Time to Think about Your Supply Chain’s Future

Stephen DeAngelis

December 31, 2018

With the approach of each New Year, business executives naturally start thinking about the future. Year’s end is a time to set goals and make resolutions — it’s a time to think about change. Over 2500 years ago, the famous Chinese philosopher Lao Tzu stated, “Life is a series of natural and spontaneous changes. Don’t resist them; that only creates sorrow. Let reality be reality. Let things flow naturally forward in whatever way they like.” Although I agree life involves a series of changes, letting things flow naturally does not make good business sense. Businesses must adapt to changing circumstances; but, good business executives provide the necessary change leadership to create, not simply accept, future outcomes. One business area undergoing constant change is the supply chain. Supply chain transformation is not a new phenomenon. As new technologies emerged throughout history, supply chains have transformed to take advantage of these technologies. As a result, transformation has been and remains an essential characteristic of supply chains. Nevertheless, the rate of transformation today is breathtaking.

Technology is driving supply chain transformation

Rich Weissman, a supply chain practitioner turned college professor, writes, “In the supply chain world, change is coming fast and furious. The factory of the future is already here, and changes in work processes and customer demands continue unabated. In the blink of an eye, technology dominates and overtakes our jobs. It seems like only yesterday we adopted lean concepts to streamline operations, and today we interact with robots and look for driverless vehicles in the warehouse and over the highway.”[1] Below are some of the technologies making supply chain transformation an imperative.

The Cloud. Nicole Pontius, marketing communications manager for Camcode, notes, “There’s no doubt that cloud technology has transformed supply chain management and logistics operations. While the cloud has played an integral role in supply chain efficiency for the past few years, it’s unquestionably a mainstay. … Companies that take advantage of the latest technology and trends made possible by the cloud will be better positioned to adopt newer technologies that are on the horizon. By staying on the leading edge of technology adoption, you’ll level the playing field with larger competitors and be poised for success.”[2]

Internet of Things and Blockchain. Deloitte analysts, John Liu (@johnliu88) and Peter Cannistraci, Oracle’s Anant Kadiyala (@akadiyala), write, “Complex global supply chains are ripe for technology-led reinvention, with the internet of things (IoT) and blockchain leading the way toward the creation of a digital supply network that listens and automatically responds to demand and supply signals. IoT can help organizations track and monitor physical objects journeying across the globe in real time via internet-connected sensors, while incorporating blockchain capabilities allows the extended supply network ecosystem to access product information in an immutable shared repository.”[3]

Cognitive computing. Cognitive technologies are what put the smarts into intelligent supply chains. Cognitive platforms are part of the ecosystem that also includes sensors, the Cloud, and the IoT. Pontius explains, “One of the biggest boons for the supply chain industry made possible by cloud computing is the ability to leverage powerful analytics to make smarter decisions, speed logistics, and enhance both the efficiency and accuracy of the flow of products through the supply chain. … One particular trend that’s making analytics both faster and more readily accessible is the proliferation of the internet of things. Gone are the days of manual data entry and the need for humans to aggregate and analyze data from multiple sources. With the rise of IoT, devices are cloud-enabled and connected, automatically transmitting essential business data to centralized systems, where it can be machine-analyzed and translated into actionable insights.”

Automation and autonomous vehicles. With the rise of e-commerce and omnichannel operations, robots and automation have made a big supply chain impact — especially in warehouses. Andy Hemphill (@Andy_ICIS_Fertz) reports automation and autonomous vehicles are also poised to make a big impact on supply chain operations.[4] He explains, “Once the dream of science fiction authors, autonomous vehicles now look set to be the next ‘great leap’ in transportation.” He reports mining giant Rio Tinto is using autonomous trucks and locomotives in Australia and Norwegian fertilizer production giant Yara is testing an autonomous, electrically-powered container vessel for use on the oceans. In addition, every large logistics provider is testing autonomous delivery vehicles from drones to vans.

The above list is not exhaustive. Other technologies, like additive manufacturing, are also impacting many supply chains. What weaves these technologies together is data. Leveraging data can help make supply chains more agile and adaptable. As evolution has taught us, it’s not the biggest or strongest entity that survives, it’s the one that is most adaptable to changing circumstances.

Enhancing supply chain agility

Lora Cecere (@lcecere), founder and CEO of Supply Chain Insights, observes that making supply chains agile is not easy because embedded processes often work against each other. She explains, “Agility is the output of systems design. In contrast, the design of ERP-based systems is functional efficiency. Most learn the hard way that functional efficiency and alignment are geometrically in opposition. The solutions optimize source, make and deliver within silos, but lack the ability to drive alignment and improve agility. Consequently, we are making our systems more efficient, but less effective.”[5] Enhancing supply chain agility, Cecere insists, requires two things. “The first step in the delivery of an agile supply chain,” she writes, “is a clear definition.” She defines agility “as the ability to have the same cost, quality and customer service given a level of demand and supply volatility.” In other words, supply chains must be able to adapt to changing circumstances. Score another one for Charles Darwin. “The second step to drive value,” Cecere notes, “is defining the flows and aligning the tactics. The agilest supply chains are outside-in using channel data. This decreases demand latency and improves market sensing.”

Mark Derks, director of global marketing for C.H. Robinson, notes, “Businesses go through many stages. At inception, business might be simple and consist of serving only a few local customers. Then growth — perhaps from new customers or a new product — adds complexity. No matter what phase your business is at, from the most successful, legendary brand to a smaller, emerging one, every aspect of your business needs to help move your business forward to the next stage. This includes your supply chain.”[6] He believes supply chain managers should be concerned with efficiency, reliability, and capacity. Cecere would obviously add agility to that list. Derks concludes, “Like many things in life, a strategic supply chain will be an ongoing journey that changes as your business changes. A supply chain decision made five years ago may not be what your business — or your customers — needs today. This is especially true with the fast pace of change our industry has seen through advancing technologies.”

Footnotes
[1] Rich Weissman, “Ch-ch-ch-change is coming fast and furious to supply chains,” Supply Chain Dive, 29 October 2018.
[2] Nicole Pontius, “5 Supply Chain Trends Driven by Cloud Technology in 2017,” Business.com, 11 September 2017.
[3] John Liu, Peter Cannistraci, and Anant Kadiyala, “5 Supply Chain Use Cases for IoT, Blockchain,” The Wall Street Journal, 8 November 2018.
[4] Andy Hemphill, “Rise of the machines – the automated supply chain,” ICIS, 2 October 2017.
[5] Lora Cecere, “Be Careful What You Ask For,” Supply Chain Shaman, 18 July 2018.
[6] Mark Derks, “4 Questions to Ask to Take Your Supply Chain to the Next Level,” Talking Logistics, 31 May 2017.