Supply Chain Disruption and Digitization

Stephen DeAngelis

July 26, 2018

Disruption is generally anathema in supply chain circles. Yet, more and more articles address the topic of digital disruption and see it as an opportunity. The dictionary defines a disruption as “a disturbance or problem that interrupts an event, activity, or process.” Digital disruption is about interrupting business models or entire economic sectors. Enterprises are simultaneously worried and excited about it and want to know how they can successfully adapt. Some pundits believe the term “disruption” is overhyped are now calling for an end to its use. Leigh Alexander (@leighalexander) writes, “The Silicon Valley buzzword has the aftertaste of a sucked battery. It doesn’t even mean anything any more.”[1] Ryan Bradley (@theryanbradley) adds, “Disrupt is a good word we have mistreated terribly to the point it has become powerless.”[2] That may be true; nevertheless, Luigi De Bernardini (@ldebernardini), CEO of Autoware, asserts, “Digitalization is impacting and probably disrupting the supply chain — or at least the traditional concept we have for supply chain.”[3] Before moving on, I want to point out pundits are split over whether it should be “digitization” or “digitalization.” A recent survey concluded either is acceptable and both refer to the same phenomenon.

Supply chain digital disruption and digitization

De Bernardini points to a number of emerging technologies he believes are disruptive enough to change how supply chains work. They include: Real-time Big Data and advanced analytics; mobility; the Internet of Things (IoT); social media; additive manufacturing (aka 3D printing); and drones/autonomous vehicles. Many pundits would add another emerging technology to the mix: blockchain. Each of these disruptive technologies is discussed below.

Real-time Big Data and advanced analytics. Big Data is now a fact of life. The IoT, however, will dramatically increase the amount of data with which companies must deal. De Bernardini notes, “A massive amount of data will be available, along with systems and tools to collect, analyze and transform that data into information. Even more important, the information will be available in real time, enabling companies to make decisions on product design, manufacturing, distribution and even prices.” What De Bernardini doesn’t note is that cognitive technologies with embedded analytics are going to be essential to analyze available data in support of all organizational processes not just those associated with the supply chain. David Lengacher, Head of Data Science at MonarchFx, predicts data science as a whole will have a disruptive impact on supply chains. He explains, “Although supply chain management has been slow to the game, advances in data science are now quickly changing the way supply chains are managed. … Data science can be leveraged in several ways. For most organizations applying it to forecasting will be the most valuable.”[4]

Mobility. One of the most impactful technologies of the Information Age is the smartphone. Mobile technology not only permeates developed economies it has opened new opportunities for developing economies as well. It should come as no surprise, then, that mobile technologies are finding their way into the supply chain. De Bernardini explains, “The information to manage the supply chain will not be generated by desktop devices anymore. Mobile devices are already frequently used in logistics, but their usage is growing day by day. Mobile devices provide the ability to collect and deliver information in real time wherever the user is. The impact of mobile order and delivery information entry in the coordination of the supply chain is critical. It dramatically changes how orders are received and processed, with a critical impact on production organization and scheduling.”

Internet of Things. The IoT is not a single network; rather, it’s a network of networks each with its own ecosystem. That ecosystem consists of sensors generating data, connectivity linking sensors to computers, and cognitive platforms that perform advanced analytics. De Bernardini observes, “The number of sensors used in any kind of industry is rapidly growing. Because of the rapidly decreasing cost of devices that can be considered smart because of their embedded computational capabilities, they are being incorporated in an increasing number of products. Most of these devices can be connected to the Internet and can become an incredible source of information that would otherwise not available.”

Social media. Most people probably don’t think about social media when they think about supply chains — that’s a mistake. De Bernardini explains, “The information coming from the products can be related to the sentiment of users collected on social media. Many companies monitor — manually or automatically — social channels to understand what their clients think of their products, and use the information to tune design, production, logistics, or marketing and communication.”

Additive manufacturing/3D printing. The number of materials available for and potential uses of additive manufacturing are remarkable considering where 3D printing was a decade ago. De Bernardini explains, “3D printing is an emerging technology that is becoming quite common in many different kinds of industries. Automotive, aerospace and medical device industries are increasing the usage of 3D printed components in their products. Other industries, like the food industry, are just starting to experiment with the use of 3D printers. It can be an extremely disruptive technology that permanently modifies the existing supply chain in some industries. It allows the transfer of information instead of material goods and moves component production close to where the assembly takes place. This basically virtualizes all the logistics. Moreover, 3D printing allows low-cost product customization and allows the production of micro lots or single products to be sustainable.”

Drones and self-driving vehicles. Supply chain professionals are well aware of truck driver shortages as well as challenges associated with attracting workers into the supply chain field. Automation has long been viewed as a solution to these challenges. The latest technologies being experimented with are robots in warehouses, drones, and autonomous vehicles. De Bernardini writes, “The use of drones has already significantly modified the supply chain in areas and markets where transportation was a critical bottleneck. One of the best examples is the delivery of blood bags in some areas of Africa. Ground transportation was unacceptable because it took too much time, especially during the rainy seasons. … Something similar is happening with self-driving vehicles. They are pretty common inside production plants, where automated guided vehicles (AGVs) or laser-guided vehicles (LGVs) are used to move goods. Interesting experiments are in progress in several cities, both to address the last mile issue or the transportation to distribution centers.” Rio Tinto is using autonomous vehicles in its mining operations. And truck platooning is being experimented with in North Carolina.

Blockchain. A Deloitte and MHI study notes, “Blockchain, while seen as having eventual impact as a disruptive technology or a source of competitive advantage, distantly trails the rest of the technologies. … Nevertheless, blockchain and other distributed ledger technologies ‘could significantly change the way retailers and consumer packaged goods (CPG) manufacturers operate their supply chains to sell goods and services,’ predicts Peter Loop, principal technology architect at Infosys.”[4]

Summary

Supply chain professionals trying to figure out how to leverage emerging technologies could easily become overwhelmed. Shay Scott, executive director of the GSCI, notes, “There’s no meaningful way for any company to try to adopt every technology currently relevant to supply chain. Digitalization is about generating new forms of value, which requires careful coordination between your current data resources, experts, and management.”[6] To best leverage these technologies companies need to do two things. First, identify current pain points and determine whether any of these technologies can help relieve the pain. Second, do a little “what if” thinking to imagine how your company would be different had it been born in the Digital Age. If you don’t figure out new business models that could replace your company, competitors will.

Footnotes
[1] Leigh Alexander, “Why it’s time to retire ‘disruption’, Silicon Valley’s emptiest buzzword,” The Guardian, 11 January 2016.
[2] Ryan Bradley, “Time to retire the word ‘disrupt’,” Fortune, 12 July 2013.
[3] Luigi De Bernardini, “Digitalization Is Disrupting the Supply Chain,” Automation World, 25 June 2018.
[4] David Lengacher, “NextGen Supply Chain: Data science comes to the supply chain,” Supply Chain 24/7, 23 May 2018.
[5] Adrienne Selko and Dave Blanchard, “Top 10 Technologies That Will Disrupt Your Supply Chain,” Material Handling & Logistics, 17 April 2017.
[6] Staff, “How to Leverage Digital Technology in the Supply Chain,” Material Handling & Logistics, 7 Jun 2018.