Digital technologies are reshaping the supply chain. Disruptive innovations from the “Internet of things” to autonomous vehicles and perhaps even Amazon’s delivery drones will significantly change the dynamics of the supply chain and with it the role of the supply chain manager.
Companies face growing difficulty in managing increasingly global, complex, and fast-changing supply chains.
Technology is being called upon help meet these needs. The consultancy Deloitte forecasts that by 2020, 70% of companies will use advances such as predictive analytics and wearable technology in their supply chains.
Scott Sopher, principal at Deloitte Consulting, says we are at the dawn of an innovation wave that will sweep across the entire material handling industry.
“The convergence of big data, faster and cheaper computer power, and the increasing demands of customers will likely accelerate the adoption of innovative products and services,” he says. He adds that executives should prepare for tech like drones and additive manufacturing — 3D printing — to significantly disrupt their industries.
This shift will have a profound impact on the role of supply chain departments, and the strategies of supply chain managers, who increasingly need to deploy cutting edge technologies.
“There are various skills you need to develop,” says Canan Kocabasoglu-Hillmer, director of the Master’s in Global Supply Chain Management at Cass Business School, including around data analytics and IT software.
Tech is seen as an answer to the tangled web of logistical problems, which have become more complicated as globalization has extended supply chains and increased risks.
The more outlandish innovations include 3D printing. Instead of shipping a product to a consumer, suppliers could sell permission to download a software file with instructions on how to print the component at home — cutting out transport costs.
Some 30% of companies polled by PwC, the consultancy, said they believed 3D printing would have a disruptive impact on their supply chains.
“3D printing has the potential to revolutionize supply chain design completely,” says Mike Bernon, senior lecturer in supply chain management at Cranfield School of Management. He says there is growing innovation around design customization of products. A consumer could in theory 3D print an iPhone to their own specification, for example by increasing or decreasing the size of the screen.
But, “it’s early days for this technology,” says Arnold Maltz, associate professor in the supply chain department at W. P. Carey School of Business.
Also, the relatively high costs of 3D printing have put the brakes on wide-spread adoption, say experts.
Supply chain managers are particularly excited about big data. With analytics, companies have the potential to restructure and adjust their supply chains based on real-time data, and consumer demand.
“It is having an enormous impact,” says Mark Johnson, associate professor of operations management at Warwick Business School. He says retailers are particularly keen to harvest consumer data to improve the supply chain, such as the UK’s Tesco, which has used loyalty card data to predict buying patterns.
In many industries capital is also tied up in stock held in warehouses. Using modelling tools allows supply chain managers to improve distribution performance based on previous sales data, and to predict where stock can be optimized.
The challenge, however, is seeing the wood for the trees. “Once you have the data, can you understand it?” asks Mark.
He says there is a skills problem. “You need people who understand business and computational statistics — [but] there are very few of those people around.”
Demand for well-trained supply chain managers is high. A recent survey by MHI, the trade association for the logistics industry, found 31% of companies lacked adequate talent to implement and deploy new technologies in their supply chains.
“The demand for well-trained supply chain professionals is constantly rising,” says Nick Vyas, director of the Center for Global Supply Chain Management at USC Marshall School of Business. “As globalization is growing rapidly, corporations continue to expand their markets in new regions.”
Chris Higgins, of the Career Development Centre at the business school INSEAD, says many large businesses are demanding talent for supply chain management roles, such as retail and distribution companies like Germany’s DHL.
There are also opportunities at the management consultancy firms — including McKinsey & Company and Boston Consulting Group — that offer operations management services.
Online retail groups like Amazon are particularly active recruiters. As consumer expenditure online rises, one of the key factors that influence online shopping behaviour is delivery times. “Supply chains have become the backbone of e-commerce,” says Chris.
Another sign of the growing importance of supply chains to global business is the number of companies with board level supply chain personnel.
“Not only have supply chains become a focus but, in many companies, they have become a department with senior-level management,” says Eugene Spiegle from the Supply Chain Management Department at Rutgers Business School.
The globalized nature of the supply chain means firms must work with multiple partners, many of whom have multiple partners themselves and may lack the expertise needed to connect their management systems.
Cloud computing is already changing this, by providing a platform where they can see orders in real time, track the status of deliveries and see quickly where there is a problem — further slashing delivery times.
“It should have dramatic improvement affects,” says W. P. Carey’s Arnold.
Robotics and automation software are also making their way into the supply chain. Food manufacturer Kellogg, for example, provides warehouse staff with headsets that tell them what items to pick up to build a palette of goods to be shipped.
“While advanced robotics has perhaps enjoyed the least media attention, it bears huge potential for structural change,” says Thomas Roemer, senior lecturer in operations management at MIT Sloan School of Management.
Decreasing the cost of robotics will cause a renaissance of manufacturing in industrialized nations, he predicts, and will reduce the size of manufacturing sites.
This has obvious implications for supply chains, he says, “such as lower transportation and inventory costs, shorter lead times and higher degrees of customizations”.
Meanwhile, there is growing scrutiny of supply chain practices. Scandals such the revelation that UK supermarkets sold horse meat to consumers in 2013, or the Bangladesh garment factory that collapsed the same year, killing more than 1,000, have drawn political and consumer scorn.
Many US manufacturers also find it difficult to comply with the Dodd-Frank act, which requires companies to know whether their products contain “conflict materials” such as tin that originate from some parts of Africa.
As such, supply chain sustainability is a focus. “Customers have become sensitive, and more information is being disseminated about sustainability practices,” says Cass’ Canan.
Technologies have often been called on to help meet supply chain needs as a “silver bullet” solution, yet many have failed to bring the expected widespread benefits.
But most experts agree that past hyped innovations, such as RFID — radio frequency identification — tags, which allow individual goods to be tracked with precision, will be matched.
“Disruptive technologies have reshaped global supply chains to some degree already, but they will do so increasingly in the future,” says MIT Sloan’s Thomas.