The ongoing transformation of our industrial supply chain is hardly the first of its kind. What’s different about today’s modernization is its unprecedented speed. We are still in the early phases, but the supply chain will evolve from a clunky, reactive, operational process into a strategic profit driver, woven deep within the fabric of every competitive business.
Though we are still in the early stages of the digitisation of the supply chain, when we are finished, it will have evolved from a clunky, reactive, operational process into a strategic profit driver, woven deep within the fabric of every competitive business.
What’s different about today’s modernization is its unprecedented speed, enabled by new tools that act faster than human beings. To get there, organizations are rethinking the way they approach supply chain planning—integrating several individual phases of the process into one continuous, end-to-end system. Traditional planning has been conducted in siloed stages: the inventory silo, the demand silo, the transportation silo.
Today’s planning takes place across those siloes to implement new ways of working and to deliver the increasingly precise service criteria which customers are demanding. All of this is enabled by the rapid progress of several key technologies, which are now at a tipping point.
Those that fail to adopt them soon will find themselves in a difficult competitive spot five years from now. The technology driving supply chain digitisation falls into six categories:
- Demand sensors and signals – Infrastructure which provides continuous real-time input from customers to improve customer satisfaction with “right time and place” supply
- Artificial intelligence (AI)/big data – Aggregation and analysis of massive amounts of data to identify and respond to trends in customer demand
- Advanced robotics and machine learning – Modern warehouse management, plus “non-physical” robotics such as database tools for deeper trend analysis that can more accurately forecast based on past trends and current state
- Internet of Things (IoT) – Connected devices, vehicles, and buildings that collect and exchange data
- Automation / 3D printing – Delivering custom service that meets the most specific, time-sensitive customer demands
- Augmented or virtual reality (AR/VR) – Generated simulations that lead to faster decision-making and avatar realities
These disruptive technologies will become commonplace over the next decade. Technology sector experts will argue that we’re there now, but their view is likely skewed by their proximity to “tech hubs,” where tech is everything and everywhere. The digitisation of the supply chain is, in turn, a driver of a much more profound trend—the disruption of the business model.
Early adopters are enthusiastic, but the rest of the world is not yet as comfortable with these new tools. That’s not to say there’s resistance. But the technologies all must be fully ready before most companies will adopt them.
Many are just beginning to experiment and run pilot programs—mostly the big businesses and only in certain sectors, while most mid-sized and small companies are watching with interest. The digitisation of the supply chain is, in turn, a driver of a much more profound trend—the disruption of the business model. Organizations today have much different considerations than they might have had five years ago. In fact, it would not be an exaggeration to say that all companies are now actually supply chain companies that happen to use differing levels of technology to meet the needs of their business model. Without supply chain, they have nothing to sell.
Johnson & Johnson, which clearly operates in the healthcare industry, selling pharmaceuticals, biomedical devices, and consumer products, is very much a supply chain company. In fact, the company credo, after giving due respect to the doctors, nurses, patients, mothers, and fathers who use our products, underscores the importance of the supply chain to our business:
“We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.”
This is a profound acknowledgment of the significance of supply chain, and companies that fail to recognize and embrace this significance are running a big risk. Imagine a major retailer that chose not to operate in eCommerce a decade ago. Would it still be a viable player in business today?
Today, a company might decide not to use artificial intelligence to meet customer demand. Where will it be in 20 years, when everyone else is relying on computers to make decisions? You must at least be planning for the transformative process ahead—or planning to hire people that can help you get there.
The technology era has seen several infamously poor decisions by executives of major companies who doubted the future, and quotes like: no one will have a computer in their house, or no one will buy things on the Internet. Those quotes sound ridiculous now, but that’s not stopping people from saying similar things today. Skepticism is healthy, but not to the point of denying inevitable trends. Eventually, the skeptics will either embrace the future or they we will be left behind. We are all in the supply chain business now.