Supply Chain Transformation in the Digital Age

Stephen DeAngelis

August 06, 2019

Company executives are increasingly aware of the importance of supply chains in making companies successful. A couple of years ago, however, a McKinsey study concluded companies weren’t investing enough in supply chain transformation technologies. Justine Brown reports, “McKinsey found the digitization of supply chains will have the biggest impact on revenue, yet 49% of companies are investing in digitizing their distribution channels or marketing instead. Only 2% of companies are applying digital strategies to the supply chain.”[1] Surely, those numbers have improved over the past two years; however, it’s troubling to note some executives still under-appreciate the value of a well-tuned supply chain. About the same time McKinsey was insisting investments in supply chain performance could have a significant business impact, the editorial staff at Materials Handling & Logistics (MH&L) magazine were reporting the results of survey conducted by Clear Peak Supply Chain Advisory Council that supported the McKinsey conclusion. According to the survey, “Big-data analytics and other technologies are dramatically improving productivity in the global supply chain.”[2] Brown insists, “Digital transformation isn’t going away anytime soon, so there’s no point in ignoring it. In fact, the more boldly a company pursues digital transformation efforts, the more likely they are to see a big payoff.” Steve Laughlin (@splaughlin), General Manager for Global Consumer Industries at IBM, goes even further; he insists, “Today’s supply chain must drastically change.”[3]

Technology and supply chain transformation

Since we live in the digital age, Laughlin asserts companies must leverage supply chain data to gain a competitive advantage. He explains, “The key first step starts with understanding consumers’ wants, needs and desires, and then work upstream. Brands must translate the huge amounts of information that exist at the local level into demand signals, and then digitize the entire supply chain to be more flexible and nimble. This will improve speed to market and reduce excess inventory and cost.” Analysts at Thomas agree with Laughlin, they write, “Big Data, automation, and blockchain are just a few of the transformative technologies that are triggering major advances in supply chain management. Resilient organizations must be constantly evolving in order to grow their business and keep up with the competition in today’s shifting landscape.”[4]

They add, “Changes to the supply chain are coming fast and furious, with new innovations cropping up seemingly every day. … Supply chain managers can’t stand still. Embracing and integrating innovation can cut costs, boost productivity, enhance globalization, drive sustainability efforts, improve worker safety, eliminate product shortages, and allow for smarter, real-time decision-making — all while boosting the bottom line.” The very fact technology solutions are “coming fast and furious” is both a blessing and a curse. The challenge is identifying the right solution for the right problem without worrying having to worry about obsolescence. The first part of that challenge, identifying the right solutions, is becoming more of a problem than worrying about obsolescence since most vendors now offer solutions as a service (SaaS). Solution as a service is an approach to cloud computing that delivers all aspects of an IT solution integrated as one offer. SaaS is a step beyond software as a service in that it provides businesses with the hardware, software, and knowledge necessary to manage a business challenge effectively. As the name implies, SaaS is a complete solution aimed at improving project risks and reducing time to value.

David Weldon (@DWeldon646), Editor-in-Chief of Information Management, suggests there are eight technologies currently having the greatest impact on supply chains.[5] They are:

1. Artificial Intelligence. “AI technology in supply chain seeks to augment human performance. Through self-learning and natural language, AI capabilities can help automate various supply chain processes such as demand forecasting, production planning or predictive maintenance.”

2. Advanced Analytics. “Advanced analytics span predictive analytics — those that identify data patterns and anticipate future scenarios — as well as prescriptive analytics — a set of capabilities that finds a course of action to meet a predefined objective. The increased availability of Internet of Things (IoT) data and extended external data sources such as weather or traffic conditions allow organizations to anticipate future scenarios and make better recommendations in areas such as supply chain planning, sourcing and transportation.”

3. The Internet-of-Things. “The IoT is the network of physical objects that contain embedded technology to interact with their internal states or the external environment.”

4. Robotic Process Automation (RPA). “RPA tools operate by mapping a process in the tool language for the software ‘robot’ to follow. They cut costs and eliminate keying errors.”

5. Autonomous Things. “Autonomous things use AI to automate functions previously performed by humans, such as autonomous vehicles and drones. They exploit AI to deliver advanced behaviors that interact more naturally with their surroundings and with people.”

6. Digital Supply Chain Twin. “A digital supply chain twin is a digital representation of the relationships between all physical entities of end-to-end supply chain processes — products, customers, markets, distribution centers/warehouses, plants, finance, attributes and weather. They are linked to their real-world counterparts and are used to understand the state of the thing or system in order to optimize operations and respond efficiently to changes.”

7. Immersive Experience. “Immersive experiences such as augmented reality (AR), virtual reality (VR) and conversational systems are changing the way people interact with the digital world.”

8. Blockchain in Supply Chain. “Although supply-chain-related blockchain initiatives are nascent, blockchain has potential to fulfill long-standing challenges presented across complex global supply chains. Current capabilities offered by blockchain solutions for supply chain include traceability, automation and security.”

Those are a lot of technologies to deal with and not all of them will be applicable to every supply chain challenge. Laughlin writes, “The most difficult part will be transforming the culture. Brands need to begin changing how they think about the supply chain and adopt a philosophy of experimentation. If they want a continuous flow of innovation to make and keep their customers happy, they must experiment with the creation and design of a new global supply chain model — or risk falling behind those who do.”

Concluding thoughts

Every supply chain professional wants his or her supply chain to be the best it can be. Naomi Hunter (@NHSuppliesNews) writes, “By nature, supply chain success is largely dependent on the chain’s ability to adapt and evolve within its environment, much like a living organism. However, unlike a living organism, this process does not happen instinctively. It’s the responsibility of supply chain professionals to foresee trends and risks, and in turn, recognize how to respond to them.” The Clear Peak Supply Chain Advisory Council “encourages supply chain executives to learn and leverage technology and move up the learning curve to make better investments in emerging solutions that offer supply chain visibility and data-driven supply chain management.” With so many technologies to consider, supply chain professionals need to become lifelong learners and champions of change.

Footnotes
[1] Justine Brown, “Want digital transformation? Make sure you’re investing in the right places, McKinsey says,” CIO Dive, 10 February 2017.
[2] Staff, “Data-Driven Culture Creates Advantages for Global Supply Chain,” Materials Handling & Logistics, 11 April 2017.
[3] Steve Laughlin, “Transforming the Global Supply Chain,” IBM Think Blog, 10 May 2017.
[4] Staff writer, “How to Prepare for the Next Wave of Supply Chain Innovation,” Thomas Insights, 6 February 2019.
[5] David Weldon, “8 top technology trends impacting the supply chain in 2019,” Information Management, 10 May 2019.
[6] Naomi Hunter, “3 Fundamental Success Criteria for Future Supply Chains,” All Things Supply Chain, 12 November 2018.