Digitization and the Future of Supply Chains

Stephen DeAngelis

May 20, 2019

An anachronism is “a thing belonging or appropriate to a period other than that in which it exists, especially a thing that is conspicuously old-fashioned.” People who live in Pennsylvania are familiar with anachronistic encounters with the Amish who still traverse busy streets riding in horse-drawn carriages. Their way of life survives, even thrives, because it connects to and is supported by the modern world. Motorized coaches and cars bring passengers to their stores and restaurants and modern transportation systems ship their handmade goods to a broader customer base. The Amish, however, are the exception rather than the rule. When motorized vehicles became commonplace, horse-and-buggy supply chains found they couldn’t compete with modern transportation systems. They were out of step with the times. Neil Ackerman (@ackatak), Senior Director of global supply chain advanced planning for Johnson & Johnson, writes, “If we look back through history, every generation has seen major upheaval driven by technology — the railroad, the telephone, the automobile, the television, and now the internet. What’s different about today’s modernization is its unprecedented speed, enabled by new tools that act faster than human beings.”[1]

 

We now live in the digital age and supply chains desiring to remain competitive must keep in step with the times. Nikos Papageorgiou, Vice President of Customer Success at Slync, writes, “Supply chain digitization is already showing significant impact for those willing to invest. According to a KPMG survey, the investment in intelligent automation will reach $232bn in 2025, compared to $12.4bn today. The reasons: digitization can enhance the customer experience, improve efficiencies by eliminating manual processes, and foster new operating or business models.”[2] Supply chains that aren’t digitized will soon be anachronistic.

 

The digital transformation imperative

 

Connectivity has always been the hallmark of supply chains. In the supply chain’s earliest manifestation, trade connected villages. Eventually, trade routes connected nations. Today’s supply chains are a complex web of interconnected networks. Unfortunately, they are not as well connected as they could be. Claudio Diotallevi, a Partner Manager for Transport & Logistics at Ericsson, explains, “Participants in the supply chain are connected — just not to each other or not at the right time.”[3] In the digital age, data can connect the right stakeholders at the right time — if data is shared correctly. “Data in itself,” writes Diotallevi, “isn’t necessarily helpful. However, when relevant data is shared with the right counterpart in a timely manner, it becomes actionable and useful information. Being able to acquire information from the other parties and automatically detect the position and status of parcels or containers increases the situational control, predictability of delivery, and quality of service as perceived by end-customers.”

 

Bob Allen, Josh Nelson, and Sandip Saha, analysts with Hackett Group, observe, “The supply chain is considered to be a key area that can greatly benefit from digital transformation.”[4] They go on to list a number of “challenges facing the supply chain that digital technologies can help overcome.” They are:

 

  • “Lack of coordination across global locations, acquisitions, external partners and customers or consumers.”
  • “Siloed processes and systems with duplication of functions across systems, business units and geographies.”
  • “Inability to synthesize and react to large volumes of data.”
  • “Increased complexity in managing market demands and regulations of diverse geographies.”

 

They assert emerging technologies, like cognitive computing, can help address these challenges. They explain, “Digital transformation addresses these challenges by integrating the supply chain with technologies that enable deeper and more meaningful insights in a more timely fashion, thereby accelerating business processes, optimizing investments and improving decision making.”

 

Digital transformation technologies

 

According to Ackerman, “Digitization has the potential to turn the supply chain into a strategic profit driver, woven deep within the fabric of every competitive business.” He lists a few of the emerging technologies he believes will benefit future supply chain operations. They are:

 

  • 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, like database tools for deeper trend analysis that can help predict the future.”
  • Automation/3D printing — “Delivering custom service that meets the most specific, time-sensitive customer demands.”

 

Arun Samuga (@ArunSamuga), Chief Technology Officer for Elemica, agrees with Ackerman that adopting emerging technologies is essential to digital transformation. He explains, “Next-generation technologies are built such that data is captured, cleansed, linked, visualized and finally powered with machine learning algorithms, leading to holistic decision-making capabilities with customer centricity.”[5] He also asserts corporate thinking and strategy must transform. He explains, “Making the digital pivot to an outside-in supply chain requires next-generation thinking. Traditional thinking for supply chain processes involves a linear approach with inside-out processes, focus on efficient organizational silos, use of transactional batch data centered around history, slant towards response and process standardization. Next-generation thinking is based on outside-in processes designed for structured or unstructured data that move at different speeds. Next-generation thinking shifts from traditional response driven-systems to sensing-driven systems with more intelligence.”

 

Concluding thoughts

 

Analysts from Land Link note, “Clearly, digitalization will change supply chains, but our understanding of how it will play out is a work in progress. … Technologies like predictive analytics, better visibility over the movement of goods, and robotics that help warehouses and distributions centers will all play a role in digital supply chain management.”[6] Papageorgiou asserts that digitization will be a supply chain game changer. “Digitization,” he writes, “allows for a paradigm shift making supply chains a differentiator and a strategic pillar of new business models. Personalized consumer goods, next generation drug therapies and fair-trade compliant supply chains to name a few cases where supply chains can be a differentiator. … The supply chain digitization vision encompasses available technologies such as artificial intelligence, workflow automation, and internet of things (IoT).” He insists the best place to begin digital transformation is with anachronistic parts of the supply chain, like spreadsheets, email, instant messaging, BI reports, bills of lading, legacy systems, EDI feeds, and pdf documents. He concludes, “Digitization of global logistics is picking up momentum as supply chain leaders become increasingly aware of the available technologies and their applications. Each technology — artificial intelligence, blockchain, intelligent workflows — has its own merit, and when combined they can turn supply chain into a differentiator. Front runners are the organizations that have been able to understand the ROI, run ‘quick-win’ pilots, and then execute at scale to ‘move the needle’. While some of the emerging technologies, like blockchain, might not be mainstream for some time, digitization is definitely here, and companies should take steps now — even if they are small — so they don’t get left behind.”

 

Footnotes
[1] Neil Ackerman, “How and Why to Digitize Your Supply Chain,” Manufacturing.net, 12 April 2019.
[2] Nikos Papageorgiou, “Betting on Supply Chain Digitisation: Why It’s Your Competitive Advantage?Supply Chain Digital, 29 December 2018.
[3] Claudio Diotallevi, “Supply Chains and Logistics Need a Digital Transformation,” IoT for All, 22 January 2019.
[4] Bob Allen, Josh Nelson, and Sandip Saha, “Transforming your Supply Chain for the Digital Era,” Supply & Demand Chain Executive, 4 February 2019.
[5] Arun Samuga, “Making the Digital Pivot in Supply Chain Management,” SupplyChainBrain, 6 February 2019.
[6] Staff, “The Coming Evolution of the Digital Supply Chain,” Land Link, 12 April 2018.