How Technology is Changing the Supply Chain

Stephen DeAngelis

March 1, 2016

Everyone knows that technology (especially, the Internet) has changed the business landscape. Loretta Chao (@LorettaChao) and Steven Norton (@steven_norton) write, “Many traditional retailers are struggling as their customers move online, hoping that costly investments to retool their supply chains for e-commerce will eventually pay off.”[1] Asserting that brick-and-mortar stores are struggling is probably an understatement. Walmart has announced the closing of 269 stores, Macy’s has announced the closure of 36 stores, Finish Line has announced it will close about a quarter of its 600 stores, K-Mart has announced 27 store closings, Stage Stores has announced it will be closing 90 of its 850 stores, and list goes on. Although e-commerce is foremost among the reasons the retail space has changed, other factors have also played a role — factors like improved home delivery, urbanization, and the ubiquity of mobile devices. Lora Cecere (@lcecere), founder of Supply Chain Insights, adds three other factors changing the retail landscape.[2] They are:

 

1. Decline in Customer Sentiment. The turbulence in the January stock market has an impact on customer sentiment. Customers are buying less.

 

2. Success of New Business Models. The Amazon Impact is having an effect on Wal-Mart Stores, Inc. and retail in general. Amazon’s innovation is redefining e-commerce faster than Walmart can keep up.

 

3. Disintermediation. Manufacturers are Now Selling Directly to Consumers. The days of going to a brick and mortar store to buy product is only one of the ways that people want to buy.

 

As Chao and Norton note, many companies are hoping emerging technologies can help them improve their supply chains and attract consumers on their digital path to purchase. They explain:

“Retailers are investing heavily in state-of-the-art software, redesigning their warehouses and training employees, with the goal of getting their merchandise to customers seamlessly, whether they buy online or in a store. The strategy, known as ‘omnichannel’ retailing, demands a far more complex and interconnected supply chain.”

State-of-the-art software is not the only technological advance being implemented in supply chains, hardware (like robotics) is also being purchased — and many more changes are likely to come. As David Hauptman, vice president of product management at Geodis SA’s OHL, told Chao and Norton, “The ground is shifting beneath us, and the dust has not settled. Nobody’s found the answer yet.” Below are some of the technologies that are likely to become supply chain mainstays in the years ahead.

 

Automated Manufacturing and Warehousing

 

“For most retailers,” Chao and Norton write, “the effort to adjust to online sales starts at the warehouse. They have redesigned facilities originally equipped to send bulk shipments to a limited network of stores so that workers can quickly assemble, package and ship many small parcels to consumers in far-flung locations.” For many of the products retailers sell, the technology story begins with manufacturers. Jim Rock (@jimrock33), CEO at Seegrid, observes, “An increasing number of intelligent robot systems is already on the ground, in warehouses and manufacturing facilities, helping to manufacture and move products across the globe. These automated systems, which employ the world’s most innovative advancements in software, artificial intelligence and machine learning, are transforming the core process of how each and every product is produced and delivered.”[3] For example, Charles Orton-Jones (@CharlesOJ) reports, “Amazon is using 15,000 Kiva robots, each capable of moving 340kg of products at a time, receiving directions wirelessly from the control centre.”[4]

 

Value Chain Insights

 

The editorial staff at eDelivery predicts, “With delivery costs and customer service expectations both rising, real-time telematics and mobile data solutions will become a core investment for 21st century retailers. … Transporting goods from suppliers and ports into distribution centers, onward to stores and, for some items, finally to customers’ homes is one of the highest costs for retailers, both for traditional bricks-and-mortar operations and for online offerings. … Telematics can deliver solutions to help meet the twin challenges of maintaining high levels of customer service while simultaneously controlling delivery costs.”[5] Telematics are just one portion of the emerging Internet of Things that will foster machine-to-machine communication. In the future, everything from individual products to bulk container shipments will likely be tagged and tracked. Although this will improve supply chain visibility, the need goes beyond end-to-end supply chain visibility and requires a new System of Insights layer between a corporation’s Systems of Record and its external data. Fortunately, Enterprise Cognitive Systems are now available that enable these Systems of Insight to improve visibility, execute decisions, integrate data, and support corporate alignment.

 

As the eDelivery staff notes, advanced analytics “can help identify trends and patterns across all elements of the operation and discover where the bottlenecks and inefficiencies are, delivering insights into productivity, business process efficiencies, costs and customer service levels.” Chao and Norton add, “To manage costs, many retailers are betting on new software that helps them decide which warehouse or distribution center can ship a particular customer’s order most economically. Many variables factor into those calculations, such as labor costs, distance, and the strength of local supply and demand.” Cognitive computing solutions are ideal for addressing these kinds of challenges because they can analyze an unlimited number of variables and provide actionable insights.

 

Last Mile Solutions

 

Rock reports, “Skype co-founders Ahti Heinla and Janus Friis [are] introducing autonomous robots to a street corner near you. Designed to address the ‘last mile’ — the notoriously difficult final leg of the delivery process — the Starship bots will deliver groceries and small packages to suburban homes. Operating autonomously 99 percent of the time, each robot uses high-resolution navigation software to pinpoint its location, and a camera and radar to avoid obstacles. The mini-fridge-sized vehicles will have speakers and microphones to chat with humans, and their six-wheel treads can even climb small staircases.” The systems getting the most attention are autonomous drones to solve the last mile challenge. Both Amazon and Google have filed for patents involving drone delivery systems.

 

Conclusions

 

The technologies discussed above are only a sampling of the technologies that are likely to emerge in coming years. Others, like additive manufacturing and driverless vehicles, will also have an impact. The common threads tying them together are connectivity (i.e., the Internet of Things); artificial intelligence (especially, cognitive computing); big data, and advanced analytics. Rock concludes, “While it’s true that tomorrow’s industries will likely look quite different than they do today, I anticipate a workplace where humans and robots work in collaboration. … We should embrace the automation technology that helps us move goods around the planet — and look forward to a future where robots make all our jobs less mundane.”

 

Footnotes
[1] Loretta Chao and Steven Norton, “Retailers Bet Big on Retooling Their Supply Chains for E-Commerce,” The Wall Street Journal, 28 January 2016.
[2] Lora Cecere, “Transforming Consumer Value Chains: Navigating the Power Shift to the Shopper,” Supply Chain Shaman, 18 January 2016.
[3] Jim Rock, “Autonomous Robots Are Changing The Way We Build And Move Products Around The World,” TechCrunch, 17 January 2016.
[4] Charles Orton-Jones, “Top 5 Technologies Revolutionising Supply Chain,” Raconteur, 12 February 2015.
[5] Editorial Staff, “Telematics focus: intelligent deliveries,” eDelivery, 20 January 2016.