March 2017 | Commentary | IT Matters

Today's Competitive Supply Chain: Digital, Smaller, More Resilient

Tags: 3PL, Ocean, Trucking, Cloud Computing, Transportation, Logistics, Technology , Third-Party Logistics, Supply Chain

Sean Riley is Global Industry Director, Supply Chain,
Manufacturing & Transportation, Software AG, 630-434-0720

Historically, the supply chain and manufacturing industry has been relatively slow to embrace the opportunities presented by the digital revolution. Technology is advancing quickly, and it's time to buck this trend.

Whether it's recognizing the crucial strategic strength and impact offered by the Internet of Things (IoT), taking advantage of the dramatic increase in automation, or dealing with a desperate shortage of operations talent, we'll reach a tipping point in 2017. Digital technology will emerge as a business initiative as responsiveness and ever-faster execution becomes mission critical.

Manufacturers and supply chain managers will address the following in 2017 to become competitive and forge ahead in this rapidly changing industry.

  • Obsess over digital. By 2020, 90 percent of supply chain execution systems expenditure will be for cloud-based applications, while supply chain planning applications will remain on premise, according to Gartner. The IoT will give companies the ability to digitally connect physical assets and create a flow of data across the value chain, linking every piece of the product lifecycle.

    In addition, advanced (predictive) analytics will allow for condition analysis and real-time visibility. Early adopters will start deploying burgeoning technologies such as blockchain to assist shippers with gross weight verification. Digital transformation will be key to capitalize on the available value of these technologies in the supply chain.

  • Forecast this. With the increased implementation of IoT to take advantage of available sensor data, short-term forecasting will all but disappear due to demand sensing and robust supply chain visibility. However, this will not occur for manufacturers that do not have a supply chain resiliency program in place.
  • Do not disrupt. Shippers will begin in earnest to pursue a resilient supply chain as disruptions will have a much larger effect on supply chains pressed for spare capacity and inventory. A resilient supply chain will be critical to identify, manage, and mitigate supply chain risks.
  • Smaller is better. Taking note of Amazon's logistics network, manufacturers will begin examining the feasibility of using a micro-logistics network. Much of this depends upon the ability to work with third-party logistics (3PL) providers and shift from a dedicated- to a shared-facility supply chain model.
  • Shrinkage may occur. Transoceanic container shipping, third-party distribution services, and over the road carrier services (trucks) will consolidate due to either financial difficulties or the need for strategic capacity. The consolidation will result in contract rationalization and rate fluctuations, and will create a lever for 3PL agreements to be focused more on value than price.

Embracing the Digital Revolution

Due to the opportunities available and upcoming business environment changes, 2017 promises to be the turning point for supply chain practitioners to better meet their business goals. These changes will be driven by shippers who have to be as agile as their smaller counterparts.

While no company has embraced all the digital tools available, many have made progress. As consumers demand a greater personal experience and more sophisticated product, the digital revolution will prove a competitive advantage to those who embrace it.