2016 Supply Chain Trends: 7 of 12 Trends that Will Drive Supply Chain Management in 2016
As we head into a new year it is a good time to take a look at the coming year and see what it may hold in the way of trends. We kick off today a month-long focus on trends in the following categories: Manufacturing, Manufacturing Technology, Supply Chain, Logistics, and Transportation Management. We have already covered the top 6 trends for 2016 in manufacturing. We will then do a deep dive all month long and until we have covered each trend individually within these categories. By the end of the series, we will have ample content to then turn it into a downloadable e-book that should serve any professional well as they look to continually improve themselves and, if they are a worker or manager within these categorical industries, can help keep an eye out for how you may apply a trend into your everyday workplace to stay competitive and efficient.
2016 Supply Chain Trends: The First 7 of 12
Today we will begin our two part series covering the 2016 supply chain trends we expect to see come to fruition in the next year. These trends are clear in that technology will continue to, as it has over the last decade, drive change in supply chain management. However, what is refreshing to see is that although technology and innovation are a focus, that also we must understand the fundamentals in order to make it all work. It was Bill Gates who famously quipped:
The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.
So, we must put a note on these technological trends: make sure you are looking at your processes and your people. Do you have the most efficient process that you can then scale with technology and automation? Do you have the right people in place? As you will see from one of our trends, we in the supply chain industry, and as we first hand know at Cerasis, that if you do not have the fundamentals down and the right people in place, it is very tough to get the results you seek. After all, any professionals job is to do the best job the most cost and time efficiently all while reaching your goals.
What 2016 Supply Chain Trends to you expect to see? After reading, we'd love to hear from you in the comments section below.
2016 Supply Chain Trend #1: Supply Chains will Look to Go Digital
Technology has driven a new wave of productivity by digitizing key financial and business processes and enabling collaboration across the organization. This 2016 supply chain trend will continue as best-in-class organizations leverage business networks to create a digital community of partners executing coordinated processes in a more organized and informed way than in the past.
But, Wait....What is the Digital Supply Chain?
Accenture has put out an amazing video describing the digital supply chain and states the following:
Digital technology is disrupting traditional operations and now every business is a digital business. The impact on supply chain management is particularly great. Businesses cannot unlock the full potential of digital without reinventing their supply chain strategy.
Many companies understand the elemental nature of these changes and are already working to introduce digital technology into their operations. However, simply adding digital technology is not the answer.
This approach overlooks the fundamental difference between traditional supply chains that have been “digitally enhanced” and truly integrated, re-invented supply chains whose DNA is fundamentally digital.
For digital technology to create significant improvement in business outcomes, businesses need to:
Reinvent their supply chain strategy
Reimagine supply chain as a digital supply network (DSN) that unites not just physical flows but also talent, information and finance
This new breed of supply chain is more connected, intelligent, scalable and rapid than traditional supply chain management.
In a metaphorical sense, the DSN enables people and data—as well as materials, products and supplies—to travel together across the extended enterprise.
This is vastly different from digitally enhanced supply chains which (because they are never stronger than their weakest links) have less potential to help companies:
Develop new synergies
Relate more fully to customers
Rapidly reach new markets and quickly build and scale new offerings
In today’s global and connected economy, digital supply chains are the on-ramp to innovation and success. And if you want to be among the winners, you need to get on the highway and go fast. Start today by re-imagining your supply chain. Develop digital strategies that allow you to proactively evolve ahead of the competition. Employ comprehensive solutions that support the entire source-to-settle process and create value for all parties involved in it.
2016 Supply Chain Trend #2: Responding to Innovation & Change But with An Eye On Fundamentals
As stated by Accenture on what is the digital supply chain, that you must rethink the supply chain. And, remembering Bill Gates, if we do not keep our eye on the fundamentals, technology will only put a spotlight on inefficient process. In this 2016 Supply Chain Trend, we are going back to the basics.
The ability to accept innovations and take advantage of the synergy effects of individual movements is a core competence of future-oriented companies. Not losing sight of the essentials while filtering out what is personally important, requires our full attention and continual development. Nevertheless, we reach our limits time and again and need support, e.g. from operations research, which provides us with intelligent decision-making algorithms enabling us to keep up with today’s fast-paced operating environment.
According to Grant Marshbank, COO of VSc Solutions, supply chains will face a number of challenges, he said: “Supply chain managers are already under huge pressure to adapt to turbulent economies, labor issues, and expansion into global markets.
“The bad news is that the rate of change isn’t going to slow down. The good news is that emerging trends hold opportunities to reduce both costs and carbon footprints, and enable exceptional customer service at the same time.”
“Technology will only deliver the intended positive results if it is implemented with strategy and operations that adhere to best practice in supply chain management. Get basics right first. Not even the smartest technology can compensate for less-than-best practices,” he added.
“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,”
“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.”
Advances in technologies available to optimize supply chains have made faster implementation times a reality. “It is easier and more affordable for both big and small businesses to go live with a new system within two weeks of finalising paperwork,” explained Marshbank.
“Most supply chain professionals already have a sound strategic plan in place. Instead of being sold a new system, they might just need some guidance on how to solve their pain points by repurposing their existing technologies.”
“Being able to blend systems and implement tools on a scalable basis is what sets the technology of the future apart from the unwieldy enterprise-wide software packages that were popular in the previous era,” said Marshbank.
2016 Supply Chain Trend #3: Augmented Reality a.k.a AR
Is augmented reality the future of supply chain? DHL Trend Research certainly seems to think so when it comes to this 2016 Supply Chain Trend. DHL looks at the following ways Augmented Reality will provide benefits to the supply chain as listed from the Elementum blog:
- Picking Optimization: Each picker sees a ‘digital picking list’ on a heads-up display (picture Google Glass visuals). When someone selects an item, the display calculates the most efficient path through the warehouse, guides that person to the package, scans it as ‘picked’ into the Warehouse Management System, and immediately directs the picker to the next closest package.
- Facility Planning: You’ll be able to visualize your next warehouse in full-scale before even beginning construction. You can model workflows through the facility, test measurements, even “field test” rearrangements—all virtually. Not only will it save you money, it’ll allow you to fully experience what you’re trying to do, before actually doing it.
- Freight/Container Loading: Augmented reality could replace the need for a physical cargo list and load instructions. How? By allowing to see loading instructions on a heads-up display with step-by-step instructions on how to most efficiently load a container given the size, dimensions, and weight of the packages going into it.
- Dynamic Traffic Support: Most delivery trucks already come equipped with GPS navigation, but AR systems are the natural successors. Heads-up and windshield displays would allow carriers to efficiently re-route shipments on the fly without causing any significant distraction to the driver. The display would show the driver critical information including cargo temperature (especially important when transporting medical devices or other fragile goods), gasoline efficiency (which changes based on the weight of the truck!), and a variety of interesting and critical information.
2016 Supply Chain Trend #4: Artificial Intelligence on Steroids
Huge Investments being made in Artificial Intelligence by many companies including Facebook, Google, Apple, Tesla, and many many more companies.
Speaking of Facebook, Mark Zuckerberg is certainly all in on Artificial Intelligence.
In a Facebook post Sunday, the social network’s founder and chief executive said his personal challenge for 2016 is to build an assistant powered by artificial intelligence to help him at home and work.
“You can think of it kind of like Jarvis in Iron Man,” Mr. Zuckerberg wrote, referring to the AI assistant used by Mr. Stark, the movie’s fictional main character played by actor Robert Downey Jr.
Mr. Zuckerberg said he would code the AI assistant himself and start by exploring pre-existing technologies. He will train his virtual assistant to understand his voice so he can control various functions in his home. He will even train it to recognize his friends at the door and of course, make sure he is able to know what is going on with his new daughter, Max, at anytime of the day.
But what does Artificial Intelligence mean in the supply chain?
Machine vision and robotics are already in use around us, most notably in industrial applications, including the warehouse, as well as facial recognition systems used by law enforcement. Yet as Peter Gasperini explores for EBN, the possibilities of these two types of technology are exciting—and they can apply to a number of industries.
“Some of the most exciting work in machine/computer vision stems from subtle insight into the current deficiencies of CAD,” Gasperini writes. “In order to interact with 3D models, designers today use clunky peripherals such as keyboards, mice and joysticks. Machine vision systems are being developed that completely bypass such inefficient mechanisms by employing a gesture recognition apparatus. A camera array tracks hand and finger positions dynamically. The system then alters a 3D screen image so that a user can virtually interact with the model, reaching into the design to toggle switches, press buttons and so on.”
While some people fear that the onset of artificial intelligence will surpass, and perhaps, control the human mind, Wired magazine reported that there’s evidence that human intelligence is actually expanding by interacting with, and perhaps competing against, artificial intelligence.
Similarly, by powering supply chain leaders and operators with advanced predictive technologies that model future scenarios, people will be able to more effectively operate the supply chain, while at the same time developing a deeper understanding of the interactions of the various drivers on supply chain performance.
We will also see Artificial Intelligence through Autonomous Vehicles. We are still a long way from the so-called “highway pilot” driving a truck, but there are predictions that in 2020, about 10 million self-driving cars will already be traveling the roads.
And further, that advent of Industry 4.0 and Smart Factories all powered by the Internet of Things will make running a supply chain as easy as pushing buttons (of course this all means it was set up correctly!). The use of Artificial Intelligence seems almost endless, but be on the lookout for some serious applications in the supply chain for 2016.
2016 Supply Chain Trend #5: Agile = The New Lean
The fundamentals of the Lean Supply Chain are still valuable, but there is a shift to Agile? Agile simply means, according to agilemethodology.org:
Agile methodology is an alternative to traditional project management, typically used in software development. It helps teams respond to unpredictability through incremental, iterative work cadences, known as sprints. Agile methodologies are an alternative to waterfall, or traditional sequential development.
Considering individualization and growing complexity, the lean concept is, however, no longer sufficient. Now and in the future, processes in the supply chain must rather be agile or, more clearly, flexible and interactive, ensuring high-quality delivery results. To expand upon Agile in the supply chain management model, agile supply chain management stands for the ability to cope with unforeseen events through the use of lightning-fast decision making. The implementation of this management approach requires more than just the commitment of those involved. An additional technological component is essential and enables people to deal with the unplannable.
Achieving agile leadership skills is actually more of a process than a 2016 supply chain trend and will accompany us through the year 2016.
2016 Supply Chain Trend #6: Procurement’s New (read Bigger) Role in the Supply Chain
Think purchasing & procurement and often what comes to mind is the struggle or battle to make a supplier give you materials or services for the lowest amount of money possible.
However, as global growth stalls and companies are forced to control costs to generate profit, sourcing and procurement could take center stage.
It won’t, however, be about beating up suppliers for every penny. Instead, procurement’s new role will be to forge new relationships with suppliers and icnrease collaboration. As our friend Chuck Intrieri likes to say, collaboration is at the heart of successful supplier relationship management.
A Wall Street Journal article wrote about how industrial manufacturers like GE and United Technologies “are squeezing suppliers for lower costs and shifting existing factories to cheaper locales as they seek to maintain profit margins in …. A prolonged period of slow global growth.”
The Journal notes that UTC plans a $1.5 billion restructuring effort through 2018 that could include closing or shifting production related to “half of the company’s 42 million square feet of manufacturing space.” “The weak link in our whole manufacturing process remains the supply chain,” UTC’s chief executive says.
Meanwhile, GE is deploying strategies like purchasing small suppliers that provide critical parts or services.
None of those strategies work without a strong procurement practice that is integrated with other supply chain processes.
Like social networks, such as Facebook and LinkedIn, business networks house incredible amounts of insights and data. Procurement will unleash the power of this information to optimize their supply chain decisions and accelerate innovation and growth. They may, for instance, access performance ratings on potential trading partners along with recommendations from the community to determine who to do business with. Or detect risk across the multi-tier supply chain based on world events and geopolitical risk factors. They might combine in-the-moment demand data with historic trends to predict stock outages before they happen and direct replenishment. Or gain real-time insights into invoice approval status to more efficiently manage cash.
2016 Supply Chain Trend #7: Collaboration Continues to Take Center Stage for Efficient Supply Chain Management
Speaking of supplier collaboration, many companies have taken steps to improve the efficiency and effectiveness of their supply chain operations by automating key processes beyond procurement to areas such as with orders, invoicing, and payment. This is with good reason backed by data.
According to Emily Rakowski of the Procurement Leaders:
Research shows that companies who have embraced digital strategies are seeing real value, boosting revenue more than nine percent, market valuation more than 12%, and profitability by over 26%.
Led by procurement, many of these companies will take things to the next level and enable new processes that drive more collaborative, intelligent, and transparent ways of operating. Processes like dynamic discounting that allow them to secure discounts that can be reinvested in research and development and funding to expand their business. Contingent workforce management through which they can identify and manage highly specialized resources needed to develop that next-generation product. Or joint solution development where they get innovations that enhance their products, and their partners get something they can market to others in the industry.
By ensuring supply chain entities work together in a smarter way, businesses will be able to benefit from more efficient and effective operations.
Some benefits realized from more collaboration in the supply chain include:
- Collaboration Increases Share of Wallet: This simply means over time you gain a deeper relationship, thus in the trust of the customer, you gain more of the business.
- The Longer the Collaboration, the Lower the Costs: Over time, trusted collaboration begets an understanding so intimate, you begin to understand each other and almos "finish each other's sentences." Simply put, you know internal processes and have a work flow that minimizes resources spent on administrative or time intensive tasks.
- The Power of Word of Mouth: The old saying is true "If you do right by someone (in business), they will do right by you." Referrals are the life blood of any business, and if trust and collaboration is a part of a business relationship, a supplier, OEM, or the 3PL can refer you to get more business.
- Innovation through Long-Term Collaboration: This goes back to the second point. The more you understand the pains and the processes of the client the easier it is to lead towards innovative ways which lead to further hard and soft cost savings.
Here is a great video from Dimension Data about the Collaborative Supply Chain that will drive the point home:
These are the first 7 of the 2016 Supply Chain Trends we are going to see. Tomorrow we will cover 5 more supply chain trends to watch out for in 2016. What supply chain trends to you expect to see this year? Let us know in the comments below!