Capgemini: Scaling supply chain digitisation after COVID-19
Disruption caused from the current pandemic has forced business leaders to make important, rapid decisions to protect and support the health and safety of their people while trying to minimise disruption to their business operations.
For some, the economic repercussions have been severe, especially given the extent of their global footprints and the complexity of their multi-tiered, global supply ecosystem. Until the world emerges from the pandemic, it will be difficult for businesses to predict the full implications for their supply chains; however, not all the current challenges are a result of COVID-19.
Rather, the situation has brought into sharper focus what was already present, forcing businesses to rethink issues they had perhaps neglected.
Across all sectors and at all levels, businesses are being forced to think beyond existing horizons, and to act outside their comfort zones. Many existing business models will need to evolve. This period presents an opportunity to accelerate the digitisation of the supply chain and bring some autonomy to it. Let’s take a look at some of the possible developments.
The impact on fulfillment
As more employees grow accustomed to out-of-office work, it’s likely that business travel, notably by air, won’t return to previous levels. Environmentally, this would be a good thing. However, with around 40-50% of air cargo being belly freight, carried in the holds of commercial passenger flights, this also presents a new challenge and one that isn’t as environmentally friendly as first thought.
Businesses will need to rethink their supply chain management and assess alternative options to achieve fulfilment - whether this means dedicated cargo flights, or ships. On the flip side, businesses may also see an increasing demand from customers to look at local resourcing. Some organisations will therefore shorten supply chains completely by finding new suppliers closer to home, reducing overall transportation costs and lowering carbon footprints.
‘Servitization’: what happens now?
Lockdown has called for businesses to rethink their approach to standard supply chain models. For customers that previously had operational leases or pay-per-use commercial models, the global pandemic has caused more problems.
With people working from home, surplus onsite resources have increased and demand has plummeted, leaving stock and equipment to stand idle in empty warehouses or offices.
The answer is a subscription-based model, sometimes known as ‘servitization’, which allows businesses to re-package products and services in a new way that remains commercially attractive to their customers.
This was a growing trend well before the current pandemic, but COVID-19 has pushed the industry toward this type of business model sooner than expected, as a reliable way of boosting the bottom line. For example, by offering continuous, remote support of equipment, businesses can open doors to new revenue streams through flexible and sustainable supply chain operations, preventative maintenance, extending the lifecycle of the product and improving the customer experience.
Working practices and the impact on supply chains
One of the most pertinent examples of new working practices is technology which facilitates online meetings or enables teams to collaborate on projects remotely. This has been available for some time, but lockdown has made it an everyday necessity – something that these product owners could capitalise on from a servitization perspective. However, working remotely is going to have much broader implications for businesses.
Many employees will want to adapt to more flexible working practices on an ongoing basis, and organisations must now consider the potential impact on how corporations manage their supply chains on a more permanent basis. How do they predict employee behavior and desires, and to what extent will this influence how supply chains are operated?
What will emerge is an entirely new way of operating and managing supply chains and employees - but with a new focus on standard practices and principles to ensure it runs smoothly. And this means a focus to further reduce manual interventions when operating supply chains.
The way forward
Organisations can no longer assume that old response plans will keep their business running in the face of adversity. There is a need to organise a proactive and holistic response looking into end-to-end exposure, associated risk, and operations management capabilities for all critical functions.
Building resilient and flexible value chains to manage future challenges means focusing on digitisation and the implementation of technology platforms that support applied analytics, AI, machine learning and robotic process automation (RPA). Leveraging data and analytics allows the company to then run dynamic scenarios to prepare for the future, while providing end-to-end visibility to identify, assess, and mitigate risk across the business, partners, and suppliers.
The COVID-19 pandemic has been a unique challenge in comparison to previous recessions or crises. It has impacted almost every part of the globe in a way that was once unimaginable. Businesses have had to find new ways to adapt to the immediate challenge, but in the long-term, supply chains will never be the same.
There is an increasing need for global coordination to help organisations redefine their supply chain capabilities to create and maintain a rapid, yet flexible response through the creation of an intelligent supply ecosystem. This will not only enable organisations to moderate the risks and stabilize the functioning of global supply chains, but reduce or minimise disruptions, while also adapting to a new normal.
By Jörg Junghanns, Digital Supply Chain Practice Director, Europe, for Business Services at Capgemini
Upgrading RFID and Automated Track and Trace Solutions
During the COVID-19 pandemic, global supply chains faced the challenge of rapidly adjusting their business priorities to new customer preferences. Local supplier backlogs, winter storms, and the Suez Canal backup in March underscored the need for efficiency and visibility across the supply chain.
According to Christof Backhaus, Digital Lead Product Supply and Smart Label Project Lead at Bayer, companies must now place critical importance on tracking and tracing their products. “All large enterprises in the world dealing with finished goods,” he said, “seek functional and technical solutions to real-time channel inventory.”
Indeed, RFID’s real-time tracking data allows executives to make quick, well-informed decisions in moments of supply chain crisis - and rather than unfolding across days or weeks, it only takes a matter of minutes.
Why does RFID remain relevant despite digital disruption?
Essentially, RFID uses radio frequency waves to transfer data wirelessly between a scanner and a tag. In contrast to barcode technology, which requires a stationary scanner, RFID tags can be pinged from anywhere in the world, allowing companies to track real-time movement through the supply chain. RFID tags can also scan unique SKU numbers and distinguish between varying product sizes, colours, and styles: a critical feature for increasingly personalised end-user products.
Though the first patent for RFID tags appeared in 1973, higher accuracy rates, lower costs, and advances in sensor and data technology have made it newly accessible to a wide range of companies. Today, the technology is used in logistics networks, manufacturing and delivery networks in the pharmaceutical industry, and any business where efficiently tracking and monitoring product location is critical: raw materials, consumer products, cars, electronics, retail, and agriculture.
What are the key benefits?
Overall, automated track and trace solutions keep labour costs low, optimise operating costs, mitigate security risks, use capital effectively, and assist companies in adhering to regulatory requirements.
Below are three in-depth dives into how RFID benefits major industries:
- Pharmaceuticals: RFID tags help manufacturers safeguard sensitive products such as vaccines, tracking where they are and when they will arrive in real-time. Sensors closely monitor temperatures to ensure regulatory compliance. If anyone tampers with a shipment, the sensors alert the company.
- Logistics: RFID identifies process gaps and frequent anomalies by monitoring a product’s lifecycle from shipment to delivery. This data helps decision-makers predict the most efficient routes and therefore optimise their distribution schedules.
- Retail: Sensors help guard shipments against theft and provide critical intelligence when shipments go missing. Before adopting RFID technology in 2203, UK retailer Marks and Spencer relied on barcodes to scan inventory. When they made the switch, their productivity increased from a maximum of 400-600 items scanned per hour to up to 15,000 items scanned per hour. Building on their initial success, the retailer expanded the use of the technology and is still using it today.
Regardless of the industry, RFID promotes accuracy, immediacy, and efficiency. Companies reduce human error by automatically scanning products, keep track of inventory even in geographic locations with poor connectivity, and help streamline warehouse operations by identifying exact product locations.
Which recent innovations have changed the game?
With recent developments in cloud technology and IoT, a multitude of cloud-based alternatives have emerged to challenge traditional RFID technology. One of these cutting-edge solutions is Sony’s Smart Label - an intelligent shipping label that runs on AT&T’s global cellular network.
As with any good innovation, Sony’s proprietary technology started with a customer need ready to be solved: the Bayer Crop Science Division lacked an international IoT solution that could track seed products from start to finish throughout its distribution channel. Millions of dollars of revenue stood at stake, so Bayer turned to Sony to develop a smart label that would set the organisation up to manage its supply chain with end-to-end visibility.
Sony’s printable and disposable adhesive label allows companies to track the condition and location of their products worldwide and act upon the vast amounts of data it collects. The process is simple: the label activates when attached to the package, connects to AT&T’s secure LTE-M network, and sends data to the Smart Label Cloud in real time.
In sharp contrast to other smart label solutions that place trust in a patchwork combination of Wi-Fi, radio-frequency identification, and other limited coverage connections, the Sony Smart Label connects solely through a secure and universally-available cellular network. “Working with Sony,” says Robert Boyanovsky, the vice president of Mobility, IoT and 5G at AT&T, “we provide full visibility of every item shipped.”
Most importantly for companies on the edge, the Smart Label integrates with existing enterprise systems to achieve full visibility, thus adding value without disrupting supply chain process flow.
Why is this important now?
Companies that previously delayed introducing RFID and other automated track-and-trace technologies can capitalise on recent developments that lower costs, improve accuracy, and supercharge traceability.
Clearly the technology has value in today’s uncertain global marketplace, and can help decrease the costs of tracking goods. To quote Christof Backhaus, the Project Lead at Bayer, “the Smart Label indicates how much product is in the market, from the packaging line to the end customer.” Companies no longer have to spend a small fortune to take advantage of recent IoT developments. “Due to the technical composition [of the label],” Backhaus explains, “we don’t require additional infrastructure, manual scanning, or other expensive tools.”
Over the decades since RFID was first introduced, support for introducing it to company supply chains has also improved. AT&T’s IoT Professional Services Organisation, for example, supports companies through the end-to-end design and integration process--from installation to deployment and project management.
Companies that invest in traceable and visible supply chain solutions stand the best chance of survival, adjusting in real-time to natural disasters, shipping backups, and slowed-down supplier turnarounds as a result of the global pandemic. “Smart Label promises to help businesses like Bayer realise the full potential of the IoT,” says AT&T’s Boyanovsky. “[We can] deliver improvements in revenue and cost savings and make supply chains more efficient.”
Certainly, company executives will be hard-pressed to ignore recent innovations. In an age of uncertainty, RFID and its challengers herald a welcome sense of supply chain security. The next step? “Our sales team,” Boyanovsky adds, “is prepared to engage with prospective customers now.”