Capgemini: the rise of drones in supply chain post-COVID-19
As a way of introducing yourself, can you start off by telling me a bit about your career and your journey to finding yourself with Capgemini?
“I lead Capgemini’s Consumer Goods and Retail global sector practice – a portfolio which includes major global retail, fashion, restaurant, consumer products, transportation, and distribution brands like McDonald’s, Coca-Cola, Meijer, Office Depot, Domino’s, and Unilever. I’ve been with Capgemini for over 20 years and was previously a partner at EY, where I created and led the Structured Lending practice for blue chip clients in the financial services and lending capital industry.”
How would you describe Capgemini? What gives it an edge over competitors?
“Capgemini is at the forefront of innovation to address the entire breadth of our clients’ opportunities in the evolving world of cloud, digital and platforms. We harness the power of data-driven insights to help brands compete against competitors, engage customers, enter new markets and, ultimately, positively disrupt the world we live in. We’re also a company which is actively pursuing a positive future for our company, clients and wider society. Sustainability, digital inclusion and inclusivity are central to our values.”
What does digital transformation currently look like in the supply chain industry today?
“COVID-19 has heightened the frailties of many supply chains. A lack of visibility and agility has brought many firms to a literal stand-still. Last year, Capgemini found that just 14% of organisations had scaled their pilot plans to digitise their supply chain, with 86% still at the pilot stage. In the wake of the pandemic, innovation has become an imperative. Recent events have shown us it is impossible to plan for what’s coming next, so adaptability is critical. This can only come about from digitalisation, which will give organisations the effectiveness, transparency and resilience they need.
“Firms need to move away from linear, traditional supply chain models to become connected, supply networks. The goal is to create a single, end-to-end, unified view of the ecosystem so that organisations have precise, real-time visibility into their operations – from the suppliers of materials, the transporters of those supplies and finished goods, and finally to the customers demanding fulfillment.”
How has automation and robotics transformed supply chains?
“Most supply chain organisations already use some form of robotic process automation (RPA), particularly in areas that are high-volume, repetitive and rule-based like orders and claim processing. RPA software bots can monitor inventory, generate notifications and reorder products when levels go below a set threshold, freeing up time and resources for people to work on high-value exception-based requirements.
The future of robotics and automation in the supply chain will feature self-orchestration. Radio-frequency identification (RFID) and GPS are not new, but, as artificial intelligence and 5G mature, so do the use cases for these technologies: examples include using autonomous robots for pick-pack-ship activities and self-driven trucks for logistics.”
What are the real benefits to using drones in logistics? How were drones and Automated Guided Vehicles (AGVs) considered in the industry pre-COVID and what do you feel their future looks like in the supply chain?
“Pre-crisis, . Consumers want fast and cheap deliveries, but this is hard for organisations to deliver while making a profit. Drones have huge potential as a last mile resource because they reduce the need for human intervention and are exceptionally fast. They can also reach isolated locations which are tricky to get to via traditional vehicles – potentially opening up new customer bases.
Drones have been experimented with over the years as a delivery option by the likes of Amazon and Walmart. However, airspace restrictions and concerns about drones crossing over flight routes meant they have never taken off – until now.
“COVID-19 spurred the world’s first drone delivery service into existence in Ireland and we’ve seen more players utilise this delivery method in the wake of the pandemic. If these test deliveries are successful, logistically possible on a wider scale and public opinion of their use is positive, we may see restrictions around drones eased, leading them to become a viable device for remote orders. While this may not be the future of delivery on a mass scale, drones do offer an interesting solution to ongoing issues of social distancing and the overwhelming levels of demand.”
Can you talk me through your COVID-19 approach? What kind of impact did it have in the industry and how are drones and AGVS being used?
“Many of the challenges that companies faced at the beginning of the pandemic were not solely the result of the virus. It was more that the sudden change in working conditions and increase in demand put a spotlight on pre-existing issues. Our focus has been to help our clients build resilience – quickly – through digitalisation. By helping organisations to enhance immediate supply chain visibility, adopt emerging technologies to limit disruption, and rethink supply chain strategies, we are protecting them in the short-term while setting them up for long-term success.”
What are the major trends you are observing in the industry and how is your business responding to them?
“Building resilience is a critical theme, as is sustainability. We 79% of consumers are changing their purchase preferences based on social responsibility, inclusiveness, or environmental impact, and this trickles down to the supply chain too. For these organisations, there is a huge onus to make practices more sustainable through initiatives like waste reduction, energy efficiency and using more sustainable materials. Many manufacturers and retailers are worried that implementing sustainable approaches is too costly, but technology is opening new frontiers to manage and scale up sustainability initiatives while boosting revenue and reducing operational costs. More importantly, they may find that the price of not pursuing these aims may also cost them dear.”
What’s next for the Consumer Goods and Retail sector at Capgemini?
“Capgemini recognises that service needs and solutions vary by subsector. For example grocery is looking for fast progression in both contactless commerce of consumer engagement as well as profitable fulfillment, while apparel looks to restructure as well as find direct to consumer (DTC) solutions.
“Capgemini is evolving and applying specific solution and service emphasis to drive tailored client needs. We’re also helping organisations to develop what we call invisible infrastructure – operating models that are agile, fluid and adaptable. In line with this, we see simplification as a key theme for our clients. Emerging technologies like 5G and Internet of Things (IoT) can seem overwhelming to business and IT leaders, but through simplification, we look at real-world use cases for these technologies, making them tangible and exciting for our clients.”
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”