Are Chemical Companies Focusing Digital Initiatives On The Highest Value Opportunities?

Rich Seltz

I’ve spent the past few months meeting with innovation leaders at several global chemical companies. Without a doubt, the power of digital is becoming top of mind, and most companies are asking hard questions about how their organizations will be impacted by advanced digital capabilities.

For chemical companies, operational efficiency is a huge priority. It’s therefore not surprising that many digital initiatives focus on reducing unplanned downtime and maintenance, improving worker safety, and streamlining the supply chain or back-office processes. Each of these initiatives generally addresses issues within a clear-cut organization (e.g., maintenance and engineering) and, therefore, is relatively easy to sponsor and initiate.

But what about efforts to redefine business models or ways customers engage with a chemical supplier? Compared to other industries, there are still relatively few activities in these areas. Why?

Follow the money

Let’s face it: cutting costs equals more profit hitting the bottom line. In my career, I’ve led several enterprise-wide initiatives to dramatically reduce SG&A and operating costs and fully appreciate the power of this important tactic. But, in the relatively high fixed cost world of chemical production, is this the best way to drive enterprise value from digital? Simple math indicates that this isn’t the case.

Consider this example: For a hypothetical company, 25% of revenue is spent on raw materials, 10% on other variable costs (energy, shift labor, etc.), and 35% on relatively fixed costs, yielding 30% gross profit (GP). In this scenario, any product manager would inherently know that more GP can be driven by growing volume and revenue. In this case, a 10% volume increase drives 21% more gross profit (365 versus 300). To achieve the same net benefit (assuming the cost of raw materials doesn’t change), a 10% reduction in fixed costs would still require a 30% decrease in other variable costs. This is very challenging; fixed costs are very difficult to decrease without costly write-downs, and non-raw-material-related variable costs simply don’t give you enough leverage.

So why are most companies investing in operational efficiency when it is clear that growing revenue drives more profit than cutting costs? There are three potential answers:

  1. Operational efficiency is well understood and appreciated. Digital initiatives in this area generally target clearly defined processes and issues that are familiar to people from the production line to the boardroom. Granted, IoT, predictive maintenance, augmented reality/wearables, and advanced analytics are complex technologies. However, within the context of operational efficiency, they can be applied to clearly defined use cases that impact a relatively narrow scope in a company. In short, it is far easier to test and validate key assumptions by focusing on processes and people within a controlled environment. And these early initiatives build capability and muscle memory to make future endeavors easier.
  1. Growing volume/revenue is notoriously difficult for chemical companies. Chemical leaders understand the correlation between better products, services, customer experience, and increased revenue. But there is great skepticism regarding the role digital can play in this arena. The truth is that most chemical companies are relatively uncomfortable with changing how they engage with customers and how they compete. The true capability of digital is not yet fully recognized or embraced.
  1. Collaboration across the value chain is relatively weak. Most activity between chemical suppliers and their customers are arms-length transactions. Few chemical companies actually have rich dialogues with their customers, and there is relatively little emphasis on mutual value generation. And, the same is true in reverse: most companies that buy chemical products can’t easily envision why their supplier would want or need to be more engaged.

The case for a broad digital agenda

Does this mean that companies should continue to focus digital on operational excellence? No. I’ve witnessed firsthand how exploring new business models and rethinking customer engagement are driving surprising results. Bringing chemical suppliers and their customers together in design thinking workshops is yielding tremendous insights and opportunities to create and share value. In some cases, the simple act of discussing digital innovation concepts across the supplier-customer relationship actually reveals issues and opportunities about products and services that have never been recognized. It is clear that this dialogue should strengthen and continue.

The great news is that many operational efficiency initiatives can (and should) be extended to address customer engagement and even new business model initiatives. Two potential examples:

  • Expand predictive maintenance into predictive quality: Improving yield, reducing scrap, and optimizing inputs all drive significant cost savings. However, this also forms the basis for entirely new business models and customer engagement. Advanced technical service and micro-product differentiation are just a couple of ways that companies are helping their own customers realize higher value – thereby driving a higher share of wallet or improved pricing.
  • Expand improved order confirmation into differentiated service policies and outcome-based models: Customer service representatives and supply chain personnel are eagerly embracing new ways to confirm customer orders and deliver on their promises. Digital enables much greater visibility into the real-time situation of inventory, production, and logistics so that effective order commitments can be made in real time. But, this can be taken much further. Why do service policies (e.g., minimum order quantities, lead times, shipping conditions, etc.) remain static when every customer has different needs and preferences? Through digital customer engagement, there are opportunities for customers to rethink how they define service policy so they can differentiate themselves and capture higher pricing or share of wallet. Taken a step further, this forms the basis for shifting towards billing for outcomes instead of deliveries.

Without a doubt, chemical companies should continue to focus on operational excellence initiatives. However, I believe that companies risk leaving the majority of potential business value on the table unless they recognize and address the revenue upside tied to these efforts. This is not easy, and it certainly makes things far more complicated. But other industries have already proven that the case for action is strong.

Learn about The Essentials of Process Digitization Excellence.

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About Rich Seltz

Rich is a Vice President of Digital Transformation at SAP with emphasis on the chemicals and industrial sector. He works with leading companies to understand and exploit digital opportunities. He brings extensive experience as a former global CIO, supply chain leader, and general manager in the chemicals industry.

Fordlandia And The End Of The Vertically Integrated Company

James Marland

At River Rouge, Michigan, Henry Ford set up a company that would produce a million tractors a year. It was to include a blast furnace that would allow him to bring iron ore in on boats and turn the ore into steel, then into the tractors’ component parts, and the tractors would drive out of the other end. The plant also had shipyards, sawmills, concrete plants, and tanneries; this process was called “vertical integration.”

Ford did not want to be dependent on any outside suppliers at all. But there was one raw material that he did not control: rubber, which was controlled in Malaya and Sri Lanka by British agents.

So in 1927, Henry Ford, now the richest man in the world, bought a tract of land twice the size of Delaware in the Brazilian Amazon. His intention was to grow rubber for the wheels for his new Model T cars. In some ways, this was just an extension of his assembly line, one which now started in the fertile soil of the Amazon.

It ended in disaster, and the shells of his houses, chapels, schools, and hospitals can still be seen poking out of the resurgent rainforest. For some, this ended the vision of the vertically integrated company, with raw materials coming in one end and finished goods coming out of the other.

What we see now could not be more different. Companies often own no assets, buy no raw material, and hardly have anyone on the payroll. Apple doesn’t make anything. Facebook’s main assets are the habits and preferences of its customers. Boeing doesn’t make the cockpit on its own aircraft.

But many IT systems are still set up for the age of the vertically integrated company, because they focus only on the processes inside a company. But with most of the value created externally, this approach will always be inferior to a network-based value chain management approach, where the vital assets, intellectual property, and information from customers, suppliers, and stakeholders can be managed as effectively as Henry Ford managed his factories.

You don’t need to wait: Ariba Network is already doing with companies like Coca-Cola, FMC, Microsoft, Emirates, and BASF. Learn how Ariba is powering the world’s global supply chain.

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James Marland

About James Marland

James is responsible for defining and rolling out strategies for the Network with particular focus on Europe. He joined Ariba at the launch of the Ariba Network in 1998 after previously being a Solution Consultant at SAP America. In addition he has held the position of Director of Algorithms at Vendavo, an SAP Partner in the area of Pricing. He has a Bachelor of Science degree in Mathematics from Southampton University. Follow James's twitter feed at @JamesMarland

Digital Transformation Outside – And Inside – The Box

Emma Reeve

A product’s packaging can be as important as the merchandise inside it. Effective packaging reflects the product’s quality and promotes the brand’s identity. Who hasn’t taken notice of an attractive, well-designed package and thought more highly of the brand behind it?

That crucial role of product packaging has a growing number of brands turning to packaging expert Marvinpac for the best packaging solutions. That’s good news for the company, which in the past few years has tripled its customer count.

But with growth comes challenges, as Jan Vrátil, CEO of Marvinpac CZ, is the first to acknowledge. “We are working with big international companies, and it’s always a challenge, because they are usually the leaders in the market … and they expect the same from their partners,” Vrátil says. “[So] you need [to] continuously innovate your service.”

To achieve that goal, Marvinpac turned to an in-memory computing platform for greater speed and accuracy, end-to-end supply chain traceability, and the flexibility and scalability to respond to customer needs.

Packaged fast, packaged right

Founded in 1999, Marnivpac is a leading provider of “contract packing” for the food, cosmetics, chemicals, and other industries. Its 500 employees in Switzerland and the Czech Republic pack 40 million products a year.

When Marvinpac opened its Czech facility in 2010, it was still a small company with 25 workers. But as customers pushed for more sophisticated services, the company saw opportunities for rapid growth. To respond, it knew it needed to replace manual, time-consuming, and error-prone activities with digitized, automated, and accurate processes built on a reliable and scalable IT platform.

“The company is growing more or less 50% each year,” Vrátil notes. “So for me, one of the challenges is to keep the company stable and make the process stable.”

By leveraging the platform, Marvinpac was able to standardize and simplify production processes. As a result, it could actually accommodate more complexity. “At the beginning, we had dedicated lines for dedicated customers,” Vrátil explains. But as the company gained clients, production became more complex. “We started to share the lines among customers and among products. And the technology enabled us to make this happen.”

Today, production is up an astounding 600%. Yet delivery accuracy is an enviable 99%. The secret was simplification through digitization. “We now have the key element to absorb more complexity,” Vrátil says.

Digitized from cradle to grave

In fact, digitization is no longer an option. As Marvinpac’s customers digitized, they demanded the same from Marvinpac so they could benefit from real-time connectivity and end-to-end transparency.

This traceability became an imperative as Marvinpac entered the food and cosmetics industries. Customers had high standards for quality assurance, and they needed accurate, fast visibility up and down the supply chain.

“Nothing ruins the relationship more with the customer than the wrong data,” Vrátil points out. “If you have wrong data, you cannot develop the business. [So] the main idea was to have all the processes under one environment, to have quick access to data, and to be able to provide the relevant information to the customers.”

That’s what Marvinpac is now delivering. “Today we are talking about full traceability everywhere,” Vrátil says.

Growing with the customer

Marvinpac’s customers often come calling when they need to get a product to market quickly. So the company needs the flexibility and scalability to get new production up and running fast. It might then need to scale back if the customer takes production in house, or to maintain that volume if the customer continues to outsource.

Vrátil reports that the in-memory computing platform is supporting such agility. It’s also enabling a more flexible supply chain as the company sources more materials from lower-cost markets in Asia. At the same time, the software has allowed Marvinpac to slash lead times by half and achieve 98% availability of raw materials.

For Vrátil, the solution has enabled him to focus on strategic decisions rather than operational tasks. Staff are empowered to solve day-to-day problems themselves so Vrátil and other leadership can plan for the future.

“We hope to grow around the world,” Vrátil says. With the implementation, he believes it will be simple to replicate systems in new markets and then rapidly expand to meet new demand. “If you have data you can trust and you have tools where you can analyze them,” he concludes, “you can continuously innovate your services.”

Learn more about how Marvinpac’s Jan Vrátil and other leaders are using SAP solutions to help their businesses run live. Watch our exclusive “Leaders Are Live” videos.

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Emma Reeve

About Emma Reeve

Emma Reeve has 20 years of experience creating world-class marketing initiatives that focus on customer and audience experience for technology, finance and pharmaceutical industries. She is currently the Global VP of Storytelling for SAP driving customer experience through storytelling. Prior to SAP, she has led strategic audience engagement on both the corporate and agency side from interactive storytelling; brand communications; digital creative and gaming; advertising; sponsorships and partnerships; branded events; interactive media; e-commerce; and social media strategy. While integrating storytelling as a key tenant professionally, Reeve has also used it as a tool is raising awareness philanthropically. She tells personal stories of women in Rwanda and their path towards hope through skills training, education and community support, while inciting a movement that encourages people to get involved in being part of the change in the world. Reeve communicates strongly her passion that storytelling can engage anyone to empathize, take action, make decisions and more - but at its core it is at the center of making change.

The Blockchain Solution

By Gil Perez, Tom Raftery, Hans Thalbauer, Dan Wellers, and Fawn Fitter

In 2013, several UK supermarket chains discovered that products they were selling as beef were actually made at least partly—and in some cases, entirely—from horsemeat. The resulting uproar led to a series of product recalls, prompted stricter food testing, and spurred the European food industry to take a closer look at how unlabeled or mislabeled ingredients were finding their way into the food chain.

By 2020, a scandal like this will be eminently preventable.

The separation between bovine and equine will become immutable with Internet of Things (IoT) sensors, which will track the provenance and identity of every animal from stall to store, adding the data to a blockchain that anyone can check but no one can alter.

Food processing companies will be able to use that blockchain to confirm and label the contents of their products accordingly—down to the specific farms and animals represented in every individual package. That level of detail may be too much information for shoppers, but they will at least be able to trust that their meatballs come from the appropriate species.

The Spine of Digitalization

Keeping food safer and more traceable is just the beginning, however. Improvements in the supply chain, which have been incremental for decades despite billions of dollars of technology investments, are about to go exponential. Emerging technologies are converging to transform the supply chain from tactical to strategic, from an easily replicable commodity to a new source of competitive differentiation.

You may already be thinking about how to take advantage of blockchain technology, which makes data and transactions immutable, transparent, and verifiable (see “What Is Blockchain and How Does It Work?”). That will be a powerful tool to boost supply chain speed and efficiency—always a worthy goal, but hardly a disruptive one.

However, if you think of blockchain as the spine of digitalization and technologies such as AI, the IoT, 3D printing, autonomous vehicles, and drones as the limbs, you have a powerful supply chain body that can leapfrog ahead of its competition.

What Is Blockchain and How Does It Work?

Here’s why blockchain technology is critical to transforming the supply chain.

Blockchain is essentially a sequential, distributed ledger of transactions that is constantly updated on a global network of computers. The ownership and history of a transaction is embedded in the blockchain at the transaction’s earliest stages and verified at every subsequent stage.

A blockchain network uses vast amounts of computing power to encrypt the ledger as it’s being written. This makes it possible for every computer in the network to verify the transactions safely and transparently. The more organizations that participate in the ledger, the more complex and secure the encryption becomes, making it increasingly tamperproof.

Why does blockchain matter for the supply chain?

  • It enables the safe exchange of value without a central verifying partner, which makes transactions faster and less expensive.
  • It dramatically simplifies recordkeeping by establishing a single, authoritative view of the truth across all parties.
  • It builds a secure, immutable history and chain of custody as different parties handle the items being shipped, and it updates the relevant documentation.
  • By doing these things, blockchain allows companies to create smart contracts based on programmable business logic, which can execute themselves autonomously and thereby save time and money by reducing friction and intermediaries.

Hints of the Future

In the mid-1990s, when the World Wide Web was in its infancy, we had no idea that the internet would become so large and pervasive, nor that we’d find a way to carry it all in our pockets on small slabs of glass.

But we could tell that it had vast potential.

Today, with the combination of emerging technologies that promise to turbocharge digital transformation, we’re just beginning to see how we might turn the supply chain into a source of competitive advantage (see “What’s the Magic Combination?”).

What’s the Magic Combination?

Those who focus on blockchain in isolation will miss out on a much bigger supply chain opportunity.

Many experts believe emerging technologies will work with blockchain to digitalize the supply chain and create new business models:

  • Blockchain will provide the foundation of automated trust for all parties in the supply chain.
  • The IoT will link objects—from tiny devices to large machines—and generate data about status, locations, and transactions that will be recorded on the blockchain.
  • 3D printing will extend the supply chain to the customer’s doorstep with hyperlocal manufacturing of parts and products with IoT sensors built into the items and/or their packaging. Every manufactured object will be smart, connected, and able to communicate so that it can be tracked and traced as needed.
  • Big Data management tools will process all the information streaming in around the clock from IoT sensors.
  • AI and machine learning will analyze this enormous amount of data to reveal patterns and enable true predictability in every area of the supply chain.

Combining these technologies with powerful analytics tools to predict trends will make lack of visibility into the supply chain a thing of the past. Organizations will be able to examine a single machine across its entire lifecycle and identify areas where they can improve performance and increase return on investment. They’ll be able to follow and monitor every component of a product, from design through delivery and service. They’ll be able to trigger and track automated actions between and among partners and customers to provide customized transactions in real time based on real data.

After decades of talk about markets of one, companies will finally have the power to create them—at scale and profitably.

Amazon, for example, is becoming as much a logistics company as a retailer. Its ordering and delivery systems are so streamlined that its customers can launch and complete a same-day transaction with a push of a single IP-enabled button or a word to its ever-attentive AI device, Alexa. And this level of experimentation and innovation is bubbling up across industries.

Consider manufacturing, where the IoT is transforming automation inside already highly automated factories. Machine-to-machine communication is enabling robots to set up, provision, and unload equipment quickly and accurately with minimal human intervention. Meanwhile, sensors across the factory floor are already capable of gathering such information as how often each machine needs maintenance or how much raw material to order given current production trends.

Once they harvest enough data, businesses will be able to feed it through machine learning algorithms to identify trends that forecast future outcomes. At that point, the supply chain will start to become both automated and predictive. We’ll begin to see business models that include proactively scheduling maintenance, replacing parts just before they’re likely to break, and automatically ordering materials and initiating customer shipments.

Italian train operator Trenitalia, for example, has put IoT sensors on its locomotives and passenger cars and is using analytics and in-memory computing to gauge the health of its trains in real time, according to an article in Computer Weekly. “It is now possible to affordably collect huge amounts of data from hundreds of sensors in a single train, analyse that data in real time and detect problems before they actually happen,” Trenitalia’s CIO Danilo Gismondi told Computer Weekly.

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials.

The project, which is scheduled to be completed in 2018, will change Trenitalia’s business model, allowing it to schedule more trips and make each one more profitable. The railway company will be able to better plan parts inventories and determine which lines are consistently performing poorly and need upgrades. The new system will save €100 million a year, according to ARC Advisory Group.

New business models continue to evolve as 3D printers become more sophisticated and affordable, making it possible to move the end of the supply chain closer to the customer. Companies can design parts and products in materials ranging from carbon fiber to chocolate and then print those items in their warehouse, at a conveniently located third-party vendor, or even on the client’s premises.

In addition to minimizing their shipping expenses and reducing fulfillment time, companies will be able to offer more personalized or customized items affordably in small quantities. For example, clothing retailer Ministry of Supply recently installed a 3D printer at its Boston store that enables it to make an article of clothing to a customer’s specifications in under 90 minutes, according to an article in Forbes.

This kind of highly distributed manufacturing has potential across many industries. It could even create a market for secure manufacturing for highly regulated sectors, allowing a manufacturer to transmit encrypted templates to printers in tightly protected locations, for example.

Meanwhile, organizations are investigating ways of using blockchain technology to authenticate, track and trace, automate, and otherwise manage transactions and interactions, both internally and within their vendor and customer networks. The ability to collect data, record it on the blockchain for immediate verification, and make that trustworthy data available for any application delivers indisputable value in any business context. The supply chain will be no exception.

Blockchain Is the Change Driver

The supply chain is configured as we know it today because it’s impossible to create a contract that accounts for every possible contingency. Consider cross-border financial transfers, which are so complex and must meet so many regulations that they require a tremendous number of intermediaries to plug the gaps: lawyers, accountants, customer service reps, warehouse operators, bankers, and more. By reducing that complexity, blockchain technology makes intermediaries less necessary—a transformation that is revolutionary even when measured only in cost savings.

“If you’re selling 100 items a minute, 24 hours a day, reducing the cost of the supply chain by just $1 per item saves you more than $52.5 million a year,” notes Dirk Lonser, SAP go-to-market leader at DXC Technology, an IT services company. “By replacing manual processes and multiple peer-to-peer connections through fax or e-mail with a single medium where everyone can exchange verified information instantaneously, blockchain will boost profit margins exponentially without raising prices or even increasing individual productivity.”

But the potential for blockchain extends far beyond cost cutting and streamlining, says Irfan Khan, CEO of supply chain management consulting and systems integration firm Bristlecone, a Mahindra Group company. It will give companies ways to differentiate.

“Blockchain will let enterprises more accurately trace faulty parts or products from end users back to factories for recalls,” Khan says. “It will streamline supplier onboarding, contracting, and management by creating an integrated platform that the company’s entire network can access in real time. It will give vendors secure, transparent visibility into inventory 24×7. And at a time when counterfeiting is a real concern in multiple industries, it will make it easy for both retailers and customers to check product authenticity.”

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials. Although the key parts of the process remain the same as in today’s analog supply chain, performing them electronically with blockchain technology shortens each stage from hours or days to seconds while eliminating reams of wasteful paperwork. With goods moving that quickly, companies have ample room for designing new business models around manufacturing, service, and delivery.

Challenges on the Path to Adoption

For all this to work, however, the data on the blockchain must be correct from the beginning. The pills, produce, or parts on the delivery truck need to be the same as the items listed on the manifest at the loading dock. Every use case assumes that the data is accurate—and that will only happen when everything that’s manufactured is smart, connected, and able to self-verify automatically with the help of machine learning tuned to detect errors and potential fraud.

Companies are already seeing the possibilities of applying this bundle of emerging technologies to the supply chain. IDC projects that by 2021, at least 25% of Forbes Global 2000 (G2000) companies will use blockchain services as a foundation for digital trust at scale; 30% of top global manufacturers and retailers will do so by 2020. IDC also predicts that by 2020, up to 10% of pilot and production blockchain-distributed ledgers will incorporate data from IoT sensors.

Despite IDC’s optimism, though, the biggest barrier to adoption is the early stage level of enterprise use cases, particularly around blockchain. Currently, the sole significant enterprise blockchain production system is the virtual currency Bitcoin, which has unfortunately been tainted by its associations with speculation, dubious financial transactions, and the so-called dark web.

The technology is still in a sufficiently early stage that there’s significant uncertainty about its ability to handle the massive amounts of data a global enterprise supply chain generates daily. Never mind that it’s completely unregulated, with no global standard. There’s also a critical global shortage of experts who can explain emerging technologies like blockchain, the IoT, and machine learning to nontechnology industries and educate organizations in how the technologies can improve their supply chain processes. Finally, there is concern about how blockchain’s complex algorithms gobble computing power—and electricity (see “Blockchain Blackouts”).

Blockchain Blackouts

Blockchain is a power glutton. Can technology mediate the issue?

A major concern today is the enormous carbon footprint of the networks creating and solving the algorithmic problems that keep blockchains secure. Although virtual currency enthusiasts claim the problem is overstated, Michael Reed, head of blockchain technology for Intel, has been widely quoted as saying that the energy demands of blockchains are a significant drain on the world’s electricity resources.

Indeed, Wired magazine has estimated that by July 2019, the Bitcoin network alone will require more energy than the entire United States currently uses and that by February 2020 it will use as much electricity as the entire world does today.

Still, computing power is becoming more energy efficient by the day and sticking with paperwork will become too slow, so experts—Intel’s Reed among them—consider this a solvable problem.

“We don’t know yet what the market will adopt. In a decade, it might be status quo or best practice, or it could be the next Betamax, a great technology for which there was no demand,” Lonser says. “Even highly regulated industries that need greater transparency in the entire supply chain are moving fairly slowly.”

Blockchain will require acceptance by a critical mass of companies, governments, and other organizations before it displaces paper documentation. It’s a chicken-and-egg issue: multiple companies need to adopt these technologies at the same time so they can build a blockchain to exchange information, yet getting multiple companies to do anything simultaneously is a challenge. Some early initiatives are already underway, though:

  • A London-based startup called Everledger is using blockchain and IoT technology to track the provenance, ownership, and lifecycles of valuable assets. The company began by tracking diamonds from mine to jewelry using roughly 200 different characteristics, with a goal of stopping both the demand for and the supply of “conflict diamonds”—diamonds mined in war zones and sold to finance insurgencies. It has since expanded to cover wine, artwork, and other high-value items to prevent fraud and verify authenticity.
  • In September 2017, SAP announced the creation of its SAP Leonardo Blockchain Co-Innovation program, a group of 27 enterprise customers interested in co-innovating around blockchain and creating business buy-in. The diverse group of participants includes management and technology services companies Capgemini and Deloitte, cosmetics company Natura Cosméticos S.A., and Moog Inc., a manufacturer of precision motion control systems.
  • Two of Europe’s largest shipping ports—Rotterdam and Antwerp—are working on blockchain projects to streamline interaction with port customers. The Antwerp terminal authority says eliminating paperwork could cut the costs of container transport by as much as 50%.
  • The Chinese online shopping behemoth Alibaba is experimenting with blockchain to verify the authenticity of food products and catch counterfeits before they endanger people’s health and lives.
  • Technology and transportation executives have teamed up to create the Blockchain in Transport Alliance (BiTA), a forum for developing blockchain standards and education for the freight industry.

It’s likely that the first blockchain-based enterprise supply chain use case will emerge in the next year among companies that see it as an opportunity to bolster their legal compliance and improve business processes. Once that happens, expect others to follow.

Customers Will Expect Change

It’s only a matter of time before the supply chain becomes a competitive driver. The question for today’s enterprises is how to prepare for the shift. Customers are going to expect constant, granular visibility into their transactions and faster, more customized service every step of the way. Organizations will need to be ready to meet those expectations.

If organizations have manual business processes that could never be automated before, now is the time to see if it’s possible. Organizations that have made initial investments in emerging technologies are looking at how their pilot projects are paying off and where they might extend to the supply chain. They are starting to think creatively about how to combine technologies to offer a product, service, or business model not possible before.

A manufacturer will load a self-driving truck with a 3D printer capable of creating a customer’s ordered item en route to delivering it. A vendor will capture the market for a socially responsible product by allowing its customers to track the product’s production and verify that none of its subcontractors use slave labor. And a supermarket chain will win over customers by persuading them that their choice of supermarket is also a choice between being certain of what’s in their food and simply hoping that what’s on the label matches what’s inside.

At that point, a smart supply chain won’t just be a competitive edge. It will become a competitive necessity. D!


About the Authors

Gil Perez is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Tom Raftery is Global Vice President, Futurist, and Internet of Things Evangelist, at SAP.

Hans Thalbauer is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Dan Wellers is Global Lead, Digital Futures, at SAP.

Fawn Fitter is a freelance writer specializing in business and technology.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

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Four Retail Technology Trends To Take Off In 2018

Shaily Kumar

Over the past few years, technology has seen a significant shift from cyclical, invention-led spending on point solutions to investments targeting customer-driven, end-to-end value. The next wave of disruption and productivity improvements is here, which means a huge opportunity for digital-focused enterprises – if you are following the right roadmap.

Technology trends have significant potential over the next few years. Establishing a digital platform will not only set the stage for business innovation to provide competitive advantage, but it will also create new business models that will change the way we do business. Technology trends in 2018 will lay the foundation for the maturity of innovative technologies like artificial intelligence and machine learning and will prepare both businesses and shoppers to be ready for their consumption.

Like any other industry, retail is being disrupted. It is no longer enough to simply stock racks with alluring products and wait for customers to rush through the door. Technological innovation is changing the way we shop. Customers can find the lowest price for any product with just a few screen touches. They can read online reviews, have products sent to their home, try them, and return anything they don’t want – all for little or nothing out of pocket. If there are problems, they can use social networks to call out brands that come up short.

Retailers are making their products accessible from websites and mobile applications, with many running effective Internet business operations rather than brick-and-mortar stores. They convey merchandise to the customer’s front entry and are set up with web-based networking media if things turn out badly.

Smart retailers are striving to fulfill changing customer needs and working to guarantee top customer service regardless of how their customer interacts with them.

2017 saw the development of some progressive technology in retail, and 2018 will be another energizing year for the retail industry. Today’s informed customers expect a more engaging shopping experience, with a consistent mix of both online and in-store recommendations. The retail experience is poised to prosper throughout next couple of years – for retailers that are prepared to embrace technology.

Here are four areas of retail technology I predict will take off in 2018:

In-store GPS-driven shopping trolleys

Supermarkets like Tesco and Sainsbury’s now enable their customers to scan and pay for products using a mobile app instead of waiting in a checkout line. The next phase of this involves intelligent shopping trolleys, or grocery store GPS: Customers use a touch screen to load shopping lists, and the system helps them find the items in the store. Customers can then check off and pay for items as they go, directly on-screen. These shopping trolleys will make their way into stores around the last quarter of 2018.

Electronic rack edge names

Electronic rack edge names are not yet broadly utilized, but this could change in 2018 as more retailers adopt this technology. Currently, retail workers must physically select and update printed labels to reflect changes in price, promotions, etc. This technology makes the process more efficient by handling such changes electronically.

Reference point technology

Despite the fact that it’s been around since 2013, reference point technology hasn’t yet been utilized to its fullest potential. In the last few years, however, it’s started to pick up in industries like retail. It’s now being used by a few retailers for area-based promotions.

Some interesting uses I’ve observed: Retailers can send messages to customers when they’re nearby a store location, and in-store mannequins can offer information about the clothing and accessories they’re wearing. I anticipate that this innovation will take off throughout 2018 and into 2019.

Machine intelligence

The technological innovations describe above will also provide retailers with new data streams. These data sources, when merged with existing customer data, online, and ERP data, will lead to new opportunities. Recently Walmart announced it would begin utilizing rack examining robots to help review its stores. The machines will check stock, prices, and even help settle lost inventory. It will also help retailers learn more about changing customer behavior in real time, which will boost engagement.

Clearly, technology and digital transformation in retail have changed the way we live and shop. 2018 will see emerging technologies like machine learning and artificial intelligence using structured and unstructured data to deliver innovation. As technology develops, it will continue to transform and enhance the retail experience.

For more insight on e-commerce, see Cognitive Commerce In The Digital World: Enhancing The Customer Journey.

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Shaily Kumar

About Shaily Kumar

Shailendra has been on a quest to help organisations make money out of data and has generated an incremental value of over one billion dollars through analytics and cognitive processes. With a global experience of more than two decades, Shailendra has worked with a myriad of Corporations, Consulting Services and Software Companies in various industries like Retail, Telecommunications, Financial Services and Travel - to help them realise incremental value hidden in zettabytes of data. He has published multiple articles in international journals about Analytics and Cognitive Solutions; and recently published “Making Money out of Data” which showcases five business stories from various industries on how successful companies make millions of dollars in incremental value using analytics. Prior to joining SAP, Shailendra was Partner / Analytics & Cognitive Leader, Asia at IBM where he drove the cognitive business across Asia. Before joining IBM, he was the Managing Director and Analytics Lead at Accenture delivering value to its clients across Australia and New Zealand. Coming from the industry, Shailendra held key Executive positions driving analytics at Woolworths and Coles in the past.