2020: Uncertainty calls out for resilience
If the last decade has taught us anything, it’s to expect the unexpected - from extreme weather events to endless political psychodramas to tech startups disrupting whole industries.
Global supply chains are particularly vulnerable to changes triggered by these events, including increased regulation, new tariffs and radical shifts in demand patterns. The need to prepare supply chains not only to survive, but to thrive in chaos provides the backdrop for all our 2020 predictions. We start with four predictions on technology innovations that will mature and converge to support greater supply chain resilience.
1. Algorithmic supply chain planning will go mainstream
Today’s supply chains have access to technologies that enable them to connect to and gather data across demand, supply and production. Deriving value from huge data volumes, however, depends on being able to separate signals (which have predictive value) from ‘noise’. Advanced machine learning (ML) algorithms are key to this. Based on probability (or stochastic) forecast models, these algorithms exploit the inherent uncertainty of demand and supply. Instead of ‘one number forecasts,’ they present ranges of numbers, each with a probability assigned. From this detail, predictive algorithms can identify patterns that help planners respond and course-correct before crises occur. We believe this sophisticated “algorithmic supply chain planning” as Gartner calls it, will start to enter mainstream adoption in 2020.
2. The robots will elevate supply chain humans
Though the whole supply chain environment will become increasingly self-adaptive and automated, humans with domain expertise will remain in charge. The good news for business is that these humans don’t all have to be expensive, hard-to-recruit data scientists. Consider mobile phones, cars and home thermostats that use machine learning. Do you need to be a data scientist to use them? Of course not. The same will apply in supply chain planning teams. Machine learning algorithms will handle boring, repetitive tasks like data hygiene and number crunching that planners with domain experience will use to make decisions. In our customer base, technology automation hasn’t replaced humans but elevated the roles of chronically overstrained planners, allowing them to focus on work that creates the most value.
3. Digital twins will help mitigate supply chain risk
The growing momentum around systems-based thinking in supply chain planning has given rise to the “digital twin” - the ultimate ‘what-if’ scenario planner. Digital twins help companies mitigate risk by accurately testing the resilience of complex, multi-echelon, global supply chains. They drive benefits such as improved business planning and improved sourcing, procurement and supplier management. Digital twins can measure the impact of random events on the supply chain, from tropical rainstorms that threaten to shut down an Italian distribution center top the risk of a no-deal Brexit creating a customs border in the Irish Sea. It’s little wonder in such an uncertain supply chain planning environment we expect to see more companies like our customer SKF building digital twins in 2020.
4. Blockchain will help promote supply chain trust and transparency (but slowly)
Applications and devices in our increasingly automated supply chains generate huge volumes of data. Innovative new techniques like algorithmic supply chain planning and digital twins will help companies tap into this data to improve planning opportunities. However, stakeholders have to trust the data. How can companies promote trust in supply chain data? Blockchain could be the answer. Blockchain’s ability to provide transparency while protecting data’s intrinsic security, veracity and above all, value, will make it useful to supply chain infrastructure. In modern, multi-echelon, global distribution networks it’s all too easy to lose data accuracy. However, with blockchain companies can validate the provenance of raw material in the food, medicine or consumer goods supply chain, a track and trace task that has been very difficult and expensive. Though it will gain some traction in 2020, blockchain adoption won’t happen overnight. Similarly to broader digital transformation initiatives, many businesses lack solid use cases and internal buy-in/expertise to pilot blockchain projects. 12% of respondents in our study had a supply chain-related blockchain project underway.
This year, we’ve also invited partners from all corners of the globe to contribute their unique insights.
Supply chain goes from “boring to the boardroom”
We are finally seeing supply chain getting the attention it deserves from board-level stakeholders, which is a very welcome development. Historically, board members and executives have largely dismissed supply chains as cost centers, without seeing the potential upside. To some extent this is understandable as poorly optimized supply chains have generated costly waste and tied up working capital. Fortunately, this mindset is shifting as executives from large companies share stories of being able to improve service levels and cut waste while freeing up working capital. Also, from a sustainability perspective, 90% of companies’ emissions are generated from their supply chains - another important reason to optimize to avoid unnecessary production and logistics. With supply chain digitization offering greater visibility and foundation for decision making, it has become much easier for company leaders to make smart tradeoffs and act decisively.
Anders Remneback, Product Manager, Optilon AB (Stockholm, Sweden)
Spreadsheets will start being consigned to the “supply chain museum”
As more high-profile success stories of digital transformation emerge, companies will feel growing urgency to achieve meaningful returns on their supply chain planning investments. Most of the mid-large size companies we meet have invested for years in consulting services, planning tools, ERP, databases and upgrades, and still not getting any ROI. Many still rely on manual spreadsheets in parallel with their ‘end-to-end’ legacy supply chain tools. In 2020, I expect to see senior management challenging supply chain and IT organizations to work together to improve business outcomes. Spreadsheets won’t be completely consigned to the “supply chain museum” in 2020 but as more companies modernize, I expect to see fewer companies relying on it as a failsafe.
Levent Ozsahin, Managing Director, Advancetics B.V. (Turkey and the Netherlands)
Supply chains (and their twins) will get greener
In 2020, roughly 35% of Global corporations will incorporate sustainability initiatives into their digital transformation strategy that will generate a competitive advantage and create more than 200 billion dollars in incremental value. The “Green Twin” will emerge as a useful term to describe data models that are optimized to address corporate sustainability objectives in addition to profitability and service goals.
George Fowler, Group Vice President, Spinnaker Supply Chain (North America)
Data analytics will get simpler
With specialist data skills at a premium, technology providers will continue to simplify, automate and shield planners from the complexity of data science. Of course these will never be completely “off the shelf” products, however supply chain planning tools will increasingly apply machine learning to automate high-volume data analysis to support tasks like seasonality clustering, promotions planning and new product introductions.
Cem Kobaner, Co-Founder & Managing Partner, Advancetics BV (Turkey and the Netherlands)
For more information on all topics for Procurement, Supply Chain & Logistics - please take a look at the latest edition of Supply Chain Digital magazine.