The supply chain is undergoing major changes as the manufacturing sector ramps up its effort to adopt new capabilities and technologies around advanced analytics, cloud networking, the internet of things (IoT), and blockchain. The supply chain’s core goals of improving productivity, quality, service and cost efficiency remain unchanged. However, what is shifting is how these goals are achieved through an enterprise’s digital transformation.
Market research firm IDC recently released its 10 predictions for the global supply chain in 2018 that all converge around digital transformation (DX). The forecast looks at how new technologies including analytics-driven cognitive capabilities, clouds, blockchain, robotics, and IoT can have a positive impact on supply chain planning, supply chain execution/fulfillment, procurement and supply chain security.
Although the new IDC report, IDC FutureScape: Worldwide Supply Chain 2018 Predictions, focuses on near to midterm (2017-2020) trends, IDC said the impact of these predictions will continue for many years in the manufacturing industry. IDC forecasts that 60 percent of G2000 manufacturers will rely on digital platforms and support as much as 30 percent of overall revenue by 2020.
Simon Ellis, program vice president, Global Supply Chain Strategies, said older measures, such as productivity, quality and service still apply, but digital transformation is poised to change everything, which presents both new opportunities and new challenges.
“Most supply chains have been on this journey for a while,” said Ellis. “As we’ve seen the maturing of many of these digital capabilities the potential that those capabilities can deliver to the supply chain has grown in importance and significance.”
Ellis describes supply chain transformation as achieving one of three goals, labelled as Horizon 1, Horizon 2 and Horizon 3.
Horizon 1 is the use of digital capabilities to perform traditional supply chain tasks more efficiently and more cost effectively. Horizon 2 is making sure that the supply chain is resilient to potential disruption, i.e., a supply chain that can quickly respond to and adapt to disruption. Horizon 3 focuses on being the business disrupter in the industry and having the supply chain capabilities to support that disruptive business model.
“I think the challenge for the supply chain and this notion of massive change is to remain competitive,” said Ellis.
Supply chain practitioners are all looking for an edge, said Ellis. He believes turning data into information and insight will give supply chain practitioners competitive differentiation in the supply chain.
“It goes back to what is ultimately the end game,” added Ellis. “For some, it may be the opportunity to simply make them more cost competitive, and for others it may be resilience to external disruption. For others, admittedly in the minority who have the good fortune to be the disrupter in the marketplace, it’s about making sure the supply chain can deliver the new capabilities required for that disruptive business model.”
IDC’s Worldwide Supply Chain 2018 Predictions
Prediction 1: By 2020, 60% of G2000 manufacturers will rely on digital platforms that enhance their investments in ecosystems and experiences and support as much as 30% of overall revenue
Prediction 2: By the end of 2020, one-third of all manufacturing supply chains will be using analytics-driven cognitive capabilities, thus increasing cost efficiency by 10% and service performance by 5%
Prediction 3: By the end of 2018, half of manufacturers will be using analytics, IoT, and social collaboration tools to extend the integrated planning process across the entire enterprise, in real time
Prediction 4: By 2021, 60% of manufacturers will be leveraging an advanced analytics-driven data aggregation platform for supply chain operational data to improve the speed and accuracy of the fulfillment process
Prediction 5: By 2019, 80% of supply chain interactions will happen across cloud-based commerce networks, dramatically improving resiliency and reducing the impact of supply disruptions by up to one-third
Prediction 6: By 2021, one-third of manufacturers and retailers will be tracking goods using blockchain in anticipation of regulatory changes, resulting in an improvement in delivered product quality of up to 20%
Prediction 7: By the end of 2018, the use of industry clouds, blockchain, and cognitive will have dramatically enhanced the understanding of supplier capacities for one-third of manufacturers, enabling the iterative rebalancing of critical supply based on capabilities rather than units and quantity
Prediction 8: By 2019, robots will be in use in 50% of fulfillment centers, resulting in productivity gains of up 30% and helping drive down the cost of operations and offset an increasing shortage of labor
Prediction 9: By the end of 2019, cybersecurity will have surpassed physical security as a top concern for one-half of all manufacturers, and in the transition to digitally enabled, cognitive supply chains, cybersecurity will have become a top investment priority
Prediction 10: Smart postponement techniques and additive (3D) manufacturing will have been deployed by one-third of manufacturers by 2020, thus reducing delivery latency by up to 50%.
IDC provides several recommendations in the report to help manufacturers leverage the value from new digital capabilities and technology investments in the supply chain, reiterating that manufacturers must create value from their investment to solve business problems or enable new offerings.
A key point IDC makes is that data is “digital capital.” This means data in your enterprise and from connected products, supply chains and assets should be used as the starting point for new initiatives around digital transformation.
A few things manufacturers should do is to cultivate IT talent and collaborate with partners to accelerate IT capabilities. Manufacturers also need to review their supply chains to ensure that they are ready for digitally-enabled products and processes.
“Companies don’t want to invest time and effort into things that aren’t drivers of value,” said Ellis. “So as we embark on this digital transformation journey in the supply chain I think it’s how do you separate reality from hype; how do you figure out what makes your supply chain competitive, and what will a competitive supply chain mean in the future and then follow that path.”
“For many companies the path is not clear,” Ellis continued. “None of us, ultimately, have a perfect crystal ball for the future. It’s about making changes to the supply chain that puts us in a position to be reactive and responsive to both the changes that we’ve anticipated as well as changes that we did not anticipate.”