Navigating your Supply Chain Digitalisation Strategy

Supply chain management

The below post is a summary of the Q&A that took place on the 14th February with Yingli Wang, where executives asked their burning questions on digitalising their supply chains. Over the last decade, Yingli has worked intensively with many organisations including shippers, logistics service providers and IT service providers, in the field of e-logistics, such as Tesco, ASDA, BT and Tata Steel to name a few.

Q: What are the top 5 most important supply chain trends for 2020?

A: It is quite difficult to pin down the top 5 trends, but the overall consensus can be categorised into five keywords. 

The first one is resilience. Resilient supply chains are extremely important in order to be able to respond to all those disruptions we are currently experiencing. It is very important to think about how you respond to them while maintaining your economic viability.

The second keyword is connectivity. This is an especially up to date topic when thinking about end-to-end supply chain visibility in the context of a global and diverse supply chain. Connecting managers across functional and organisational boundaries and providing them with relevant, accurate, and timely information reduces temporal and spatial distance enabling them to make better, more collaborative decisions. This connectivity is very much related to digitalisation and information visibility along the supply chain. Technological advances such as cloud computing, IoT, blockchain and internet-based platforms are enablers to seamless supply chain connectivity and end-to-end supply chain visibility.

The third keyword is sustainability. It is increasingly important to be aware of this topic. When we are talking about sustainable supply chains, we are researching questions such as how to reduce plastic or how to reduce the supply chain’s carbon footprint. However, sustainability is not only relevant in an environmental context but also in a social one.

This leads to my next keyword, which is accountability. It is important to make sure that the supply chain doesn’t have any major social issues that could damage a company’s reputation – for instance, modern slavery or child labor. Firms are required or expected to justify their decisions and actions for product design, sourcing, production or distribution to stakeholders.

The final keyword is intelligence. When talking about intelligent supply chains, we mean utilising the available technologies such as artificial intelligence, big data and machine learning or robotics in order to make sure that a supply chain works smarter and more efficient.

I hope these five key words summarise what is currently going on in a range of different industries - also from a research perspective.

Q: Another important question that has been coming up is how you organise your current supply chain infrastructure to support digital future needs and adapt to digital innovations.

A: I would like to point out that infrastructure doesn’t only refer to physical infrastructure but also to the digital one. It is key to make sure that you utilise technology to make sure that your digital infrastructure is up to date. In addition to building both physical and digital infrastructures, we also need to think about processes, people and relational configurations. By that, we mean that organisations have to build a dynamic capability that can respond to disruptions and can embrace new opportunities. But in order to build these capabilities you need to have an up to date and robust infrastructure - only after this you will be able to serve your customers in an environment that is often unpredictable and full of disruptions.

Q: How can blockchain improve supply chain agility?

A: Blockchain, and distributed ledger technology in general, is one of the most disruptive technologies at the moment. Supply chain transactions could be verified through the distributed network technology. We call it a distributed technology because all the transactions are conducted in a peer-to-peer fashion and all the participants can verify the transactions. Through this, the validity of the data is guaranteed by the whole network rather than by an intermediary. And by getting rid of the intermediaries, we can often get rid of tons of inefficiencies and costs. This could speed up transactions and reduce costs within our supply chain.

Another important attribute about blockchain is transparency. There is a famous example of Walmart partnering with IBM to use blockchain technology to track their leafy vegetables. If there is a food safety issue, Walmart can now quickly track each individual item. It would traditionally have taken days or even weeks but with blockchain it takes seconds. This is a very powerful use case for blockchain in the supply chain. The third attribute is immutability. Data stored on the blockchain is extremely hard to manipulate. Thereby you can have great confidence and trust about the data in a blockchain. The next key attribute is security. Cyber security is one of the most important areas within supply chain digitalisation. You can use the blockchain to securely share confidential data with third parties such as customs agencies. Blockchain systems are more resistant to cyber-attacks because there isn’t any central point of failure.

The last thing I want to point out is automation, which means that blockchain can be programmed to automate different supply chain processes through the use of so-called smart contracts. A smart contract is a computerised protocol that can automatically execute a contract if certain conditions are met. one popular application area is to use smart contract to automate the payment process.

Q: Could you please talk about AI applications for supply chain and provide successful best practice examples?

A: As with blockchain, AI is another very disruptive technology and touches almost every industry at the moment. When talking about AI, people often think about machine learning. If you look at AI more broadly, it has several different applications and machine learning is only one of them. AI can help with optimisation problems such as workforce scheduling. AI can also help with diagnosing certain diseases. By processing large amounts of images, AI can AI can outperform radiologists at cancer screening. The other type of AI applications is physical robotics, which are mainly used in warehouses or production facilities. Autonomous vehicles, especially drones are getting more and more important in the supply chain process and they are also driven by AI. 

On top of all of this, we have machine learning. Machine learning is very much about classification prediction. You feed the algorithm with a lot of data and then it takes what it has learned, applies it to new data and uses the labelling examples it has been given to classify the patterns it can observe within the new data. That’s so-called supervised learning which is the most widely used type of machine learning right now. During unsupervised learning, machines aren’t trained but are left to find patterns in data sets by themselves.

In terms of benefits, a recent global McKinsey survey has identified that businesses that have proactively used AI have seen an uptick in revenue, especially in sales & marketing, product & service development and in supply chain management. A majority of them have also seen a reduction in costs. For example, JD.com, one of the largest retailers in China, has recently built a warehouse that can handle 200,000 orders a day, but it only employs four people! A more traditional application would be workforce scheduling. I have worked with clients in the telecommunication sector, that used AI to optimise the scheduling task of their ~25,000 employees. One of them was able to generate operational cost savings of ~25 million over the last 10 years or so, reduction in travel times and productivity increases of ~10%.

A lot of organisations use AI in an ad hoc manner without really building up an AI portfolio.  The key is not to try out AI in different isolated areas but to build a systematic portfolio that allows you to scale up those use cases. Another important aspect that is often being forgotten is risk management as following AI blindly can leave an organisation extremely vulnerable to people who know how to manipulate the AI generating recommendations.

To find out more about how to create a framework for building agility, flexibility and visibility in your Supply Chain using state-of-the-art technologies, attend Yingli’s Leading the Supply Chain of the Future Masterclass.

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