The World of Supply Chain Challenges and Opportunities: What's in Store for 2024

 
The 2020s have emerged as a period of dramatic events, opportunities and uncertainty. When examining the impact of demand volatility, inventory rebalancing, trade and tariff changes, freight and logistics optimization, and rapidly evolving technologies including artificial intelligence (AI), is it possible to make accurate predictions for the upcoming year? At Molex, our investments in digital supply chain capabilities prioritizing the customer experience are focused on delivering agility, performance and predictability in the face of global supply disruptions while informing a unique supply chain perspective that enables us to share some valuable insights for 2024.

For many supply chain teams, the challenge in 2024 will be uncertainty around demand as industry economic cycles normalize post-Covid as well as response to geopolitical events. Inventory rebalancing and lead time reduction with shrinking backlogs for certain industries will continue while innovation and transformation will fuel new opportunities and demand in areas such as AI, data centers, clean energy, transportation and healthcare. At Molex, we believe that end markets will continue to be dynamic in the new year. While 2023 was a strong year in the transportation sector, uncertainty surrounding global interest rates could present headwinds for the auto industry. While EVs still look likely to remain in an innovation cycle, the inflationary cost of materials is moving price points above what was previously anticipated.  

We’re also focused on supply chain resilience to address the strong investment in AI with emphasis on expanding data center markets, driving time to scale for new technologies. Important opportunities in the medical device and drug delivery industries as well as the global repositioning of industrial manufacturing will be critical looking forward.We’re also evaluating the strong investment that we’re seeing in the data center market, particularly in the medical space, as inventory rebalancing is currently underway.  As each of these markets shows its individual nuances, understanding demand in each discreet category of the markets we serve is a front-and-center initiative for Molex.  

While trade and tariff concerns are not new for 2024, increasing geographical optionality remains a key strategy for supply chain teams to mitigate geopolitical risk, improve service levels and optimize lead times. We expect to see continued focus on connecting data ecosystems to support decision platforms for improving the customer experience and inventory management. We see this strategy as particularly important in the electronics industry in 2024, with a strong bias towards Mexico and Southeast Asia.  

Strong demand in 2021 and 2022 led to a significant inventory increase across the complete electronics ecosystem over the last two years. The result is what could be termed an “inventory hangover” for 2023. We expect this situation to continue for the first half of 2024 — possibly lasting into the second half — as inventory levels continue to rebalance across the value chain.

One bright spot in 2023 was that freight costs are returning to pre-pandemic levels for high traffic lanes. The primary challenge for 2024 will be commodity and labor input costs. These costs remain dynamic, driven by labor inflation, regional events and currency exchange rates. High input costs will likely remain through 2024, reinforcing the importance of optionality in this environment. Working with the right partners that leverage actionable insights will be critical in 2024.  

For years, the retail sector has leveraged machine learning to build insights including “demand sensing” into their operational environments and marketplaces. Look for many other sectors to follow this evolutionary path to drive enhanced data-driven decisions. Molex continues to strengthen our AI capabilities to enhance our demand planning accuracy and supply network agility to deliver on customer expectations and improve working capital.  

We are aggressively working to enrich our data ecosystem to improve insight into our demand and supply planning efforts, we continue to build our team that has the digital DNA to effectively interpret the data-driven insights that our tools provide. 

At Molex, a good example of this is our ability to leverage enhanced capabilities, technologies and knowledge processes in our Global Sales and Operations Planning and Execution (GSOP&E), where we are capturing the data and developing and training the models to look at historical and forward-looking scenarios to improve and identify a range of outcomes. Excess inventory is a great example. This approach enables us to optimize inventory health and velocity using machine learning and a new set of data elements. We can generate valuable insights about potential outcomes and make better decisions in our network. The result is higher on-time delivery and better visibility for our customers. 

Looking forward, in 2024 we will continue this shift from simple supply chain execution to a focus on more digital and data-driven business outcomes as part of our intelligent digital supply chain strategy. 

Regardless of the expected and unexpected scenarios in 2024, organizations that embrace collaboration and data sharing and pursue digital transformation including advanced analytics and AI will be positioned with the agility to respond to market changes and global shifts in 2024. The key is not simply prognosticating future events but having the vision to build out capabilities and an organization with digital supply chain DNA that can respond and deliver mutual benefit in all market conditions.