Trends 2016: Supply Chain

Stephen DeAngelis

January 4, 2016

“The export-based economic model that we now take for granted,” assert analysts at Stratfor, “depends on supply chains.”[1] That statement is as blunt as is it profound. The statement is a global version of what Supply Chain Insights Founder and CEO Lora Cecere (@lcecere) asserts, “The supply chain IS Business, not a department within a business.”[2] Most people don’t have an adequate appreciation for supply chains or their central role in our everyday lives. The world is constantly changing and supply chains must keep pace if global prosperity is going to be achieved. The Stratfor analysts observe:

“Moving goods is easier than ever because of an array of technologies, relatively cheap and globally accessible credit, and a host of other factors, including the United States’ protection of the world’s sea-lanes. But supply chains have changed significantly over the last decade. The ability to acquire goods from a staggering number of suppliers in vastly different locations, frequently referred to as globalization, has only recently become possible, in large part because of technological advancements.”

Below are some of the trends pundits have identified as important indicators of how the supply chain is going to transform in the years ahead.

Technology

Stratfor analysts predict, “Improvements to technology will transform global supply chains over the next decade.” That’s a sweeping prediction sadly lacking in specificity. Nye Longman (@MrNLon) agrees that technology is a core strategic driver of supply chain operations; but, he offers a little more specificity as to the types of technologies that are going to have an impact on supply chains in the years to come. They include “trends like big data, the Internet of Things, and the coordination of multiple sources of data.”[3] Cecere can also be counted among those who believe that technology will have a profound effect on supply chains; but, she avoids “the buzzword bingo terms of Big Data, the Internet of Things, and omni-channel.” She writes, “I hate these terms.”[4] She predicts that technologies like sensors, GPS, driverless vehicles, robotics, and prescriptive and cognitive learning engines will result in “the dawn of the autonomous supply chain.” Of course, many of the technologies Cecere mentions have artificial intelligence at their core. I agree with Cecere, especially when it comes to the maturation of cognitive computing. Because cognitive computing systems can make routine automated decisions on many fronts, they are likely going to be at the heart of any autonomous supply chain. At the end of the day, Stratfor analysts are correct, “Improvements to technology will transform global supply chains over the next decade.” Almost every important trend transforming supply chains is being driven by one or more of the technologies mentioned above.

Adaptability

One of things that we learn from evolution is that the biggest and strongest species are not the ones that survive when conditions change. The species that survive and thrive are those that are most adaptable. The same holds true in the business world. Grant Marshbank, COO of VSc Solutions, told Longman that new technologies are making supply chains more adaptable. “Real time system integration, secure data exchange, visibility and traceability between disparate systems across multiple supply chains and industry verticals are just some of the options already available through technology,” he stated. “The greatest barrier to the adoption of these technologies is a lack of understanding of the benefits combined with an expectation of high implementation costs.” Cecere insists that cognitive computing will facilitate corporate adaptability. “Supply chain planning systems,” she writes, “will be redefined based on cognitive learning. This transformation will define the third generation of planning and will make the current predictive analytics obsolete.”

Smart Manufacturing

The editorial staff at Material Handling & Logistics (MH&L) writes, “In order for the U.S. manufacturing sector to remain competitive it must continue to invest in advanced technology.”[5] They list ten advanced technologies they believe will shape the future of manufacturing. They are:

1. Predictive analytics
2. Smart, connected products (Internet-of-Things)
3. Advanced materials
4. Smart factories (Internet-of-Things)
5. Digital design, simulation and integration
6. High performance computing
7. Advanced robotics
8. 3D printing and scanning
9. Open-source design / direct customer input
10. Augmented reality

Cecere, like many other experts, believes that additive manufacturing (aka 3D printing) is going to have a profound effect on the future of manufacturing. “Maintenance, Repair and Operations (MRO) parts will be redefined,” she writes. “Parts will be printed in maintenance shops. While not all parts will be replaced, store rooms will be reduced. Additive printing will also help redefine medical device supply chains and the testing of drug cocktails on tumors. It will also drive a redefinition of organ transplants.”

Customer-centric Supply Chains

Professor Burcu Keskin from University of Alabama asserts that consumers are being empowered as never before. “Differentiated customer experiences define the current supply chains,” Keskin writes. “In the past, having a one type product with a long life cycle had been the norm. However, with reduced life cycles, customer-driven innovative products and services have forced supply chains to be flexible and adaptable. The biggest implication of this new imposition on procurement process is that now procurement managers have to deliver suppliers that are cost conscious and timely in their operations but at the same time can adapt to the changing demands of end customers.”[6] Cecere agrees that supply chains must be customer-centric and insists that this new focus requires a retooling of planning processes. “Today’s planning processes are inside-out,” she writes. “Companies cannot sense markets and planning processes are based on historic orders and shipments. As markets become more volatile, and assortment more regional, companies will build outside-in processes with test-and-learn capabilities across channels.” To learn more about customer-centric supply chains, read my article entitled “Building a Customer-centric Supply Chain.”

Supply Chain Visibility

Supply chain visibility has long been a goal supported by supply chain professionals. Until recently, however, technologies that could make this goal a reality have not been available. Today, however, there is hardly an activity that doesn’t produce some kind of data that can help companies understand what is going on within their supply chains. As the ability to see more clearly and deeper into supply chains improves, supply chains will become safer and more secure. Cecere writes, “Today 1/3 of fruits and vegetables and poultry products are thrown away due to spoilage. Companies struggle with counterfeit goods. In the future I expect the automation of the chain of custody with better control of temperature and secure handling.” Keskin adds, “Data coming from different sensors located at different suppliers from their production and transportation operations carry a lot of information regarding the quality of production process and timeliness of delivery. At the same time, this data may indicate possible issues in the procurement process, regarding product quality and delivery. Monitoring and analysis of this data may provide opportunities to intervene before issues becomes major problems.” Better visibility can also result in real-time inventory management. The experts at PLS Logistics Services explain, “Leading retailers will begin implementing mobile point of sale (POS) systems, beacons, sensors and other technology that will revolutionize inventory management and the whole buying experience. Customers will be able to pick up an item and simply walk out of the store, with the price of the item automatically charged to their card. Real-time visibility, both in the store and throughout the supply chain, will allow inventory to be replaced as it is moved, and items produced as they are bought.”[7]

Summary

Clearly, the items discussed above do not represent an exhaustive list of how supply chains will transform in the years ahead. They do provide a pretty good idea of what experts are thinking; especially concerning how cognitive computing systems could dramatically change how supply chains operate. I share Lora Cecere’s vision of the autonomous supply chain in which people provide oversight and deal with anomalies while cognitive computing systems make routine decisions and help make processes more effective and efficient.

Footnotes
[1] “Covering the Costs of Globalization,” Stratfor, 20 January 2015.
[2] Lora Cecere, “Sage advice? Only for turkeys.” eft, 1 February 2013.
[3] Nye Longman, “Four Supply chain trends to watch in 2016,” Supply Chain Digital, 30 November 2015.
[4] Lora Cecere, “Tell It Like It Is. What Will Supply Chain 2030 Look Like?” LinkedIn, 13 December 2015.
[5] “10 Advanced Technologies That will Shape Manufacturing’s Future,” Material Handling & Logistics (MH&L), 20 November 2015.
[6] Burcu Keskin, “[INFOGRAPHIC] Expert Reveals 7 Supply Chain Trends to Watch,” FlashGlobal, November 2015.
[7] “2016 Trends in Logistics,” PLS Logistics Blog, 23 November 2015.