Global sourcing is becoming an essential strategy for companies in developed countries. Amidst increasing economic and political volatility, as well as growing ESG pressures, importers must consider more factors beyond just price. Supply chains need to be environmentally friendly and low in carbon, while still maintaining a stable flow of goods. Although this presents many challenges, it also creates opportunities for the global supply chain industry to develop new trends in the near future.
So, which trends will shape the future development of the global supply chain? Let’s explore the leading trends in this article with VnCommEx.
The trend of Diversifying Suppliers Across Multiple Countries
Procurement experts are facing an increasingly unstable global geopolitical environment, with conflicts such as the wars in the Middle East and between Russia and Ukraine. Shipping routes are being altered, including the closure of transportation routes through the Red Sea due to the political instability in Yemen. No one can be certain that the situation will improve in the next 3-5 years.
In the past, most major global corporations followed a strategy of setting up factories in countries with low labour costs, tax incentives, and optimized logistics. Now, they must also consider diversifying their supply sources to avoid issues related to geopolitical conflicts. According to a 2023 global survey by KPMG, 77% of CEOs from leading global corporations agreed that the risk of supply chain disruptions is highly likely to occur in the next five years, which could seriously impact market supply if contingency plans are not in place.
The “China +1” strategy is being considered and gradually implemented. Under this strategy, global companies are proactively shifting part of their goods and production to countries outside of China. The most common destinations are India and several Southeast Asian countries such as Vietnam, Thailand, Indonesia, as well as Mexico and Poland.
Since the “China +1” strategy has been adopted by major companies, Vietnam has seen a significant increase in foreign investment. In 2023 alone, the total registered foreign direct investment (FDI) in Vietnam reached nearly USD 36.61 billion, up 32.1% compared to the same period last year. The top investing countries in Vietnam include South Korea, Singapore, and China. South Korea leads with USD 1.1 billion in investment, followed by Singapore with USD 639 million, and China with USD 382 million.
Compare the top of sourcing country in the world: Sourcing from China, Vietnam, India, and Bangladesh: Pros and Cons
Technology – Generative AI and Its Impact on Global Sourcing
Artificial intelligence, along with predictive analytics models and robotic process automation (RPA), is poised to revolutionize global sourcing and procurement over the next 5-10 years. AI’s ability to process vast amounts of data quickly and accurately is helping importers and procurement teams streamline complex tasks, reducing both time and labour costs. Applications of Generative AI technology include:
Generative AI in Procurement
Generative AI is particularly transformative in its ability to analyze data from diverse sources, including internal business databases and external market data. This capability allows procurement teams to make more informed decisions, predicting trends, market demand, and customer behaviour with unprecedented precision. For example, by leveraging AI-driven predictive analytics, companies can optimize their inventory management, reducing waste and enhancing operational efficiency.
Furthermore, generative AI extends beyond data analysis—it can create new content such as text, images, audio, and even code. This makes it a powerful tool not only for content creation but also for product design and software development. In the near future, generative AI could enable businesses to develop new products faster and deliver personalized customer experiences on a scale that was previously unimaginable.
Robotic Process Automation (RPA) in Sourcing
RPA is another critical technology that will continue to expand in the realm of business processes. RPA tools automate repetitive and routine tasks such as order processing, data management, and financial transactions. As these tools become more sophisticated, they will integrate more closely with AI, enabling them to make decisions based on complex data and contextual information, not just perform pre-programmed tasks.
Case Study – L’Oréal Cosmetics:
L’Oréal Cosmetics serves as a prime example of how AI can optimize global sourcing. The company uses AI models to analyze data on the quality and pricing of raw materials from multiple countries. This allows them to select the best suppliers and manage their global supply chain more effectively. By using AI to streamline these processes, L’Oréal reduces risks associated with supply chain disruptions and enhances sustainability across their operations.
In summary, technologies like generative AI, predictive analytics, and RPA are not just trends but fundamental shifts that will shape the future of global sourcing. These tools provide procurement teams with the ability to operate more efficiently, make smarter decisions, and ultimately, drive innovation in how products are designed, produced, and delivered.
Sustainability and ESG Standards
In the 2020s, ESG (Environmental, Social, and Governance) regulations have rapidly expanded, with the EU leading the charge. Other countries like the United States, Canada, Japan, and China have also introduced or are developing their own ESG regulations, reflecting a global trend toward mandatory compliance with these standards. According to a KPMG survey, 66% of respondents believe that ESG requirements will significantly impact sourcing strategies in the next 3-5 years. Therefore, prioritizing ESG is crucial for both importers and suppliers, as it directly influences the long-term growth of companies.
The environmental protection movement began in the 1970s, and regulations are becoming increasingly stringent. Transitioning to a circular business model involves more than just recycling and using green energy; it requires transforming the entire organization, from product design and production processes to distribution and reuse.
In recent years, suppliers have been conducting rigorous ESG assessments of their partners, demanding sustainably sourced materials and adherence to international certifications such as ISO 14001 or SA8000 to affirm their commitment to sustainable development. Failure to comply with ESG standards can result in severe penalties, including bans on importing goods into major markets like the United States, EU, and China.
Compliance with ESG standards is not just a competitive advantage but an essential requirement to ensure sustainable growth and long-term success in an increasingly complex global business environment.
Blockchain and Cryptocurrency in Global Supply Chains
Over the past decade, the global supply chain has gradually begun to explore the potential of using blockchain and cryptocurrency in transactions. Blockchain technology creates an economic system that operates without the need for human intervention, enabling “trustless” transactions. This technology offers a viable alternative to eliminate intermediaries, reducing operational costs and increasing service efficiency.
Applications of blockchain in supply chain management include:
- Enhancing Transparency in the Supply Chain: Since data on the blockchain cannot be altered without the consensus of the entire network, this technology helps minimize the risks of fraud and counterfeiting in the supply chain. Every step in the production and transportation process is recorded on a decentralized ledger, allowing stakeholders to track products from raw materials to finished goods. For example, in the food industry, blockchain is used to trace the journey of products from farm to table, ensuring transparency and safety for consumers.
- Improving Liquidity and Payment Efficiency: The digitization of currency and payment channels can be an effective solution to address issues related to 30-60-90-day payment terms and bad debt in supply chain finance. Additionally, this promotes a “just-in-time” economy for currency. Digital currency helps companies in the supply chain maintain better liquidity, enabling the implementation of smart contracts that automatically execute when predefined conditions are met. For instance, when a shipment arrives at its delivery location, automatic payment can be triggered without manual intervention, saving time and reducing the risk of errors.
Currently, the letter of credit (LC) remains one of the most popular international payment methods due to its safety. In the future, blockchain has the potential to replace this method with its inherent advantages.
Virtual and Augmented Reality (VR/AR) Applications
Virtual Reality (VR) has made significant strides over the past five years, driven by technological innovations such as the development of high-quality, low-cost mobile electronic devices, improved frame rates, and better synchronization between human processing systems and virtual systems. According to a Deloitte report, VR has the potential to significantly impact supply chains in four key areas: product and process design, data and process visualization, employee collaboration, and training processes. This helps companies improve efficiency, reduce errors, and optimize production processes. Specifically:
- AR Applications in Warehouse Management and Logistics: Augmented Reality (AR) can be integrated with GPS tracking systems and IoT to provide real-time information on the location of goods during transport. Warehouse staff or logistics managers can use AR glasses to display routes, shipment status, and delivery time predictions right in front of them. This helps manage the flow of goods more efficiently, ensuring accuracy and timeliness in the supply chain.
- VR Applications in Remote Management and Inspection: Executives and senior managers can use VR to participate in meetings or inspect factory operations remotely, maintaining control and making quick decisions without needing to be physically present on-site. This is particularly useful in the context of globalization and travel challenges.
- AR in Inventory and Production Management: For supply companies, AR supports inventory management and production oversight. Employees can use AR glasses to scan barcodes or QR codes, receiving detailed information about products such as quantity, location, and inventory status. This not only reduces errors but also speeds up the inventory process, enhancing operational efficiency.
- Creating Interactive Customer Experiences: VR and AR create interactive experiences for customers at trade shows. Customers can connect remotely, and observe products and production processes. With VR, they can navigate virtual booths, interact with 3D models, and participate in live discussions. AR provides detailed product information and allows for interactive activities such as production process simulations, product trials, or participation in product-related games.
These applications not only enhance operational efficiency but also create new and engaging experiences for customers, helping businesses increase interaction and improve brand image.
Conclusion
The coming years are expected to be highly volatile, shaped by the lingering effects of the COVID-19 pandemic, ongoing geopolitical conflicts, and the introduction of new regulations worldwide. However, these challenges present a unique opportunity for leaders in global import and supply companies to rethink and reshape their strategies.
Harnessing the power of big data, enhanced by generative AI, will be crucial for companies looking to promote sustainable procurement, achieve high performance, and drive breakthrough growth. By staying ahead of the curve, businesses can navigate uncertainties more effectively and capitalize on emerging opportunities.
At the same time, importers must consider diversifying production to markets with less geopolitical risk, ample raw materials, and lower labor costs to secure a stable supply chain. Southeast Asian countries, stand out as ideal locations. This strategic approach is already being adopted by major corporations such as Samsung, Apple, and Lego, who are leading the way in global sourcing and production diversification.
This dual approach—leveraging advanced technologies and strategically expanding production—will be key to thriving in an increasingly complex global market.
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