By 2023, at least half of large global companies will be using advanced analytics, artificial intelligence (AI) and Internet of Things (IoT) in their supply chains. That’s a scary number if you’re not one of them. But to efficiently and smoothly answer demanding customers, those technologies are not only a necessity, they also enable true versatility. Instead of struggling to bridge functions that are seemingly always rigid and disconnected, automation and other technologies are providing connections and coherence so that staff can focus on innovation.
But it’s business priorities that are driving adoption of these technologies.In the 1990s, most organizations’ focus was inside-out – making their own logistics more efficient. Now it’s outside-in, to flex around the customer, whether it’s a consumer or a B2B transaction. They want to understand what drives the various segments of their customer base and design supply chains accordingly.
That’s not to say the hunt for internal efficiency isn’t still important. Far from it: if organizations want supply chains to be adaptable to changing customer behaviors, they need to move away from rigid, disconnected processes to an agile, connected, automated approach that also drives out cost.
These must also integrate with functions such as finance (to give CFO visibility on performance and allow for strategic planning), marketing (to forecast and shape demand), operations and more.
This is where an end-to-end supply chain management (SCM) solution comes in. And underpinning its effectiveness should be the cloud. On-premises solutions are much harder to integrate across functions, locations and supply chain partners. They also create more barriers to use of the emerging technologies reshaping transparent, agile and efficient supply chains.
Here are three forces that make cloud-based supply chain transformation so compelling right now: Customers, robots and globalization
The first is the fact that modern customers have different expectations than they did before the e-commerce era. Whether they’re buying online or ordering in bricks-and-mortar stores, consumers have come to expect they will be able to buy what they want, when they want it, in the quantities they need, no matter how or where the order is placed.
According to Kibo’s 2018 Consumer Trends Report, 40% of shoppers say taking more than two days for delivery would prevent them from making a purchase, while 63% expect delivery within three days as the standard. UPS’s research paints an even tougher picture: 64% of online shoppers it interviewed expect orders before 5pm to qualify for next-day delivery.
To serve customers across multiple channels and fulfill orders quickly, supply chains need to be agile enough to change, as well as digitally connected from end-to-end.
For example, if a customer places an order online, the retailer must quickly determine how to fulfill the order. This means locating inventory – which could be in a distribution center or retail store hundreds of miles from the customer – and knowing exactly how picking, packing and shipment will execute so they can tell the customer when it will arrive. Connected applications, such as order management, inventory and logistics, provide that level of visibility and agility.
Secondly, automation is changing the game. The first wave of automation dates back 15 years or more, and was about replacing expensive resources with software agents and robots. The current wave is about developing resource that isn’t there – new capabilities that actually transform key processes in the supply chain.
We’re still some years away from fully automated delivery trucks and last-mile drones. But cutting edge solutions are already revolutionizing warehouse robotics; and customer chatbots are shifting automation at the front end. It’s reckoned about 85% of companies’ interactions with their customers will be automated eventually.
But even in less futuristic settings, automation is taking on manual transaction processes as AI and machine learning become commoditized. For example, warehouse automation enables cost-effective fulfilment of highly variable orders by reducing errors and speeding up the fulfilment process, making personal service at-scale possible. The results could impress even the most demanding CFO. Brazilian footwear retailer Paqueta, for example, reduced inventory levels 25% in one year after rolling out more integrated merchandise planning systems.
But to optimize this level of automation, partners up and down the supply chain must be able to communicate in real time – something that on-premises SCM systems struggle to support. There also needs to be a huge focus on developing insight from data – one commodity that supply chains already generate in huge quantities. That data flow will become much bigger as the Internet of Things raises supply chain connectivity to a new level.
The third trend affecting supply chains is the need to extend them across geographic locations. Again, while this trend has been visible for some time through globalization and specialization, the constant evolution of external factors and new customer demands makes it ripe for transformation using hyper-connected digital services.
And while managing global operations has always been incredibly complex, the finer tolerances of modern supply chains and need for agility is making it more so. Regulatory changes are constant, as is political instability, together with fluctuating market factors such as monetary exchange rates, raw material shortages and rising oil prices. Regulators expect proper customs documentation to be prepared and tariffs to be paid, while customers expect sellers to meet their requirements regardless of unplanned supply chain disruptions.
On-premises applications don’t support the necessary ability to dynamically reconfigure processes or achieve comprehensive visibility and granular control of global inventory. They also lack predictive analytics that use technologies like AI to model multiple logistics scenarios, so businesses can effectively adapt to unexpected disruptions.
Cloud solutions: Consolidated planning, visibility and control
The bottom line is that integrated, end-to-end cloud solutions can make supply chains faster and smarter, as well as more agile. They’re much more resilient and adaptive because planning, visibility, and control are integrated instead of operating in isolation. And cloud makes it easy to scale by adding new users, creating new value chains – and innovating with technologies as they emerge. We’re now starting to see practical applications of blockchain, with for example, CargoSmart developing intelligent track-and-trace in shipping to slash time spent on paperwork by 65%.
IoT adoption is also reaching critical mass. Cloud-based systems and IoT sensor data can create virtual representations of the physical world to track shipments, monitor the condition of sensitive cargo or even check on the quality of baked products rolling off a production line.
Crucially, you don’t need to be a data scientist or an IT specialist to exploit these capabilities. Many are embedded in the applications themselves – and with cloud based systems, new reporting capabilities or tools to support faster, better decision-making can be rolled out painlessly.