent of one year’s EBITDA.

Historical data also show that these costs are not inevitable. In 2011, Toyota suffered six months of reduced production following thedevastating Tohoku earthquake and tsunami. But the carmaker revamped its production strategy, regionalized supply chains, and addressed supplier vulnerabilities. When another major earthquake hit Japan in April 2016, Toyota was able to resume production after only two weeks.

During the pandemic’s early stages, sportswear maker Nike accelerated a supply chain technology program that used radio frequency identification (RFID) technology to track products flowing through outsourced manufacturing operations. The company also used predictive-demand analytics to minimize the impact of store closures across China. By rerouting inventory from in-store to digital-sales channels and acting early to minimize excess inventory buildup across its network, the company was able to limit sales declines in the region to just 5 percent. Over the same period, major competitors suffered much more significant drops in sales.

Supply chain risk manifests at the intersection of vulnerability and exposure to unforeseen events (Exhibit 2). The first step in mitigating that risk is a clear understanding of the organization’s supply chain vulnerabilities. Which suppliers, processes, or facilities present potential single points of failure in the supply chain? Which critical inputs are at risk from shortages or price volatility?


Future-proofing the supply chain (2)

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(Video) Future-Proofing the Supply Chain - EY

In 2021, for example, many companies in North America were affected by labor shortagesacross their supply chain operations. Tackling those shortages has forced companies to be creative in their hiring and staffing strategy. One food distributor created regional floating labor pools of drivers, warehouse workers, and supervisors, recruiting staff in areas where they were more available and deploying them wherever they were most needed. Other companies are building their labor pipeline-management capabilities—from recruiting through retention—and sharpening their labor planning as well.

Today, most organizations lack effective systems to measure and monitor those vulnerabilities, and few have such visibility beyond their direct suppliers. In a 2021 McKinsey surveyof senior supply chain executives, just under half said they understood the location of their tier-one suppliers and the key risks those suppliers face. But only 2 percent could make the same claim about suppliers in the third tier and beyond. That matters because most disruptions originate in these deeper supply chain tiers.

Closing the industry’s current knowledge gaps will require it to increase its surveillance of supply chain participants and its understanding of the physical, financial, political, and social risks they may face (Exhibit 3). The complexity and diversity of supply chain risks require smart management tools, and leading companies are applying a range of new techniques, from digital alerting systems to track potential disruptive events to risk “heat maps” that help them focus their attention on high-risk regions and suppliers.


Future-proofing the supply chain (3)

Companies will also need a management infrastructure to steer a proactive response to these risks. Such an infrastructure would include a dedicated team, headed by a senior leader, with the remit to identify, prioritize, and respond to vulnerabilities. Those responses might include structural changes to the supply chain, as well as the development of detailed contingency plans for disruptive events. Introducing resilience metrics into supply chain KPIs helps the whole organization to ensure supply chain design and execution decisions are made in a way that balances efficiency and vulnerability. And because supply chain risk is a continually moving target, the organization should conduct regular stress tests and reviews to ensure its resilience measures remain appropriate.

Increasing supply chain agility

Customer loyalty is no longer a given. During the COVID-19 pandemic, for example, 77 percent of US consumers changed stores, brands, or the way they shop. Much of that change was driven by necessity. People went online when they couldn’t access their regular stores, and two-thirds said that lack of availability was the primary reason for switching brands. The big winners of the crisis were companies, often the largest players, that could keep products flowing to their customers in a difficult operating environment.

In the postpandemic economy, established brands will face new challenges. As consumer-generated content replaces traditional brand marketing campaigns, companies have less control over the peaks or troughs of demand. Where a business might have once spent months preparing its supply chains for a carefully targeted promotional campaign, now a single viral video can bring attention from millions of consumers overnight. One consumer goods manufacturer experienced a surge in demand in 2020 after a video of a customer enjoying its product on a skateboard ride received millions of views and spawned dozens of imitators.

New players are disrupting retail channels too, widening available choices and creating space for smaller, independent manufacturers. While consumers opted for the security of big brands during the COVID-19 pandemic, a preference for smaller producers is rising, especially among younger cohorts. And the growth of comanufacturing businesses and third-party logistics (3PLs) organizations means new entrants can compete in consumer markets with fewer expensive manufacturing and supply chain assets.

For incumbents, the lesson is clear: move at the same speed as consumers. That means creating innovative products and brands that meet the changing needs of different consumer groups as those needs emerge. And it means greater skill in managing complex portfolios of brands with different market characteristics and delivering their products through multiple channels. These same pressures increasingly hold true for B2B businesses as well, as increased consumer product complexity and demand volatility trickle down the supply chain.

This fast-moving, fragmented, consumer-centric world will require a different sort of supply chain. Traditional supply chains sought to achieve stability and minimize costs. Future supply chains will need to be much more dynamic—and be able to predict, prepare, and respond to rapidly evolving demand and a continually changing product and channel mix. In short, supply chains will need to become agile.

The good news for CSCOs is that agility and resilience are highly complementary: an agile supply chain is inherently more resilient. To be truly effective, however, this agility would need to extend into R&D, procurement, planning, manufacturing, and logistics (Exhibit 4).

(Video) Future-Proofing the Supply Chain - Vodafone


Future-proofing the supply chain (4)

At the planning stage, for example, supply chain teams will need to work in a much more proactive way. As potential market opportunities are identified, the supply chain function can begin creating scenarios that are ready for implementation alongside the development of the new product or market offering. After launch, the use of advanced techniques for demand sensing and dynamic forecasting, aided by machine learning technologies, is set to become an essential part of day-to-day supply chain operations.

In supply chain execution, agility requires new capabilities and tools. Agile operations make extensive use of digital technologies in manufacturing, for example, and maximize the use of smart automation in both production and logistics settings. Unlike the rigid supply chain automation systems of the past, technologies such as collaborative robots and smart packaging machines are capable of faster changeovers and can handle a much wider range of products and shipment types.

The drive for agility may require companies to reassess make-versus-buy decisions. In manufacturing, for example, big players typically keep the production of their stable, high-volume products in-house, using comanufacturers for niche and special projects. Leading companies appear likely to invert this trend, investing in flexible core assets and skills that allow their own manufacturing to respond quickly to rapidly changing demands—and, in some cases, outsourcing stable, high-volume products to cost-advantaged external providers. In downstream logistics, meanwhile, greater use of 3PLs may become the most cost-effective way to increase asset flexibility and proximity to customers.

Agile supply chains will also need skilled, flexible people. An agile supply chain workforce is comfortable working with and alongside advanced technologies, and personnel may need a wider range of skills so they can move between tasks as business needs change. Accordingly, agile supply chains make use of agile teams and working methods, borrowing elements of the approach that have transformed flexibility, productivity, and quality in the software industry and beyond. Agile organizational principles are well-described elsewhere, but key elements of the approach include the use of tight-knit, cross-functional teams that work together to implement new concepts and solve difficult problems in short, incremental sprints. These principles are already gaining traction across a range of industries:one major consumer products manufacturer is using “flow to work” pools in its global support functions to dynamically allocate staff to projects, for example.

Future-proofing the supply chain (5)

Digital twins: The art of the possible in product development and beyond

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(Video) Bend but don’t break: Future-proofing the pharmaceutical supply chain

Achieving supply chain sustainability

Post-COVID-19 consumers have become even more likely to prefer brands that offer robust sustainability credentials and a strong purpose, but industry surveys conducted in mid-2020 suggested that environmental, social, and governance (ESG) topics slipped down companies’ list of priorities during the pandemic. Big players are now making up for lost time. In 2021, 29 percent of companies included ESG metrics in their staff incentive plans, for example, a seven percentage-point uptick over the previous year.

Companies looking to avoid the increasing reputational, regulatory, and financial risks of poor ESG performance are being pressed to act. And as companies such as Henkel have shown, strong environmental actions are also delivering real operational results: a digital twin connects and benchmarks 30 factories and prescribes real-time sustainability actions, which over ten years have reduced energy consumption by almost 40 percent and waste by 20 percent.

The supply chain has a central role to play in the enterprise sustainability transformation. Of nine ESG initiatives highlighted by senior executives in a 2020 industry survey, most either involve the supply chain directly, or have significant implications for supply chain setups (Exhibit 5).


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The foundation for an ESG-focused transformation is a clear understanding of the organization’s baseline impact. That would include, for example, quantification of the resources consumed and emissions generated by the company’s direct activities (Scopes 1 and 2) and by participants in its wider supply chain (Scope 3). This baseline allows an organization to identify the largest opportunities for improvement, helping it set challenging but realistic goals and timescales that can be communicated to external stakeholders. Capturing those improvements requires rigorous sustainability KPIs and changes from the shop floor to the boardroom, including optimized operating practices, an ESG focus in procurement decisions, and the adoption of more sustainable technologies in existing and planned manufacturing or logistics projects.

These new priorities of resilience, agility, and sustainability can’t be tacked on to existing supply chain setups. Realistically, they will need to be built in from the foundation and considered in every element of supply chain design, organization, and operation. For many companies, that will likely require a change in mindset from the top, with risk, agility, and sustainability KPIs considered alongside traditional ones focused on cost, capital usage, service, and quality. To excel in these six supply chain dimensions, workforce management and digital capabilities will be essential.

Jan Henrich is a senior partner in McKinsey’s Chicago office; Jason D. Li is an associate partner in the Toronto office; and Carolina Mazuera is an associate partner in the Miami office, where Fernando Perez is a partner.

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(Video) Episode 102 : Future – Proofing Your Supply Chain


Future-proofing the supply chain? ›

Future-proofing the supply chain requires fostering supplier relationships based on trust and mutual benefit. Business reputations hang on product availability, which depends on suppliers. Identifying the suppliers best suited to your operation is a function of data analysis.

Is your supply chain future proof? ›

Future-proofing the supply chain requires fostering supplier relationships based on trust and mutual benefit. Business reputations hang on product availability, which depends on suppliers. Identifying the suppliers best suited to your operation is a function of data analysis.

How do you prepare supply chain for the future? ›

Key Steps to Future Proofing Your Supply Chain
  1. Embrace Digitalization. ...
  2. Shift to e-Commerce. ...
  3. Build Scalable Capacity. ...
  4. Go to the Cloud. ...
  5. Move to the Cloud. ...
  6. Ensure Trade Compliance. ...
  7. Localize Stock. ...
  8. 8 Supply Chain Management Best Practices.
Sep 22, 2022

What is future supply chain? ›

The future supply chain vision encompasses concepts for infrastructure sharing that go beyond common practices. This concept reviews the current state of supply chains and presents a conceptual approach that illustrates how the likelihood of change in the future.

What to expect for 2023 supply chain? ›

2023 is expected to bring advancements in automation, sustainability, and resilience in supply chain operations. Digitization, greater collaboration, and innovation will be keys to staying ahead of changing customer demands and market disruptions.

Will supply chain improve in 2023? ›

In general, supply chain prospects seem positive in 2023, although not as strong as before the pandemic. Congestion in the shipping industry is getting more manageable now, and recovery is picking up pace. A return to normalcy is anticipated sometime in 2023.

What will affect supply chain in the future? ›

Economic markets and specifically inflation, geopolitical and trade risks, and the changing global health situation will all impact supply chains.

What is the top supply chain issue for the future? ›

71% of global companies highlight raw material costs as their number one supply chain threat for 2023. During 2023, other key steps to protect against material access issues include: Protect your core offer and mitigate risk by removing critical time spent managing low-demand items.

Will the supply chain ever recover? ›

The survey taken over May and June found that more than half of executives do not expect a return to a “normal” supply chain until the first half of 2024 or beyond, while 22 percent expect disruptions to continue until the second half of 2023.

Will supply chain get better? ›

In a survey conducted in May and June, most supply chain executives said they “don't expect a return to a more normal supply chain until the first half of 2024 or beyond.” Far less, 22%, say they expect a return to normal in the second half of 2023.

What is supply chain roadmap? ›

The supplier roadmap sets forth the company's objectives for its supply chain and identifies the specific initiatives and actions that need to be taken to achieve those objectives. The supplier roadmap is developed through a process of collaboration between the company and its suppliers.

What is the future of supply chains 2025? ›

By 2025, many supply chains may shift from global flows of goods and services to national, regional, and local networks of buyers and suppliers.

Who owns future supply chain? ›

Rakesh Biyani is the Chairman and a Non-Executive Director of our Company. He holds a bachelor's degree in Commerce from University of Bombay and has attended the Advanced Management Program from Harvard Business School.

Will there be a supply shortage in 2023? ›

It was a bad year for food shortages in 2022, with categories including eggs and baby formula hit hard. Unfortunately, 2023 could see its own batches of food shortages. Here's what consumers should start stocking up on now before prices soar and products likely become harder to find on store shelves.

Why are there so many supply chain issues 2023? ›

There are several reasons why you might have manufacturing constraints, but the primary drivers are people, materials, and equipment. As we've covered, materials shortages and long lead times will continue to be an issue this year, as will labor shortages.

How long will supply chain be an issue? ›

The supply chain issues that have been plaguing businesses seem like they will continue into 2023, and possibly beyond. As long as demand stays ahead of supply, the issue will likely continue. Marketers will have to adapt and confront the supply chain issues and hopefully, have already begun planning for next year.

What is the food supply outlook for 2023? ›

Food prices are expected to grow more slowly in 2023 than in 2022 but still at above historical-average rates. In 2023, all food prices are predicted to increase 6.2 percent, with a prediction interval of 4.9 to 7.5 percent.

What are the logistics trends in 2023? ›

Logistics trends in 2023 are expected to evolve more to cope with global economic and technological advancements. Logistics industries will focus more on automation, labour shortage and real-time tracking for efficient supply chain management.

What happens if supply chain collapses? ›

Supply chain disruptions lead to shortages of key goods, price inflation, factory closures, unloaded shipping containers and negative effects on a nation's economic wellbeing.

Why is supply chain worsening? ›

The surge in demand for finished goods at a time when supply was severely limited in part due to pandemic-related labor shortages and shutdowns —notably of cities, factories and manufacturing hubs in China — knocked the global logistics system out of whack.

Are we in a supply chain crisis? ›

In 2021, as a consequence of the COVID-19 pandemic and, later, the ongoing 2022 Russian invasion of Ukraine, global supply chains and shipments slowed, causing worldwide shortages and affecting consumer patterns.

Is the supply chain getting worse? ›

A recent survey from the Food Industry Association (FMI), a trade organization that represents food retailers and wholesalers, found that 70% of retailers said supply chain disruptions are negatively impacting their business, up from 42% the year before.

What will fix supply chain issues? ›

Six Ways to Deal with Supply Chain Problems
  • Use Tools to Boost Efficiency. Supply chain issues highlight a lack of efficiency in getting products into consumers' hands. ...
  • Form Relationships with More Suppliers. ...
  • Make Product Changes. ...
  • Add to Inventory When You Can. ...
  • Improve Customer Service. ...
  • Communicate.

Is supply chain still causing inflation? ›

Supply chain challenges played a major role in inflation's resurgence beginning in 2021. However, supply chain problems began to subside in the closing months of 2022. How the issue continues to play out will likely affect the coming months' inflation trends.

Why haven t supply chains recovered? ›

While the supply chain shortages started with COVID, they're also due to increased consumer demand, which was fueled by the federal stimulus checks that we probably didn't need to keep the economy recovering. We just didn't understand how consumer demand was going to shift, once the pandemic began to ease.

Why has shipping slowed down 2023? ›

Any labor-related issues can hit the industry hard, resulting in expensive delays. During the COVID pandemic, outbreaks in factories and warehouses were a major cause of shipping delays. Strikes, workforce shortages, and economic factors can also spark labor-related issues that delay shipping.

Is the shipping crisis getting better? ›

As economists anticipate, this crisis is far from over. But you can still minimize its impact by staying updated with container location, influential players and international dynamics. Container xChange can help you overcome the concerns.

How can we prevent shortage of supply? ›

How to Overcome the Supply Chain Shortage as a Small Business...
  1. Monitor Your Stock and Increase It Whenever Possible. Monitoring your stock is essential even with a working supply chain. ...
  2. Implement a Contingency Plan. ...
  3. Diversify your Supply Chain. ...
  4. Invest in Technology. ...
  5. Stay Informed.

What are the 5 key areas of supply chain? ›

Supply management is made up of five areas: supply planning, production planning, inventory planning, capacity planning, and distribution planning.

What are the three key supply chain flows? ›

Supply chain management is the management of these three flows:
  • Material (Product) Flow.
  • Information Flow.
  • Financial Flow.
Apr 13, 2023

What are the five in supply chain? ›

Five supply chain drivers, Production, Inventory, Location, Transportation, and Information, influence the performance of the supply chain. Companies can develop and manage these drivers to emphasize the ideal balance between responsiveness and efficiency, depending on your business and financial requirements.

Is digital supply chain the future? ›

The digital supply chain will continue to become more integrated and collaborative, with different parts of the supply chain working together more closely than ever before. This could include the use of shared platforms and technologies, as well as the adoption of industry-wide standards and protocols.

Is supply chain a promising career? ›

The salaries for supply chain managers are also extremely rewarding. According to Indeed, the average annual salary can range between $62,543 and $146,215 with an average base salary of $95,628.

What is the next gen supply chain market global forecast to 2030? ›

In LogisticsIQ's latest study, “Next-Gen Supply Chain Market – Global Forecast to 2030”, this market is likely to reach $75 billion by 2030, up from $32 billion in 2019.

Who is the godfather of supply chain? ›

Keith Oliver is a British logistician and consultant known for coining the terms "Supply Chain" and "Supply Chain Management", first using them in public in an interview with Arnold Kransdorff of the Financial Times on 4 June 1982.

What is the future supply debt? ›

Total debt on the balance sheet as of March 2022 : $71.58 M

According to Future Supply Chain Solutions 's latest financial reports the company's total debt is $71.58 M.

Who is supply chain leader? ›

A company's supply chain management leader may simply be the small business owner, conducting all operational logistics themselves or delegating them to a small staff or other contracted logistics companies.

Will grocery prices go down in 2023? ›

Food prices are projected to rise in 2023, albeit at a slower pace than they did in 2022, according to the USDA.

Should we be stocking up on food? ›

Every American should have at least a three-day supply of food and water stored in their home, with at least one gallon of water per person per day. If you have the space, experts recommend a week's supply of food and water. Choose foods that don't require refrigeration and are not high in salt.

Will things get cheaper in 2023? ›

Inflation seems to be slowing, and some things could start to get cheaper in 2023. The cost of real estate, rental, cars, and gas could fall, at least a little. Don't get too excited about potential price drops, as there's still a lot of uncertainty about the economy.

What foods are going to be in short supply? ›

These food staples are in short supply, so stock up your cart now with shelf-stable products on sale.
  • Lettuce. During the fall and winter, much of the U.S. enjoys lettuce from California, specifically the Salinas Valley. ...
  • Champagne. ...
  • Eggs. ...
  • Tomato Products. ...
  • Liquor and Beer. ...
  • Mustard. ...
  • Milk. ...
  • Sriracha.
Mar 29, 2023

What food should I stock up on? ›

What Emergency Foods to Keep in Your Pantry
  • Peanut Butter. ...
  • Whole-Wheat Crackers. ...
  • Nuts and Trail Mixes. ...
  • Cereal. ...
  • Granola Bars and Power Bars. ...
  • Dried Fruits, Such as Apricots and Raisins. ...
  • Canned Vegetables, Such as Green Beans, Carrots, and Peas. ...
  • Canned Beans.
Mar 27, 2023

Will there be a food shortage in 2030? ›

Hunger and nutrition in numbers

It is estimated that between 720 and 811 million people in the world faced hunger in 2020. Around 660 million people may still face hunger in 2030, in part due to lasting effects of the COVID-19 pandemic on global food security.

Why is there a supply chain crisis in the US? ›

Supply and demand volatility.

This led to large-scale shortages and unmet labor demand. The resulting tight labor market has emerged as another burden on the supply chain extending to all modes of transport. Without sufficient workers, manufacturers and producers still have trouble meeting customer demand.

Is supply chain management has a future? ›

The future of IoT will increase productivity in delivery and supply chain industries. Many logistics experts use these new resources to enhance their supply networks, reduce costs and generate revenues.” He also predicts an increase in artificial intelligence to solve the many inefficiencies in today's supply chains.

Will the supply chain ever get back to normal? ›

In supply chain circles battered by more than two years of upheaval, the word “normal” is creeping into the outlook for 2023. In the latest Logistics Managers' Index, “September's future predictions hint at normalization and a return to business as usual over the next year.”

How much longer will supply chain issues last? ›

Most supply chain managers expect problems to continue at least through 2024. More than half of logistics managers surveyed by CNBC do not expect the supply chain to return to normal until 2024 or after. The dour outlook comes after almost three years of global supply chain problems.

Will supply chain issues ever end? ›

The supply chain issues that have been plaguing businesses seem like they will continue into 2023, and possibly beyond. As long as demand stays ahead of supply, the issue will likely continue. Marketers will have to adapt and confront the supply chain issues and hopefully, have already begun planning for next year.

What are the biggest challenges facing supply chains today? ›

What Are the 7 Biggest Supply Chain Challenges?
  • Material Shortages. ...
  • Lack of Supply Chain Visibility. ...
  • Demand Forecasting Complexity. ...
  • Supply Chain Fragmentation. ...
  • Congestion at Critical Ports. ...
  • Increasing Transportation and Freight Costs. ...
  • Digital Transformation and Integration.

Why the US supply chain is so backed up? ›

While the supply chain shortages started with COVID, they're also due to increased consumer demand, which was fueled by the federal stimulus checks that we probably didn't need to keep the economy recovering. We just didn't understand how consumer demand was going to shift, once the pandemic began to ease.

Why are there shortages of everything 2023? ›

The FDA says manufacturing quality issues are the major reason for drug shortages, but production delays in manufacturing are also to blame. Delays in receiving materials and components from suppliers are causing manufacturing issues. Discontinuations are another factor contributing to shortages, the FDA said.

Is supply chain crisis getting better? ›

The supply backlogs of the past two years -- and the delays, shortages and outrageous prices they brought with them -- have improved dramatically since summer. “If you're in 40, that's contraction, but 50s are normal, healthy rates of growth,” he said.

Will there be food shortages in 2023? ›

Food inflation: Cost of groceries rising at a slower rate

Unfortunately, 2023 could see its own batches of food shortages. Here's what consumers should start stocking up on now before prices soar and products likely become harder to find on store shelves.

What products will be in short supply? ›

Canned foods, pet food and beer may be in short supply due to a widespread aluminum shortage. Lettuce crops and orange groves were affected by plant viruses. One major producer of lettuce lost 80% of their crop in 2022.

How serious is the supply chain issue? ›

While most consumers never had to think about supply chains, the current supply chain crunch is having an outsized impact on families across the country. American consumers have felt the consequences through inflation and higher prices, smaller quantities of available goods, and longer wait times for purchases.


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3. Future-Proofing the Supply Chain - Tungsten Network
4. Future-Proofing the Supply Chain - The Nivack Group
5. Future-Proofing the Supply Chain - CIPS Showcase
6. Future-Proofing the Supply Chain - Malcolm Harrison
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