By Upender Solanki, Managing Director North America
In the last decade, the supply chain industry has seen major advancements in areas like artificial intelligence, blockchain and end-to-end transparency. However, these innovations came with new standards and expectations that the early adopters used to gain a competitive edge in the market. Although businesses recognized the need for connected and transparent supply chains, a vast majority were not ready for these disruptive changes.
According to a recent survey, “only a quarter of supply chains currently have an autonomous supply chain in place.”1 In this next decade, the industry is at a tipping point as more companies adopt digital and next gen technologies and processes in order to meet global demands. It is time to reinvent the supply chain.
Challenges of the Modern Supply Chain
Supply chains are no longer linear, they are multi-tiered, multi-faceted and multi-supplier. Moreover, the individual links in a chain keep accelerating and the overall coordination of the chain becomes increasingly tighter, requiring the reassessment of individual processes as well as the end-to-end supply chain with greater frequency to avoid cost-intensive disruptions. Fragmentation, missing supply chain visibility and flexibility lead to major inefficiencies.
Modern supply chains are vulnerable. New shipping regulations, global trade tensions, such as Brexit, and shaky economies can upset established supply chains. Harvard Business Review notes “A lack of supply chain transparency can now stop businesses cold. For example, shipments that are missing origin documents are being held up and turned away at ports, causing costly disruptions that ripple through supply chains.”
Pressure also comes from consumers and enterprises, who expect to get shipments faster, cheaper, and with more transparency. This phenomenon is often labelled the Amazon-effect. Therefore, companies must prepare to reinvent their supply chains in order to stay competitive in 2020 and the next decade. They will need to invest in technologies that help them take advantage of these key trends: extended supply chain visibility and blockchain.
Extended Supply Chain Visibility
Having full visibility in the supply chain is only a decade and half old concept. Yet, as technologies improve and pressure mounts to share supply chain data, it is moving from optional to required. In 2020 and the next decade, supply chain visibility needs to take another step forward using real-time data integration from end-to-end.
In a recent study, 90% of survey respondents with autonomous1 supply chains reported that their market share increased somewhat or significantly in the past year. While 97% reported their customer satisfaction somewhat or significantly increased, compared to just 8% of those without autonomous supply chains.
Even though regulations and consumers may be driving the demand for traceability, supply chain stakeholders also reap benefits from connecting to the digital supply chain. The technology enables critical decision making based on real-time cross-company insights from the global value chain. Some actual results include:
- Reduced in-transit inventory by 15% by removing buffer stock from the supply chain
- Lower dwell times, in extreme cases from 20 days to less than three, which potentially decreases shipping rates by inventory pooling and improved manufacturing planning
- Proactive monitoring of actual performance against plan
The reduction of cost in IoT sensor technology offers an additional way to keep shipments or packages visible during transit, in a warehouse or anywhere. It is not only location that they track but proximity and environmental conditions. These smart sensors capture the data at pre-programmed intervals and transmit to the cloud for easy access viewing and reporting. Parameters can also be set to trigger alerts when exceptions occur.
The information also integrates into other systems, such as track & trace and ERP. Below is an example of how the sensor technology transmits the data.
The holistic view allows companies to manage by exception and proactively monitor actual performance against the plan - all while maintaining compliance in the industries that require it. The single source for end-to-end visibility across business processes, systems and partners helps them reimagine their operations and customer experience.
Blockchain / Practical Blockchain
Blockchain has been a buzzword for several years now and was initially embraced by only a few industries. However, the benefits continue to emerge and the challenges of interoperability and scalability continue to decline. Other sectors are starting implementations as it becomes easier to connect the disparate parts and multiple stakeholders.
- 83% of life science leaders believe Blockchain will be adopted within 5 years2
- 71% of business leaders using Blockchain believe it plays a key role in advancing the technology and reestablishing industry standards3
- 64% of organizations consider blockchain a current tech initiative4
Gartner defines blockchain as “a type of distributed ledger, an expanding chronologically ordered list of cryptographically signed, irrevocable transactional records shared by all participants in a network.” There are private and public versions of this ledger. However, in general, the digital report helps stakeholders, governments and consumers access the steps of the journey from origin to purchase.
The supply chain information is documented independently even if those involved are not connected, such as the farmer to the grocery store for ready-to-eat meals. Each event is added to the ledger by each stakeholder that retains the original data.
This digitization removes inefficient paper-based processes that can reduce the number (and costs) of discrepancies and disputes. Blockchain provides the chain of custody and command, or ownership trail. For example, this information is very useful when there is a foodborne illness found in food shipment. Blockchain paired with track & trace make it easier for governments to uncover the product origin and where the contamination might have occurred.
Blockchain’s decentralized system improves end-to-end visibility through its shared, immutable information. It helps reduce operational costs as well as the risk of contamination, fraud and waste.
Supply Chain 4.0
As these technologies become mainstream, companies will seek out new disruptive options to stay competitive. Startups and startup-like divisions of powerhouse industry players continue to innovate and create new business models for those in the extended supply chain. The first step to taking advantage of these opportunities is to start your digital transformation. We're ready. Let's talk.
This blog is the first in a series. The second installment will publish in January.
1 ”...Autonomous supply chain – a highly intelligent, connected and self-aware environment working from deeper insights into supply chain performance to refine business processes, improve traceability of goods, and record and secure an archive of all digital interactions between a company and its trading partner community.”, EBN, 18.06.2018
2Finds Survey from The Pistoia Alliance, 20.09.2017
3Blockchain Technology: use cases, statistics, benefits, 20.09.2017
42019 Blockchain Technology Business Guide, 19.02.2019, page 4