Comment: Innovation beyond drones - transforming the supply chain
The concept of drone delivery has not only captured column inches, but also the imagination; a valuable catalyst in stimulating discussion around innovation in the logistics industry. PwC estimates drone services to be worth more than $127bn globally, with $13bn to be made in transport. However, it’s important that we don’t become distracted and neglect to maximise opportunities that are workable in the here and now. Our role is to support retailers in tackling - and staying ahead of - the challenges that they are facing today.
Just a few months into the year, it’s clear that 2018 has the potential to be a transformative year for the logistics industry, embracing and utilising technology to its fullest potential.
In February, the UK’s leading air traffic services provider, NATS, announced its partnership with Altitude Angels to develop an effective drone air traffic control system. NATS, responsible for overseeing the safe flight of aircraft in UK airspace, aims to develop unmanned traffic management solutions by 2020, which for the first time would allow drones to legally fly beyond their operators’ line of sight - a crucial hurdle if we are to see drone deliveries taking to the skies.
Amazon continues to lead the way in supply chain innovation and its ingenuity is to be applauded - although drone technology isn’t without its challenges and there is still some way to go before we see drone deliveries landing on our doorsteps. One of the most significant jobs to be done is changing consumer perceptions and winning trust around drone deliveries, particularly concerning public safety and privacy. Understandably, consumers are more open to delivery by drone for lower-value, less fragile items such as books, and less keen to eschew traditional delivery methods for consumer electricals and luxury goods.
Nevertheless, Amazon is consistently setting the bar high, inspiring the industry to think bigger with each patent filed, whether drone hubs in the sky or underwater warehouses. The logistics industry must follow its example to produce new solutions and new processes, underpinned by new technology. This type of ingenuity and commitment to innovation, however futuristic, will almost certainly lead to new, workable solutions that will revolutionise the supply chain - both for consumers and retailers. Innovation needs to happen much more quickly if supply chain systems and capabilities are to keep pace with continued innovation in omnichannel retail.
The current retail environment is incredibly challenging; recent weeks have witnessed the collapse of several established brands, with a series of others taking decisive action to turn their fortunes around and restructure operations to better equip themselves for this changing landscape. It has never been more important for retailers to be able to deliver an effective omnichannel experience. Brands are not only battling difficult operating conditions, but must also respond to - and deliver on - increasingly sophisticated customer expectations. Convenience is key - we know that consumers now value convenience more highly than brand loyalty. Supply chain providers have a central role to play in facilitating convenience, supporting retailers to deliver a great experience - both online and in brick and mortar stores.
Innovation in the supply chain can support retailers in exceeding consumer expectations, streamlining and increasing visibility throughout, making efficiencies and reducing costs. Extensive conversation around drone delivery has brought logistics into mainstream conversation, yet this fixates on last-mile delivery. While it’s a lucrative market and a vital part of the supply chain, we shouldn’t forget the bigger picture, in which innovation is also much-needed.
The reality is, the logistics industry isn’t yet making the most of the technology we already have. More advanced use of data has the potential to revolutionise the supply chain - data we have at our fingertips already, but aren’t utilising to its full potential.
Take Radio Frequency Identification (RFID) as a case in point - it’s a concept that was first patented in the 1970s, but is only now being fully explored to its full potential, with far-reaching benefits within the supply chain, from saving time by eliminating manual hand-scanning to improving inventory management. The Internet of Things (IoT) also holds enormous potential, increasing visibility, improving systems and processes, creating a more efficient and accurate process.
Neither of these technologies have been fully explored; we’ve merely scratched the surface. At Advanced Supply Chain Group (ASCG), we’ve long championed the need for investment in new technologies that will allow retailers to compete successfully in what is a highly competitive, fast-moving global environment. Technology is the way to do that. At ASCG, we create bespoke technology that allows retailers to disrupt established, staid processes, shaking up ‘traditional’ systems. Our bespoke solutions put retailers at the forefront of innovation in omnichannel, harnessing new opportunities offered by the IoT and big data to deliver an enhanced experience, boost sales and create a smarter supply chain.
Technology offers huge potential to transform the supply chain - innovation exists far beyond drone deliveries and last-mile delivery.
Japan Seeks to Revive Stalled Semiconductor Industry
Post-pandemic, Japan has seen the consequences of relying solely on foreign imports for its semiconductors. Over 64.2% of its chips are usually imported from South Korea and Taiwan, leaving the country dependent on its neighbours. Industries from auto manufacturers to consumer electronics firms wait for chips, to no avail. But now, the Japanese government looks likely to put real funding behind its semiconductor industry, with top officials emphasising their support.
Domestic supply chains have never been more important. Rather than remain tied to international shipping routes during shortages and delays, governments are doing everything in their power to develop local lines of supply. But the question remains: can Japan pull it off?
How Will Japan Pay For It?
Herein lies our first issue. Japan’s debt has rapidly increased over the past few years, and the semiconductor industry will need roughly a trillion yen—US$9bn—in this fiscal year alone. This cost, however, pales in comparison to what Japan could lose if it fails to keep up with Europe and the US. Both nations have launched aggressive funding measures to revive their local semiconductor industries. And if Japan refuses to invest due to its debt, it could slow down progress in fields ranging from artificial intelligence to autonomous driving.
According to Tetsuro Higashi, the former president of Tokyo Electron and Japan’s top government advisor in semiconductor strategy, ‘If we miss this opportunity now, there may not be another one’. Yet one advanced wafer fabrication factory can cost more than US$10bn, and any money poured into the industry will go fast. That’s why Japan, rather than invest trillions and trillions in failing domestic firms, is considering a second option.
What Do They Plan To Do?
Japan now intends to look abroad and convince overseas chip foundries to come to its shores. Its past failures mostly centred on trying to merge domestic firms that were already going through tough times. ‘This sort of made-in-Japan self-reliance approach hasn’t worked out well’, said Kazumi Nishikawa, a director at the Ministry of Economy, Trade, and Industry’s IT division. ‘This time the goal is to offer a strong incentive for an overseas logic foundry to come to Japan’.
As follows, Japan will now reach out to industry partners and leaders in other countries, including the industry heavyweight Taiwan Semiconductor Manufacturing Co. (TSMC), to build Japanese bases. According to the South China Morning Post, the heart of Japan’s mission is a US$337.2mn research and development project in Tsukuba that will involve TSMC and more than 20 Japanese firms. ‘I think we need to cooperate with our overseas counterparts’, said Akira Amari, a senior member of the ruling Liberal Democratic Party. ‘[And] TSMC is the world’s top logic chipmaker’.
Indeed, if that’s Japan’s strategy, the future looks bright. TSMC recently set up a venture near Tokyo to research energy-efficient 3D chips with several Japanese partners. And in the future, the multinational chipmaker may consider expanding its Japanese operations—that is, if government incentives pave the path forward.