Demand for supply chain management a victim of disruption
The supply chain is the heart of a company’s operations. To make the best decisions, managers need real-time supply chain data.
The supply chain is the heart of a company’s operations. To make the best decisions, managers need access to real-time data about their supply chain, but the limitations of legacy technologies can thwart the goal of end-to-end transparency.
However, those days may soon be behind us. New technologies that have the potential to take over supply chain management are disrupting older ways of working. In five to 10 years, the supply chain function may be obsolete, replaced by a smoothly running, self-regulating utility that manages end-to-end workflows and requires little human intervention.
With a digital foundation in place, companies can capture, analyse, integrate and access high-quality, real-time data — data that fuels process automation, predictive analytics, artificial intelligence and robotics, the technologies that soon will take over supply chain management.
Leading companies are already exploring the possibilities. Many have used robotics to digitise and automate labour-intensive processes such as purchasing, invoicing and customer service. Predictive analytics are helping companies improve demand forecasting so they can reduce or better manage volatility, increase asset use and provide customer convenience at an optimised cost.
Sensor data on machine use is helping some manufacturers to better estimate when machines will break down so that downtime is minimised. Blockchains are beginning to revolutionise how parties collaborate in flexible supply networks. Robots are improving productivity and margins in retail warehouses and fulfilment centres. Delivery drones and self-driving vehicles aren’t far off.
Rio Tinto, the global resources company, is exploring how digital technologies can automate mine-to-port operations. Using driverless trains, robotic operators, cameras, lasers and tracking sensors, the company will be able to manage the whole supply chain remotely while improving safety and reducing the need for workers in remote locations.
A key concept that many of these companies are exploring is the “digital control tower” — a virtual decision centre that provides end-to-end visibility into global supply chains. For a small number of leading retail companies, control towers have become the nerve centre of their operations. A typical “tower” is a physical room staffed with data analysts that monitor a wall of high-definition screens 24/7. The screens provide real-time information and 3-D graphics on every step of the supply chain, from order to delivery.
Visual alerts warn of inventory shortfalls or process bottlenecks before they happen so teams on the frontline can course-correct quickly before serious problems emerge. Live data, accuracy, relentless customer focus and analytical leadership underlie the control towers of these retail operations.
Industrial companies also are embracing the concept. One manufacturer’s complex network moves more than a million parts and components a day. The control tower flags potential supply issues as they arise, calculates the effects of the problem and automatically corrects the issue or flags it for the escalation team.
The trend is clear: technology is replacing people in supply chain management — and doing a better job. It’s not hard to imagine a future in which automated processes, data governance, AI and a continual learning loop will minimise the need for humans. When planning, purchasing, manufacturing, order fulfilment and logistics are largely automated, what’s left for supply chain professionals?
In the short term, supply chain executives will need to shift their focus from managing people to designing and managing information and material flows with a limited set of highly specialised workers. In the near term, supply chain analysts who can structure and validate data sets, use digital tools and algorithms, and forecast effectively will be in high demand.
Looking further out, a handful of specialists will be needed to design the technology-driven supply chain engines that seamlessly support the ever-changing strategies of their businesses. To keep these engines running, people must be recruited or trained in skills at the intersection of operations and technology. Since the skills needed for these new roles are not readily available today, the biggest challenge for companies will be to create a supply chain vision for the future and a strategy for filling those critical roles.
The death of supply chain management as we know it is on the horizon. The managers and companies working today to update their processes are the ones who will come out on top.
Allan Lyall was Amazon.com’s vice-president of European operations for more than 12 years. Pierre Mercier is a senior partner and managing director at the Boston Consulting Group. Stefan Gstettner is an associate director at the Boston Consulting Group.
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