ISG Provider Lens™ Supply Chain Services - Supply Chain IT Operation Services - U.S. 2024

A research report comparing provider strengths, challenges and competitive differentiators

The differences between supply chain operations, consulting and BPO services, and digital transformation services in supply chain have become less defined since 2020, when the pandemic put global supply chains on halt. Technologies such as IoT, predictive analytics, automation and AI that have facilitated transformation initiatives are now being strategically explored and integrated with overall supply chain services. Their integration has assisted service providers with improved ways to seamlessly transform supply chain processes while helping enterprise clients find new and better ways to assess supply chain transformation services that align with their business objectives.

Clients with a positive experience with their initial transformation, such as automating certain tasks or transforming some functions, are re-evaluating their supply chain services. These enterprises are looking to partner with service providers with capabilities to digitally transform processes or even deliver road maps and capabilities and offer end-to-end supply chain operations visibility. Some current capabilities are inadequate in dealing with emerging disruptions and challenges. In addition, in the current macroeconomic uncertainty and inflationary pressure, enterprises seek to achieve a sweet spot between the supply chain as a value creation lever and a cost center. The most pressing requirements for enterprises, for which they are facing continuous pressure from their customers and regulatory  bodies, is sustainability and a circular supply chain. Therefore, aligned with this and other major market dynamics, ISG has broadened the overall coverage of the supply chain service market and provider research scope. In the 2024 report, we focus on four core aspects of supply chain services — consulting services, supply chain IT operations services, supply chain BPO services and circular supply chain services, the last one being a new quadrant.

In this year’s evaluation, ISG has also included Europe as a new geography, considering its significance in supply chain, circular economy and sustainability.

As providers innovate, their use cases, tools, accelerators and digital transformation in supply chain grow,  emphasizing end-to-end integration leveraging advanced technologies such as IoT, AI, generative AI, advanced analytics and automation to meet specific client needs. A majority of transformation projects focus on data-driven decision-making, streamlining and optimizing processes and having real-time insights across functions. The providers with high ratings on their portfolio, who have emerged as Leaders, showcase superior expertise in assisting clients to build future-ready supply chains. They emphasize revised nearshoring or onshoring build-up, risk management, touchless supply chain operations and integration of advanced AI, making supply chains more responsive and resilient to disruptions. Below are the key focus areas for service providers:

• Helping enterprises build a road map for intelligent, sustainable and circular supply chains,
• Integrating end-to-end operations for better visibility and orchestration among functions and
• Using technologies such as GenAI, AI, digital twins and blockchain across supply chain operations.

Quadrant-specific insights

Supply Chain Advisory and Consulting Services

In this year’s analysis, ISG observes that most service providers, mainly Leaders, have significantly enhanced their supply chain advisory and consulting capabilities to be positioned as end-to-end service providers. This perfectly complements our 2023 supply chain service analysis, where ISG highlighted that providers must have strong business consulting and technology consulting capabilities to succeed in the supply chain service line. In the near future, this will be the most important selection parameter for enterprise clients and the starting point of discussions or deals. 

Providers must have a more forward-looking consulting approach, which only five providers could demonstrate in this year’s assessment. This entails a design-thinking approach, building capabilities to support business model or  structure remodeling, a strong set of consulting tools such as assessment, readiness check, business value realization and using AI and analytics to offer superior process optimization, agile and responsive supply chain and long-term value.

Although cost transformation/optimization continues to be at the heart of supply chain engagements, this year, the focus is on assisting clients in building future-ready supply chains, making them more resilient, sustainable and responsive. The analysis is also focused on developing and innovating consulting capabilities for risk management, change management, network design and optimization, and technology road map and implementation. The emphasis on offering consulting-specific tools for digital practice and maturity assessment, cost optimization framework, best practice/benchmarking, benefits realization and risk management have seen better traction and innovation to offer extra consulting support required to deliver on complex supply chain requirements.

Supply Chain IT Operations Services

Compared to last year’s analysis, providers have shown dedicated efforts to showcase their supply chain services as customer-centric, focusing on offering highly tailored, digitally infused and robust services. These efforts include improved focus on building niche capabilities, tools, intellectual property and industry-specific solutions that can address any business challenges around cost, productivity and efficiency. Some Leaders are investing 5 – 7 percent of their supply chain revenues in building new intellectual property, tools and solutions, which is expected to further strengthen their position.

Most providers have further enhanced their strategic partner ecosystems by emphasizing having partners for network design and optimization, process mining and intelligence, and supply chain planning was at the core of this strategic partner-focused growth strategy. Kinaxis, o9, Celonis, iValua, LLamasoft and Blue Yonder were among the most mentioned. In this quadrant, work around data orchestration for a better flow of information and control tower for
better real-time end-to-end visibility has seen more traction. Service providers continue to leverage automation, AI and ML, and predictive analytics across all engagements with technologies such as IoT, blockchain, digital twin and RPA, which are now getting more functional and industry-specific targets. Other areas with greater growth  opportunities include touchless supply chain planning, Industry 4.0 (largely untapped), and the advancement of aftersales capabilities. 

Supply Chain BPO Services

Providers are aligning their strategies for BPO services with a focus on leveraging digital transformation as a service, analytics as a service, risk management as a service, and data as a service to offer a seamless and data-driven decision transition. Supply chain BPO services also focus on fit-for-purpose, modular solutions offering flexibility  across all the key solution dimensions, expanding deep domain expertise and embedding sustainability. At the heart of this approach, leading providers embed AI and analytics as the primary component of every engagement.

Leaders in supply chain BPO services are strategically differentiating themselves from other providers by continuously innovating their portfolio and adding GenAI capabilities along with analytics and AI-focused tools. Providers have already demonstrated use cases for returns management, contract management, supplier collaboration, customer service, logistics management and new product development by integrating GenAI.

Circular Supply Chain Services

A majority of service providers offer circular services as a part of the larger ESG and sustainability services, only a few providers have holistic and dedicated circular supply chain services and a framework supporting extended supply chain, which is downstream and upstream. Tech Mahindra, Genpact, Accenture and HCLTech are the only providers who use circular supply chain as a platform to assist enterprise clients to become more sustainable and have better ESG performance. The focus is on optimizing the use of resources, reducing waste, promoting the reuse and recycling materials within the supply chain, product design to support circular initiatives, sustainable packaging and product lifecycle management. A huge uptake of consulting and advisory around circular and sustainable supply chain leads providers to assist enterprises in implementing strategies to design products for longevity, facilitating the recovery and refurbishment of products, having proper approach and procedures for returns and integrating recycled materials into their supply chain.

Here are some disruptive trends that ISG has observed and will continue to shape supply chain services in 2024 and beyond.

Resilient and responsive supply chain: This continues to be the major trend similar to last year. Enterprises now are more focused on mitigating risk and continuous disruptions by building resilient supply chain. Enterprises are seeking superior consulting expertise of service providers to develop robust risk management strategies to ensure continuity. Lately, this also includes guiding clients to build more regional and local supply chains. Providers are offering tools and solutions such as supply chain diagnostic, resilience stress test, end-to-end visibility and robust risk management framework.

Dominance of AI in planning: AI and predictive analytics continue to dominate in supply chain planning and forecasting, and providers are focused on offering AI-enabled services to cater to growing demand for touchless  supply chain planning. AI’s ability to process vast amounts of data and make real-time decisions is revolutionizing supply chain planning, making it more agile and resilient.

GenAI’s significance in supply chain: GenAI has seen tremendous uptake in procurement, supply chain execution and aftersales, where providers deliver use cases for warranty management, contract management, supply chain optimization, guided recommendations for customer service agents and supplier risk assessment. GenAI’s ability to process and analyze large datasets, coupled with its predictive capabilities, makes it a powerful tool for modernizing and optimizing supply chain operations.

Sustainability gaining traction: In last year’s analysis, almost 80 percent of service providers mentioned providing sustainability services as a standalone offering, but this year, it has been observed that sustainability services are strategically adapted into supply chain transformation services. The focus on meeting regulatory requirements,  reducing carbon footprint, promoting ethical sourcing and product lifecycle management continue to be at the core of the offerings.

Evolving role of consulting and advisory services: Supply chain consulting capabilities are now regarded as major selection parameter and start point of discussions. Offering consulting-led approach/offerings along with consulting-specific tools such as assessment, readiness check, benchmarking, best practices and design thinking are regarded as must have capabilities. Key differentiators include consulting on risk management and change management, building more local and regional supply chains, and creating use cases and road maps for technology integration.

Overall, in supply chain services, revenues have increased by 20 percent, compared to the last year. However, this growth is attributed to smaller players with small revenue and market size that have reported revenue and client growth rate of over 25 percent. Big players such as Infosys, TCS, Cognizant, PwC, Wipro and Genpact reported revenue growth of 10-12 percent. Large enterprises accounted for more than 60 percent of the clients, but this is not reflected in ACVs, which continue to hover around $2.5 million to $3 million. This clearly indicates a majority of work around function and process transformation and very few into end-to-end supply chain. Overall, providers have reported an average increase in full-time equivalents (FTEs) by 20 percent, and domain specific professionals account for more than 60 percent of the overall employee count, signifying a focus on offering strong domain and industry expertise along with technology expertise. In the U.S., manufacturing, retail and healthcare clients accounted for  more than 70 percent of the clients.

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