Yesterday we began our two part series on 2016 supply chain trends that will drive supply chain management into the future. We listed the first 7. As with most trends we all have read over the last few years, the focus was on technology. We also took the liberty of making sure we put a focus on efficient sound process in place before new technology is applied. In that continued theme, today we will again talk about technology but will also include some trends that require a fundamental mindset as well as a holistic mindset when it comes to effective supply chain management now in 2016, throughout the year, and beyond. If you missed the first post, we encourage you to give it a read by visiting the first seven 2016 supply chain trends post here.
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Then, as a treat, we have 10 more bonus supply chain trends for 2016 in the form of an infographic from irms 360 Enterprise, a Cloud Warehouse Management System.
Supply Chain Trends 2016: 5 Additional More Areas of Focus
1. A Bigger Focus On Supply Chain Risk Management, Especially Resiliency
For years companies focused on supply chain risk management, or, how can we address the things that we believe could possibly go wrong in our operations.
That’s a great first step, but as we all know from Murphy’s Law, no matter how well you plan, things are still going to go wrong that you didn’t anticipate.
The real measure of a company is its resilience, or the ability of its supply chain to bounce back from the unexpected.
One need look no further than Chipotle to see the impact a supply chain issue – in this case tainted products that led to E. coli outbreaksin numerous locations – can have on a company’s reputation.
The next step is whether the Mexican food chain is resilient: Can it revamp its supply chain and regain the loyalty of its customers. I expect other companies to ask similar questions.
2. Making the Supply Chain Circular Vs. Linear
2015 saw a shift from the linear supply chain to the circular supply chain. The idea of a circular supply chain is now driven by the circular economy. While conventional supply chains seek to efficiently move products in a linear fashion from raw materials to end consumers, a “circular” or “closed-loop” supply chain is one that is also dependent on feeding used products back as raw materials. The resulting circular supply chain poses unique challenges and opportunities for supply chain professionals.
Successfully building and managing such a system requires new and unconventional thinking. It also requires the ability for logistics and supply chain managers to look at forward moving logistics as well as reverse logistics.
The use of reverse logistics provides a myriad of benefits to include:
- Reduced administrative, transportation and aftermarket support costs.
- Increased velocity.
- Increased service market share.
- Higher achievement of sustainability goals.
- Greater customer service and higher retention levels.
When a business, or other organization, purchases equipment, parts, or remanufactured equipment it is an investment. Over time, this equipment improves profitability and has a positive return on investment. When the time comes to get rid of this equipment, business owners can employ reverse logistics practices to reap a second return on investment from the equipment. Many computers and other electronics contain high levels of metals, such as copper, iron, or steel, which may be sold for reuse in new devices. or a defective automotive piece of equipment can be remanufactured giving life to the equipment, allowing it to be reused or resold. Essentially, this is part of the recycling process, but for our purposes, we identify this as reuse due to the income generated through it.
McKinsey says it eloquently and also provides an excellent infographic:
Manufacturers can create value, cut costs, and reduce exposure to volatile commodity prices by improving their resource productivity—using fewer resources for each unit of output. Leaders are looking for opportunities beyond their own operations. Collaboration with suppliers and customers can keep used products, components, and materials in circulation. New business models that rethink ownership can shift value along the supply circle.
Better Asset Management also comes from this paradigm shift. Asset management should be an essential part of all of the supply chain processes. Manufacturesrs should be constantly reviewing how they can improve on maintaining, upgrading, re-using and recycling, electrical goods cost-effectively.
The circular economy is a practical solution to conserving resources, where products such as a smartphone or TV will be seen in a different way, concentrating on their parts, not seeing them as they are but as opportunities for continuous value creation. Although for the supply chain this necessitates a reevaluation of practices.
Business models need to be reviewed, reformulating the way we work to place the concepts of continuous value creation as a key cornerstone of our ethos and procedure. In accommodating this, 2016 will see an emphasis upon the refurbishment of parts and products as we move to the circular supply chain.
3. Cloud Computing Continues to Increase In Use
The cloud will “level the playing” as a supply chain trend in 2016 by allowing for easy to deploy technology and systems. In 2016, costs will prove to be a huge driver to the cloud for those organizations that are still running legacy applications. The challenge of infrastructure, maintenance, and labor costs will necessitate their transition to the cloud. Four out of five new buyers are looking to the cloud simply because they don’t want to deal with the infrastructure, labor, and additional layers of responsibility and risk. A big trend we see right now is that many organizations are transitioning to the cloud due to an aging workforce. A lot of really talented technology professionals are leaving and in most cases these people are irreplaceable. How do you compensate for losing people that you can’t replace? You put in a system that doesn’t ever need to be replaced.
Supply Chain Management (SCM) has dramatically changed over the last few years. With companies that have overseas manufacturing vendors working harder than ever to improve product quality, reduce costs, and simplify processes, the concept of report once and manage anywhere is quickly becoming the standard for best-in-class SCM-driven organizations. Pivot88 has compiled a list of Six of the Top Supply Chain Management Trends of 2016, stating the following:
- The Internet Of Things: Often overlooked in all of the consumer hype around the Internet of Things (IoT), are mobile and tablet devices. These tools have quickly become mainstays for the remote workforce, and are rapidly evolving to support supply chain management functions.
- Digitization of Data: Moving from manual (or even hand-written) information and data to a centralized and secure cloud-based solution minimizes costs, eliminates inconsistencies, and standardizes the data formatting, which then opens up the capabilities of Big Data.
- Shift to Big (but Usable) Data: With the ability to quickly and easily standardize the collection of supply chain data from vendors, operations and logistics pros will now have access to “bigger” and more data than ever before, allowing them to better optimize operations.
- SCM Organizations Will Begin to Adopt Application Convergence Strategy: One way companies can do this is to layer on top of their existing robust supply chain systems with a light weight cloud-based solution.
- Risk Management Comes to the Forefront: Supply chain risks come in a variety of forms. From counterfeit products, product integrity, and quality, supply chain stakeholders are constantly faced with a barrage of SC failure points. Ultimately the focus of risk management is on making sure that supply chain continuity is maintained in the event of some unforeseen interruption.
- Operations Planning and Inventory Optimization Go Under the Microscope: Going hand-in-hand with SCRM, is looking at what aspects of the supply chain are optimal for cloud-based solutions. While the data has proven the security of the cloud—there are still substantial concerns about the security of data there.
There are a number of benefits surrounding the move to cloud-based supply chain management. Most of them center around reducing costs (if you’re using SAP or Oracle, you know SCM can be extremely costly), efficiency (apply same methodologies, processes and tools across different vendors), and scalability (whether you’re working with 5 or 500 factories, being able to manage quality and cost is critical).
4. Wearables are the New Hot Trend on the Supply Chain Block
Wearable technology, combined with the use of cloud software, will become much more widespread across the industry in 2016. The ability to access and input data in real time is the key way in which suppliers will be able to meet stringent demands of customers.
With the wearable technology market set only to grow, the supply chain must be prepared for the influx of new devices, allocating resources and sourcing new parts, as well as ensuring all technicians and other relevant people are trained. In particular, the supply chain industry must be ready as we are yet to see how this new product category will impact reverse logistics.
Wearable technologies like Apple Watch, Fitbit and Google Glass are revolutionizing our daily experiences, and soon drones, self-driving cars and self-piloting planes will be the norm.
So why not take advantage of these game-changing technological developments when it comes to your supply chain? For example, smartwatches could help site managers observe real-time performance of business processes, productivity, inventory levels and deliveries. As a result, this will improve productivity by utilizing this information to make more informed decisions.
Wearables will also help in the following 3 ways according to East West Manufacturing:
- Boosting Labor Productivity and Efficiency: Adding wearables to your supply chain allows workers to focus on high-level tasks and leave data entry to the machines. Let’s say a distribution center receives a truckload of goods. Instead of physically counting boxes, the receiver takes a count using eye movements that are tracked by tech goggles similar to Google Glass.
- Improving Safety: Wearables allow you to monitor employees and machines in real time. Measure workers’ speed and efficiency and capture repeat errors. Pinpointing issues and quickly resolving them will keep your processes running smoothly. Wearable devices can also track vitals like body temperature, heart rate and blood pressure to prevent exhaustion, heart attacks and other health issues that plague overworked employees.
- Delivering Better Quality Products and Services: wearable devices help detect errors or anomalies sooner than humans can without their help. Monitor the speed and efficiency of every step of the manufacturing process to identify and resolve bottlenecks. Pinpoint the source of quality issues and remedy the problem on the spot to prevent major quality crises.
5. A Continued, Renewed (Or New) Focus on Data Analysis for Continual Improvement & Better Supply Chain Visibility
There are multiple benefits of leveraging data analytics for the supply chain industry, including reducing forecasting errors and enabling informed forward planning decisions, and better predictions for product and parts demand.
Use of Integrated Technology for efficient data interchange to decrease errors and reduce overall resources needed to execute supply chain functions such as transportation, warehousing, and inventory management.
Supply chain visibility has long been a goal supported by supply chain professionals. Until recently, however, technologies that could make this goal a reality have not been available. Today, however, there is hardly an activity that doesn’t produce some kind of data that can help companies understand what is going on within their supply chains. As the ability to see more clearly and deeper into supply chains improves, supply chains will become safer and more secure. Lora Cecere, of Supply Chain Insights writes, “Today 1/3 of fruits and vegetables and poultry products are thrown away due to spoilage. Companies struggle with counterfeit goods. In the future I expect the automation of the chain of custody with better control of temperature and secure handling.”
Professor Burcu Keskin from University of Alabama adds, “Data coming from different sensors located at different suppliers from their production and transportation operations carry a lot of information regarding the quality of production process and timeliness of delivery. At the same time, this data may indicate possible issues in the procurement process, regarding product quality and delivery. Monitoring and analysis of this data may provide opportunities to intervene before issues becomes major problems.” Better visibility can also result in real-time inventory management.
The experts at PLS Logistics Services explain, “Leading retailers will begin implementing mobile point of sale (POS) systems, beacons, sensors and other technology that will revolutionize inventory management and the whole buying experience. Customers will be able to pick up an item and simply walk out of the store, with the price of the item automatically charged to their card. Real-time visibility, both in the store and throughout the supply chain, will allow inventory to be replaced as it is moved, and items produced as they are bought.”
Infographic: 10 More Supply Chain Trends from 2016
Upp Technology Managing Partner Jim Laverty peers into his crystal ball as he analyzes the biggest supply chain and warehousing trends for 2016.