Supply Chain Tech Roundup

It’s the 21st century. If technology isn’t doing the bulk of the heavy lifting for your supply chain, then you’re doing something wrong. Blockchain, IoT, big data — it seems like every tool out there has a group of supporters behind it promising that THIS is the silver bullet that’s going to save your business. But here’s the thing: they forget that technology only works for you when you know how to work with it. In supply chain, this requires a commitment to seeking solutions that are truly end-to-end, cutting across silos to promote speed of execution across your entire operations. And it’s the job of a great team to choose and leverage technology that will surface your supply chain’s global context and interdependencies.

To help you on your journey, we’ve brought together in one guide the digital strategies and technologies that are shaking up supply chain — so you can be prepared to use these tools the smart way. Read on to get up-to-speed.

And for more on how to align teams on a digital strategy, head over to our Supply Chain Best Practices page.

The Need to Digitize
The Challenge of Digitizing

“80% of companies are concerned with competitive threats resulting from digital disruption in the supply chain industry.”

There is a distinct power shift taking place in the global product economy. In a recent report from Accenture, 80 percent of companies said they were concerned with disruption and competitive threats coming from digitization. In the coming decade, digitized operations are going to be the marker of the most successful businesses.

The question is no longer whether to digitize, but how to digitize. The operations space is ripe for disruption, but fragmented progress and implementation has left many executives at a loss as to how they can capitalize on the change. Digitizing supply chain is an enormously daunting task because it depends on going a step further (or more accurately, several steps further) than simply harnessing information internally; digitizing in today’s hyper-connected economy means collecting and connecting information that’s spread across many enterprises and partner networks.

This explains why (in addition to things like lack of tech-savvy talent, processing technology, and other back-office digital capabilities) digitization is so difficult. Funneling cash into new technologies is an attractive antidote, but that alone won’t cause a digital transformation to materialize in your operations overnight.

Any move toward digital should be deliberate, with a specific end-game in mind. An approach of this nature requires an understanding of the forces that drive digital transformation in order to avoid running in circles.

Why Your Operations Need A Digital Strategy

CSCOs increasingly control 50 percent or more of a company’s annual spending; 75% of Fortune 100 CEOs come from operations

We are witnessing a new generation of businesses that have leveraged digital solutions to become the leaders in their industries, setting the pace for everyone else. As we progress deeper into a digital era where Moore's law is the guiding principle, businesses are no longer at leisure to treat digital transformation as simply a way to gain a competitive edge; it is, rather, the only way to survive.

Today, operations are the central competitive differentiator. Chief Supply Chain Officers (CSCOs) increasingly control 50 percent or more of a company’s annual spending, with two-thirds of all employees directly reporting to the role. Close to three-quarters of Fortune 100 CEOs come from operations, indicating that frontrunners are catching on to the incredibly valuable role operations professionals can play in a business.

Operations today influence a full spectrum of customer-centric functions, including sales, marketing, and product development. In light of this shift, traditional operations strategies, which tend to be risk-averse and oriented around cost optimization, must be overhauled in favor of ones that emphasize creating value (through speed) for the customer.

Consumer-facing companies must orchestrate a constant balancing act between high-quality and high-velocity within vast, global networks. They must also reconcile the possibilities of the future with the messy realities of the present day, a daunting task that has driven many into a state of confusion. When a wrench gets thrown into a business' operations, the last minute scramble to mitigate the damage incurred by disruption will no longer suffice. Proactive, digital-enabled network optimization to ensure preparedness in times of (inevitable) crisis, is how the successful businesses of the future will distinguish themselves from competitors.

How to Implement Digital in Supply Chain
Driving a Digital Ecosystem

In a global supply chain survey conducted in 2016 among 300 individuals from more than 30 industries, respondents attributed relatively high levels of importance to big data analytics compared to technologies like 3D printing. This is an indication that business leaders recognize data as the potential Achilles Heel that can either uplift or seriously impair how their supply chains run. Consequently, they want to address their data problems. And more and more, they are recognizing that digitization is the most competitive way to do this.

So why have so many of them failed to truly digitize their supply chains? For one thing, technologies usher in certain challenges in relation to complexity and scalability that not all businesses are prepared for. On the other end of the spectrum are companies that are enthusiastic about implementing the latest technology — and do so without taking a headcount of how many in their operations are willing, let alone qualified, to join them on the (sometimes grueling) march towards digitization.

One major point of focus should be mindset. Supply chain managers should incorporate the transformative mentality into culture and processes to help balance short-term and long-term supply chain change. The global supply chain survey report identified three key activities in relation to this concept:

  • Implement supply chain best practices and improve supply chain performance
  • Have a long-term strategy to grow and remain relevant in an increasingly connected digital world
  • Be prepared to leverage big technology shifts that improve product and service offerings while simultaneously reducing costs
In other words, supply chain managers need to embrace a holistic approach that aligns people, processes and structures within the supply chain to the challenges of the rapidly-evolving digital age.

How Technology Can Stop the Bullwhip Effect

Predicting demand is like trying to read tea leaves

To illustrate the potential that a smart digital strategy can unlock in your supply chain, we’ve taken an all-too recognizable example: the bullwhip effect.

At its core, the bullwhip effect is a problem of overly drastic changes in inventory caused by an initial shift in consumer demand that, like the crack of a whip, kicks off a chain reaction of increasingly bigger “swings” in the direction of ordering too much, or too little product.

Why is this problem so hard to solve? Too many companies believe that if they can just predict what customers want, they’ll be able to minimize the steepness of the bullwhip curves. But demand is volatile by nature, and predicting it is like trying to read tea leaves — a game of intuition that leads to shaky assumptions and ill-informed decisions.

So how do we finally put an end to the bullwhip effect? The answer is by connecting all parts of the supply chain so that information (in the form of data and communication) can flow to the right place at the right time. First, let’s look at some core problems at play here.

The Telephone Game
People working in supply chain don’t understand, or in some cases don’t trust, the accuracy of the information they’re receiving, so they alter quantities of production based on their own best guesses rather than what their partners in the manufacturing process are telling them. The result is that information gets distorted as it moves up the supply chain, much like how a simple phrase often turns into nonsensical gibberish by the end of a game of Telephone.

The Waiting Game
The second big problem is a more involved communication systems problem. Even if a manufacturer overcomes the “Telephone Game” hurdle of mistrust and manages to receive an accurate measure of the shift in demand rather than an amplified one, he still ends up “waiting” on that information for far too long before it turns into a real change. For many companies, standard protocol is a lengthy series of calls and e-mailed spreadsheets — hardly efficient.

How Technology Can Help
  • Increased transparency (and trust) across every node of the supply chain — from retailer to factory. With a more reliable platform for identifying shifts in demand, the “Telephone Game” problem of mistrust and muddled messages can be replaced with reliable, accurate communication.
  • No more “Waiting Game.” Tech can make it easier for manufacturers to communicate vertically and horizontally. Instead of updating a spreadsheet, they can monitor changes in inventory and production in the cloud.
  • Businesses will be able to stop moving excess inventory up and down the supply chain and wasting billions in inventory that will never be used. And they won’t miss big sales opportunities — like selling beer to thirsty sports fans.

Leveraging Today’s Tech to Drive Change in Your Supply Chain
Brand loyalty isn’t what it was 30 years ago. It’s now driven by product availability and the ability to provide instant gratification — not brand reputation. At the same time, there is a new set of tools in the operations arsenal that promises to enable quicker time-to-market alongside an unprecedented level of connectivity to help companies better satisfy their customers.

Supply chain technologies aren’t interchangeable. 3D printing, while it may hold value for some factories, can’t compare to big data in terms of providing supply chain managers with a bird’s eye view of demand. As the tech world comes out with more and more revelations in logistics, manufacturing, and supply chain, business leaders must weigh the potential benefits and applications of each technology to their own operations. We’ve broken down the most buzzed-about of these to make the decision process a little easier.

Incorporating Big Data Analytics in Supply Chain

The global pace of business and the rapidly changing risk environment are forcing companies to find new competitive advantages — one of those being data. But blindly implementing data, without understanding that different types of data offer different value, is dangerous. Let’s compare historical and real-time (RT) data to better understand their potential role in your operations.
Historical Data enables changes to your static supply chain network based on data collected over time.

Getting trend analysis:
  • Understanding how supply chain performance and risk metrics change over time will highlight chronic underperforming suppliers and carriers.
  • You can create advanced teaching algorithms by using machine learning software to understand the interconnections and dependencies throughout the supply chain.

Real-time Data enables you to collect relevant information related to risk using “sensors” throughout your supply chain.

Rapid detection and how it works:
  • As data is collected throughout your supply chain, smart thresholds create triggers to notify you of exceptions that are creating additional risk.
  • Sensors detect information like critical thresholds for inventory levels, quality metrics, or on-time shipments percentages.
To react quickly, your team needs to know the context around a problem (e.g., forecasts, inventory, orders) and what options are available. Historical data algorithms, coupled with real-time data, can enable more advanced statistics on value at risk, along with the potential revenue impact of events.

Some advice on using real-time data:
In supply chain, slow and steady does not win the race. When disruptions happen (as they inevitably will) you need to be able to respond faster than your competition. To utilize real-time information, you need an operating model that goes beyond the scope of your own data and knows how all the disparate pieces of data interact. In a nutshell you should be able to:

  • Collect data
  • Make sense of it fast enough so that it’s useful in assessing risk
  • Have a team that can act on the information to resolve the problem fast
The takeaway: Historical and real-time data both have unique benefits, but only real-time data can move you beyond the tiresome cycle of getting actionable information — after the time to act has already passed.

The Blockchain Question

You didn’t think you could click on a page called “Supply Chain Technology Roundup” without reading about blockchain, did you? Since cryptocurrency started making waves in the news, many in the supply chain industry have taken notice; could this fledgling technology hold answers to some of the biggest supply chain conundrums?

Blockchain has the potential to fortify vulnerable supply chains from the inside out. But it also (theoretically) throws confidentiality out the window.

When applied to supply chain management, blockchain proposes a system that is flexible and secure, allowing real-time and transparent contracts between organizations and third party partners. It’s no mystery why this is an appealing concept for businesses grappling with unruly, opaque supply chains. But before rushing into the discussion of “How do we implement blockchain in supply chain?” we want to take a step back and ask, “Should we be implementing blockchain in supply chain?”

Let’s weigh in on the technology from some key strategic angles:
  • Convenience and expedited transactions: Unlike RFID, blockchain does not require any external device or physical process to affix tags. As a result, virtually no transaction is too small to be worth generating a blockchain code. Automatically executed smart contracts are similarly expected to expedite transactions in the supply chain industry, prioritizing transparency across the board. This ideally leads to less expensive and improved inventory management while reducing fraud and error rates.
  • Cybersecurity: Blockchain has the potential to fortify vulnerable supply chains from the inside out. But it also (theoretically) throws confidentiality out the window. Blockchain systems promise incorruptibility at the expense of centralized control over potentially sensitive information. It’s important to note, however, that the blockchain being used in most supply chains isn’t truly decentralized. In fact it’s very much controlled and managed by the company implementing it. This leads to a major question: when you override the decentralized nature of blockchain, is it really blockchain?
  • Global scale: Blockchain’s tracking system and democratic information-sharing ledger could be the solution to maintaining international transparency, especially with regards to upper-tier suppliers. But with no guarantees of interoperability or an international protocol, systems engineering could turn into a trek across no-man’s land.
  • Legal matters: Harvard Business Review puts it best: “Regulations, maritime law, and commercial codes govern rights of ownership and possession along the world’s shipping routes and their multiple jurisdictions. Marrying that old-world body of law, and the human-led institutions that manage it, with the digitally defined, dematerialized, automated and denationalized nature of blockchains and smart contracts will be difficult.”

So: yay or nay? With major companies like Walmart and IBM rolling out their own blockchain efforts, the next few years should tell us how transformative the technology is. It may turn out to be just another way of tracking data in a supply chain — or it may truly revolutionize supply chain accountability and visibility.

Augmented Reality

At the warehouse, distribution, and logistics levels lies another set of potentially transformative technologies. By enhancing human interactions with the real world, Augmented Reality (AR) could help some supply chain workers be more efficient and optimize overall speed-to-market.

The AR market is on a trajectory to become incredibly lucrative — it's expected to grow by 89% between 2016 and 2020. Worldwide shipments of AR headsets will reach at least 27.3 million by 2021, almost double from 2016’s 10 million. Revenues will also reach $46.7B by 2021 compared to $2.1B in 2016. It’s poised to disrupt consumer behavior and many industries — and like the other technologies featured on this page, it also promises to bring change to supply chain and logistics.

Applications of AR in SCM
Continuity planning, cost control, risk management, and supplier/partner relationship management are all vital to a healthily functioning supply chain — and all potential candidates for getting an AR makeover in the near future. Let’s imagine some of the ways AR can be applied to supply chain (and in some cases, already is.)
  • Warehousing Operations: What's even more powerful than a warehouse bot? A warehouse employee with the optimized productivity offered by AR. Warehousing ops account for 20% of logistics costs, and AR could help curb expenses by simplifying warehouse picking, or the extraction of goods from a warehousing system to fulfil customer orders.
  • Transportation and Cargo Loading: Scanners and sensors will help logistics companies scan and document errors, damages, and product issues for regulations and compliance. Critical information and load instructions regarding cargo will also be available in displays with the touch of a button. Getting rid of clipboards and arming employees with AR devices could free up their hands and time, making the loading process faster.
  • Navigation and Logistics: For the truck driver of the not-so-distant future, heads-up and windshield displays might provide instant suggestions for re-routing shipments, without causing significant distraction to drivers. AR displays can also show drivers critical information including cargo temperature (especially important when transporting medical devices or other fragile goods) and gasoline efficiency (which changes based on the weight of the truck). AR can also assist in identifying buildings and landmarks for more efficient deliveries.

Case Studies: Augmented Reality in the Real World

  • In early 2017, Apple was reportedly working on several AR products that may serve as progenitors of more SCM-specific devices. These included digital spectacles that could connect wirelessly to an iPhone and beam maps and other useful content to the wearer. The company also introduced the ARKit: Augmented Reality for iOS WWDC 2017, a “cutting-edge platform for developing augmented reality (AR) apps for iPhone and iPad.” Additionally, Apple acquired the German computer vision company SensoMotoric Instruments, a provider of eye tracking glasses and systems to possibly bolster AR R&D.
  • AR picking software is already offering real-time object recognition, indoor navigation, and information to support workers and reduce the time needed for manual operations. For example, last year DHL rolled out "Vision Picking" smart glasses after trial runs showed a 15% increase in productivity.
Learn how to bring augmented reality to supply chain.

IoT: An In-Depth Look

No discussion on manufacturing processes is complete without the Internet of Things (IoT). These technologies are actively transforming the landscape of logistics and manufacturing networks across the globe.
Analysts expect that IoT will become the world’s biggest driver of productivity and growth over the next decade

A Brief Introduction
By linking networks of physical goods with sensors and software, IoT allows manufacturers to freely exchange data between their products and their internal systems. By 2020, 20.8 billion connected devices are predicted to be in use globally, with over half of major new business processes and systems incorporating some element of IoT into their operations.

Implications on Manufacturing and the Supply Chain
Still considered an emerging technology in many respects, IoT has proven its capabilities across many supply chain functions. Here are just a few:

  • Monitoring the manufacturing process (measuring temperature and other variables)
  • Real-time asset and inventory tracking
  • Shipment tracking and fleet management

The Internet of Things has opened up new opportunities. It's a world where things talk to things, and processes have two-way connectivity. Uses for IoT are continuously evolving throughout the supply chain. As more systems link to one another, profits will increase as expenses decline — all while giving your customers a more satisfying experience.

Gartner predicts that IoT will generate revenue exceeding $300B in 2020. Many companies today are aiming to integrate IoT into their supply chain, citing these reasons (and more) for why they think the tech is truly game-changing:

Enhancing In-Transit Visibility
The use of cloud-based GPS and RFID technologies, which provide data on the location, identity, and other tracking information, ensure more accurate delivery time and can allow for better communication between sellers, shippers, and consumers. In addition, in-transit sensors can provide predictive maintenance warning and let shippers know of any temperature fluctuations, providing enough information to create a proactive supply chain.

Enterprise Resource Planning (ERP)
IoT could make ERP flexible and intelligent. The ERP system must be able to process, analyze, and display data in a comprehensive format, in real time. This will maximize the data collected that could lead to companies offering new services to their customers.

Further Reading: Can the Internet of Things Solve Our Biggest Agricultural Problems?.

3D Printing: An In-Depth Look

3D printing, often referred to as additive manufacturing, has increasingly demonstrated its value for the purpose of prototyping, design iteration, and small scale production (especially of rare parts), among others. An estimated 71 percent of US manufacturers are already adopting the technology, but growth in the industry has slowed in recent years because cost and adoption barriers remain high.

Applications of 3D printing:

  • Cutting down on excess inventory and reducing downtime when switching between products
  • Saving warehouse space as inventory is stored virtually until it is needed
  • Faster responsiveness, especially in terms of customized products and parts
If ALL the benefits of 3D printing could be captured in a few bullet points, we probably wouldn’t be including it in this breakdown of essential supply chain technologies. Let’s take a look at some more uses of 3D printing.

Enabling Innovation
When it comes to the manufacturing process, 3D printing opens doors for creativity and fast turnaround. A quick prototype now takes a short while to create, with less of the error that comes with traditional manufacturing and more consistent quality of materials and production. One of the main hindrances to innovation is that it takes a long time to develop and build the prototype for a new product; with 3D printing, a designer can iterate rapidly, coming up with new product features with ease.
Now, customized products can be manufactured at scale, giving customers more choice while saving in manufacturing costs.

Streamlining Logistics and Manufacturing
Many supply chain headaches come from small, custom parts that manufacturers usually rely on a few suppliers to provide. These parts can be a hassle to obtain, since they often come from faraway warehouses spanning the globe. With a 3D printer, however, manufacturers might be able to produce some of those parts onsite, on demand, with no need to wait for shipping. This ability will prove especially useful as congestion from transportation increases. Overall manufacturing costs could decrease over time for certain industries if 3D printing becomes more widely implementable.

Customizing At Scale
3D printing has already begun shifting certain aspects of supply chains in multiple industries. Take medical devices, for example: devices that require a large amount of customization, such as hearing aids, are now being produced quickly and with lower cost. Prior to 3D printing, manufacturers needed to produce goods in bulk to reduce overhead. Now, customized products can be manufactured at scale, giving customers more choice while saving in manufacturing costs.

Things to Keep in Mind
3D printing is still relatively new, so there are some significant kinks yet to be ironed out. Here are a few things to keep in mind:
  • 3D printers require a LOT of energy — 50 to 100 times more than injection molding on products of the same weight.
  • Pollution — melting plastic, it turns out, isn’t the most eco-friendly process. However, many have raised the point that manufacturing and transport contribute a lot of pollution, and, especially when it comes to small parts production, the emissions from a 3D printer are negligible in comparison.
  • IP issues — it’s relatively easy to make copies of something produced on a 3D printer, and many foresee a rise in black market products. Analyst group Gartner predicts that 3D printing could cost companies $100 billion per year in IP infringement.

Automation: Self-Driving Technology

Automation is changing the game in manufacturing and supply chain. While some are wary of just how far robots will infiltrate the economy and job market, for businesses they present a serious opportunity. Self-driving vehicles are already cruising factory warehouses from Seattle to Shenzhen. Amazon uses machines that can automatically pick and sort entire shelves of packages.

Warehouses are predicted to invest a staggering $22.1 billion globally in robots in 2021. Here are some of the ways the exciting technology is powering supply chain, and how it could impact your operations:

Warehousing operations
For many years, self-driving warehouse machines had a problem: They could only use predefined routes and became stuck when an obstacle fell in their path. Now, with vision guidance technology like depth cameras and lasers, robots are becoming more agile.

Outdoor logistics operations
While recent events have shown that self-driving cars still require some improvements before being let loose in public spaces, semi-private spaces like shipment yards, ports, and airports are good places to start with outdoor logistics automation.

Line haul transportation
With the right engineering and testing, automated trucks could drive more safely than human-controlled vehicles. In fact, the signs suggest that autonomous trucks could be hauling shipments before anyone viably uses a personal self-driving car. In early 2018, Uber announced that it was already hauling freight in Arizona. Tesla and DHL are also testing driverless trucks.

Last-mile delivery
The most crucial and least predictable step in the delivery process is often the last mile of transportation to the customer. Automated driving here has huge potential for reducing total shipment times, but is the furthest from actual implementation. However, delivery drones and droids are starting to grab public attention as potential solutions to the last-mile challenge.

Automation: Drones and Droids

Transportation companies, e-commerce goliaths, and tech startups worldwide are testing drone and droid deliveries with an array of products, from fast-food orders to consumer goods. How will these emergent technologies affect supply chains?

Supply Chain Takes Flight...
Drones are on the cusp of transforming how companies deliver goods into the hands of customers. Another significant application includes inventory control in warehouses, where drones are potentially more efficient and accurate than their human counterparts.

Amazon recently made headlines after receiving U.S. patent approval for delivery drones that have the ability to react to human signals such as screaming voices and flailing arms. However, much work remains in both the R&D and regulatory arenas before the concept will be ready for rollout to wider audiences.

(See more examples of companies paving the way for automated deliveries here.)

… and Gets Grounded
Droids, the futuristic containers on wheels, designed to autonomously navigate walkways (not roads) are still in the early stages of development. However, they promise to change the game for e-commerce's biggest challenge — last mile logistics — which currently comprises 30 to 40 percent of the cost of delivery for the average e-tailer. Like any new technology, delivery robots come with their own set of pros and cons.

Pros: Droids are cheaper than drones and face fewer regulatory restrictions.

Cons: Their dependence on paved walkways means droids are restricted to operating in urban areas (which, ironically, might have too much foot traffic for droid deliveries to be viable).

The Value of Delivery Bots
The benefits of using either drones or droids in your supply chain are twofold. First, from a cost perspective, robots and autonomous systems, whether grounded or airborn, provide the advantage of reduced operating costs at a time when wages are increasing and the cost of technology is decreasing. Second comes the convenience factor. With projected delivery windows of under an hour, unmanned vehicle delivery turns instant gratification into reality, while also providing the flexibility of being compatible with various different delivery models. Drone and droid delivery seems to be the logical next step in an environment where consumers increasingly expect lower prices and faster delivery for their online purchases.

Thus far, the majority of drone and droid programs have focused on last-mile delivery. In the future, however, analysts speculate that applications will expand to involve processes further up in the supply chain, as early as the raw materials stage.

What does Automation Mean for Jobs?

When it comes to automation, AI, and robotics, a lurking question for many people is: will these technologies lead to fewer jobs? So far, that doesn’t seem to be the case.

Since 2010 the robotics market in North America has grown an average of 26% per year. At the same time during this period, the unemployment rate in the United States has fallen by over 22%. Although this is only one general measure of changes in the domestic workforce, it shows that we’re far from seeing our national economy dictated by robot overlords. Overall there are more roles requiring skilled labor that only humans can provide. Robots also eliminate some of the most difficult parts of manufacturing jobs, such as picking items from shelves during the busy holiday season.

As supply chain managers oversee these dazzling new machines, they should consider upstreaming and downstreaming to prevent bottlenecks in other nodes of the supply chain that are less automated and might not be able to keep up with automated output.

It’s important to remember that implementing automation of any kind almost always means involving more humans to oversee it.
Supply chains implementing automation will need to prevent bottlenecks across nodes of the supply chain that are less automated and might not be able to keep up with automated output.

Technology: Enhancing (Not Replacing) Human Decision-Making

Supply chain is among the industries that stand to gain the most from emerging technologies, but has thus far been one of the slowest to adopt them. If operations leaders are to reap the full advantages of the impending technology boom, they must take a holistic approach to digitization, integrating the digital into business models in order to enhance human decision-making to the point of self-adaption. The process will be trying, but the payoff will be high, in the form of tighter relationships with customers and more efficient, dynamic, and sustainable operations in the long run.

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