A surge of new digital technology has meant that the supply chain is more connected than ever. Jeremy Hammant, senior business advisor at BearingPoint, argues that logistics businesses need to exploit the situation to remain competitive.
The term “supply chains compete, not companies” was first used by Professor Martin Christopher in the last century. This was at a time when companies ran their internal supply chains on monolithic ERP systems, and information flowed along the extended supply chain via Electronic Data Interchange connections, if at all. The majority of companies were struggling to connect competing functional silos into an efficient internal supply chain. The idea that they should be working as part of an extended supply chain that was competing with other extended supply chains would have been unlikely to gain much traction.
Today, a constant stream of new digital technologies – social, mobile, analytics, cloud, Internet of Things, autonomous vehicles, artificial intelligence, blockchain – is introducing previously unimagined levels of connectivity, data access, and automation across the extended supply chain.
These capabilities are enabling greater transparency, eliminating information bottlenecks and providing the foundations for the connected supply chain.
BearingPoint’s recent research with Imperial College highlighted that whilst the term connected supply chain was well recognised there was no common definition in use. This isn’t surprising given that there is still no common definition of a supply chain, despite the terminology being around for over thirty years. So, when we talk to clients about the connected supply chain, we explain it in terms of the benefits that it can deliver to their business.
Crossing boundaries with The Internet of Things (IoT)
The potential for both short-term business benefits and long-term competitive advantage through implementing connected supply chain applications is huge. The Internet of Things (IoT) enables objects from shipping containers to individual items to communicate across organisational boundaries. This enables effective real-time shipment tracking and inventory visibility. The IoT can also contribute to better control over a range of other assets. Downtime and ineffective usage are evident, and damage caused by operators can be more closely monitored.
The connected supply chain also enables companies to track and count products and assets, and greatly reduce waste, loss, fraud and cost. Companies will know when things need replacing, repairing or recalling, and whether they are fresh or past their best. These benefits can be brought together to create process efficiencies through the opportunities that smarter, highly integrated, secure networks can drive. The wealth of data created by the IoT coupled with secure blockchain transaction processing and the burgeoning field of data analytics is already providing new supply chain opportunities.
The connected supply chain also enables the discrete processes that used to take place in silos, functional and organisational, to be observed and managed through the analysis of the data provided: the long-heralded opportunity of dynamic optimisation across an extended supply chain may now be within reach.
However, while new digital technologies are now capable of supporting the connected supply chain and delivering dynamic supply chain optimisation, they are only gradually coming to fruition. This is because companies have already invested, over many years, in implementing technology to improve their supply chain performance. For many, this has led to islands of digital technologies with no clear strategy for how these can be combined to deliver the connected supply chain. This means that most connected supply chain implementations will be challenging, as they will need to both anticipate future technology developments whilst responding to market changes.
In addition, the connected supply chain requires potentially different ways of working between organisations across the extended supply chain. While there will be benefits from implementing the connected supply chain within the confines of your own organisation, the real game changing benefits will come through optimising an extended supply chain. This will require closer, collaborative relationships with your customers and suppliers.
Future supply chain infrastructure
Not all will want to collaborate and join you on the journey – concentrate on the ones that do. For the ones that do we recommend three key areas of focus: firstly, to involve suppliers in product development as closely and as soon as possible. Secondly, to involve customers and suppliers in critical decision-making processes, especially where these have an impact on the future supply chain infrastructure. Lastly, to closely link and integrate cross-company processes between neighbouring partners in the supply chain (start close and work outwards).
Individual companies – often belonging to several industries and different networks – should exploit the connected supply chain, and their position and role, as far as possible in order to optimise their cross-company supply chain processes, both toward their neighbouring customers and with their own suppliers.
Successfully carried out, this will enable initially the most competitive companies, subsequently the most powerful parts of the supply chain, and eventually all of the extended supply chain to compete more effectively.
Our message to clients is that the connected supply chain is in reach, and dynamic optimisation has the potential to deliver a step change in supply chain performance. The digital technologies that enable the connected supply chain are developing and maturing at pace – not all will be successful. But if you just wait and watch, you may end up too far behind to participate. The age of, connected, competing supply chains is now upon us.