Comment: Supply chain in the era of intelligent automation
Every business on the planet strives to increase revenue, enhance profitability and make its customers happy. In the past, organisations mainly focused on achieving customer satisfaction with timely product or service fulfilment. Today, however, most organisations recognise that it’s no longer enough to compete merely on products and services – instead, it’s about managing customer experience and their business outcome as a value add.
We could go as far as to say this is the era of the experience economy. Most organisations make their customers happy by meeting their needs, solving their problems and providing experiences marked by immediacy, vantage and customisation. To my mind, however, what really matters is the outcome of an individual customer’s needs – which will lead to the next wave of evolution and differentiator as the “outcome economy.”
The outcome economy not only addresses customer end needs by selling a promise of outcome, it also senses and creates wish lists that open new sales opportunities for businesses to improve revenues and profitability, delivering a notable return on investment and assets, and achieving a substantial reduction in total cost of ownership (TCO). Companies such as Amazon are already leveraging their artificial intelligence (AI) tools to enable the development of the outcome economy, and we have all seen their growth over the last few years.
Challenges and opportunities
“Amazon-like” has become an industry standard for customer experience, with the convenience of placing orders with one-click checkout, real-time feedback from other buyers and complete visibility on delivery status. For customers, the service not only meets immediate requirements, but also creates a need for something they may not even have been aware of until it was recommended. For Amazon itself, it opens sales avenues and creates a phenomenal growth trajectory. However, achieving customer experience at this level and move towards the outcome economy model requires an entire digital ecosystem in the background to make it happen.
The major challenges that most companies grapple with include:
- Interactions with customers and analysis of data touchpoints
- Sensing the demand and fluctuations well in advance
- Agile and decisive actions from real-time insight that can respond to evolving needs
- Collaboration with partners for speed to market
- Complex processes and technology landscape that result in longer lead times
- Transparency and visibility across the value chain
Approaching digital transformation
To meet today’s these challenges, businesses are embarking on digital transformation across the supply chain. Successful digital transformation, however, relies not solely on implementing new technologies but in transforming the organisation to take advantage of the emerging possibilities that new technologies provide.
Major digital transformation initiatives are centred on re-imagining the customer experience, operational processes and business operating models. The fusion of the physical supply chain and the virtual world into cyber-physical ecosystems will drive transformation across industries and their supply chains – with big data, advanced analytics, robotics and intelligent automation, cognitive artificial intelligence (AI), and the Internet of Things (IoT) are creating additional opportunities along the entire industry value chain.
It’s a case of “adapt or perish” – across industries, digitisation coupled with transformation of the operating model is changing the rules of the game and businesses that fail to react to this will be overtaken by their competition.
Manufacturing companies, for example, are applying advanced analytics to predict the health of their installed bases and reduce downtime with data gathered from IoT sensors. They are also installing robots to carry out shop floor assembly activities to improve efficiency and reduce costs. CPG businesses are implementing algorithm-driven sensing platforms to predict demand well in advance in order to minimize drop orders and optimise inventories. Meanwhile, customer services functions are heavily deploying cognitive and AI applications to enhance critical customer interactions.
Transforming the supply chain through intelligent automation
The pre-digital economy was designed principally for efficiency, but in the digital economy, agility, scalability, responsiveness and transparency are key. Given this, digital supply chain transformation should be built upon four key pillars:
- Connected ecosystem
- Intelligent processes
- Cognitive analytics
- Autonomous fulfilment
Approaching it in this way not only drives optimisation of processes and operations – it opens channels to new innovative business models, which can deliver:
- Agility – redesigning the operating model to make it modular, flexible and boundless to adapt to the evolving market landscape.
- Scalability – the capacity to reinforce speed to market from product inception to commercialisation.
- Responsiveness – the capacity to make quick and informed decisions to respond to the market in real time.
- Transparency – empowering employees, customers and partners to interact seamlessly, extending real-time visibility across the value chain.
Done successfully digitisation breaks down barriers, enabling the supply chain to become a completely integrated ecosystem that is fully transparent to all players involved – from the suppliers of materials and parts to the transporters of those supplies and finished goods, and finally to the customers demanding fulfilment. The digital supply “network” will offer a new degree of resiliency and responsiveness, enabling first-mover companies to beat the competition by providing customers with the most efficient and transparent service delivery.
Deployment with care
Intelligent automation makes possible the creation of an ecosystem for holistic automation to drive value for business. But with so much noise about automation and digitisation, companies tend to deploy technologies randomly, which can generate point benefits but won’t deliver enterprise-wide added value.
With endless tools, technologies and applications available, what matters most is not just selecting the best solution, but finding one that offers the best and most appropriate way of working in the prevailing circumstances, and that will help enable a shift change in an organization’s operating model.
The key is to focus not just on automation technologies, but make them part of a comprehensive and strategic approach to the delivery of services.
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.