The Unstoppable Digital Supply Chain Movement

Stephen DeAngelis

August 8, 2017

In many aspects of life — from politics to criminal investigation to investment — the advice you often hear is “follow the money.” If you want to know where supply chain transformation is heading, follow the money. Analysts from Gartner predict the money trail will lead you to the digital supply chain. Dave Blanchard (@supplychaindave) reports, “If big numbers impress you, try the number $13 billion on for size. That’s how big analyst firm Gartner says the supply chain management (SCM) market will be by the end of this year, or at least that part of the market comprised of software revenue. That’s a gain of 11% from 2016.”[1] What’s driving those numbers? According to Chad Eschinger (@chadeschinger), managing vice president at Gartner, “Digitalization is increasing demand for agility and forcing new business models, which is boosting spending in the SCM market.”

The Digital Supply Chain

Most analysts agree we now live and work in the information age — sometimes called the digital age. Any business failing to adapt to this age is likely to fail. Alexa Cheater (@Alexa_Cheater). Product Marketing Manager at Kinaxis, asks, “How ready are you for digital business?”[2] She has good reasons to ask that question. She explains, “Gartner’s research suggests many of you are still a long ways off. Its statistics show that while 70% of companies recognize the importance of things like mitigating cyber risk, building knowledge and roadmaps for emerging technologies, and using digital to execute on a more reliable and profitable supply chain, a mere average of only 15% are actually ready to act on them. What’s even more frightening is the fact the research also shows 65% of the millions of smart devices already available on the market will be hackable by 2019. That’s less than two years away. IoT is here, and with connected devices moving into the billions, you can’t afford to ignore it. The big data it’s providing means more insight into consumer demand, but only if you have the analytics and data structure to support it.”

Even though most companies are only beginning their digital supply chain transformation, some analysts, like Lora Cecere (@lcecere), founder of Supply Chain Insights, are already looking further into the future envisioning an “Autonomous Supply Chain.” Cecere explained her vision at the 2016 “Imagine2030” conference hosted by her company. Reporting on her presentation, Bram Desmet (@bram_desmet), an Adjunct Professor in Operations & Supply Chain Management at Vlerick Business School, wrote, “She expects the ‘Autonomous Supply Chain’ of 2030 to be: outside-in; learning; socially responsible; orchestrating the network of networks; and, providing an engine of growth.”[3] He continues:

“Outside-in, as opposed to inside-out, means your supply chain is able to pick up demand signals and translate those throughout your supply chain up to your suppliers’ supplier, and likewise, pick up supply signals, like price changes or shortages of key raw materials, and translate that into demand shaping actions, like marketing alternatives. In the outside-in supply chain, the outside world is shaping our actions, not internal assets or politics. As we reach further into the extended supply chain, we will be more aware we have to manage a ‘network of networks’ instead of an actual ‘chain’. Segmentation will be key in defining which parts of the network to further integrate, and which parts to treat with a shorter term focus. Managing these networks of networks in an outside-in way, will require ‘learning’ in an ‘artificial way’. The increased complexity contains an opportunity for but it will also require the use of advanced analytics. … Last but not least, these autonomous supply chains will provide an engine of growth. It will create new jobs, with a higher skill set. Supply chain is becoming the new IT, absorbing generations of engineers and data scientists, to fulfill the dream of the autonomous supply chains by 2030.”

Cecere clearly had cognitive computing in mind when she talked about autonomous decision-making, learning, and network orchestration. Cognitive computing systems can handle all types of data (both structured and unstructured) and use advanced analytics to generate actionable insights. Because they learn as they work, cognitive computing platforms get better over time; which is why they will eventually be entrusted with decisions that make the autonomous supply chain a reality.

Manufacturing, which sits at the heart of the supply chain, is one area where digitalization will provide numerous benefits. The editorial staff at Material Handling & Logistics (MH&L) explains, “It is the connectivity of an increasingly digital supply chain that will transform performance. … The digital supply chain allows manufacturers to capture data from sensors and connected assets, use advanced analytics and AI to extract insight from that data, run prescriptive analysis, and then provide that real-time information to operational leaders who can use it to optimize performance. Improvements include better demand forecasting and automated inventory management, improved time to market, and lower-cost sources of raw materials.” Stephen Laaper (@StephenLaaper) and Adam Mussomeli, principals with Deloitte Consulting, insist all supply chain stakeholders will eventually benefit from digitalization. They write, “Supply chain operators are drawing on digital innovations from other areas of the business to help transform three phases of the supply chain’s digital journey.”[5] Those phases are:

  • Physical-to-digital: “Capturing information from the physical world to create a digital record of the structure of the supply chain and what’s happening in it. Examples of these innovations include sensors, controls, GPS, wearables, and 3D scanning.”
  • Digital-to-digital: “Harnessing the power of advanced algorithms and machine-to-machine communication to enable advanced analytics of real-time data from multiple sources. Examples include predictive analytics, artificial intelligence, and machine learning.”
  • Digital-to-physical: “Using automation and other technologies to translate decisions and actions from the digital realm into physical outcomes in the supply chain. Examples include autonomous robots and control systems, real-time geospatial visualizations, driverless trucks, drones, remote maintenance, and 3D printing.”

It’s clear that Laaper and Mussomeli agree with Cecere that artificial intelligence, including some form of cognitive computing, is going to play a significant role in the supply chain area in the years ahead.

Summary

The MH&L staff notes that a study published by Grant Thornton — “The Future of Growth and the manufacturing Industry Report” — concludes, “The supply chain shifts from its traditional linear shape to becoming an intelligent, agile network that responds rapidly to fast-changing customer needs.” Cheater adds, “More ‘things’ are getting connected every day. From smart refrigerators to toothbrushes to engines. … Humans and smart machines are already starting to co-exist. With the rise of artificial intelligence (AI) and machine learning (ML), a blended population isn’t far off. You need to start shifting your thinking from big data to big answers.” She then leaves us with a few questions to ponder, “How are you going to incorporate the rapidly growing number of digitally disruptive technologies into your end-to-end supply chain? What kind of impact will it have on your business from a profitability standpoint? A talent standpoint? A resource standpoint? Don’t put off finding out the answers. Start investigating them today.”

Footnotes
[1] Dave Blanchard, “Digitalization Boosts Demand for Supply Chain Software,” Material Handling & Logistics, 17 July 2017.
[2] Alexa Cheater, “4 unstoppable forces that WILL change your end-to-end supply chain,” 21st Century Supply Chain Blog, 19 June 2017.
[3] Bram Desmet, “How the Autonomous Supply Chain Will Disrupt All of Us,” Imagine, 1 December 2016.
[4] Staff, “Manufacturers Need Digital Supply Chain to Be Competitive,” Material Handling & Logistics, 9 May 2017.
[5] Stephen Laaper and Adam Mussomeli, “Introducing the Digital Supply Network,” The Wall Street Journal, 24 April 2017.