Let’s face it: Supply chains have a reputation for being boring, complicated, and entirely un-sexy. But with the advent of the digital economy, and as businesses enable the extended supply chain as part of their digital transformation strategies, that is all about to change.
The extended supply chain driving business today is certainly not your grandfather’s supply chain. There are huge opportunities and ramifications associated with the extended supply chain. According to the SCM World 2014 Supply Chain officer survey, 49% of supply chain executives expect digital supply chains to be both disruptive and important within the next three years.
So will our kids come home from school someday soon and tell us that they want to be supply chain executives when they grow up? That remains to be seen, but here are seven reasons why supply chains are sexy:
1. Amazon one-hour delivery
Same-day delivery is so last year. If your business wants to compete with Amazon now or in the near future, your supply chain will have to be prepared to deliver in an hour! Last year, Amazon quietly rolled out no fewer than 43 smaller urban facilities (Amazon Prime Now hubs and AmazonFresh delivery stations) in the United States, with the goal of enabling front-door delivery in 60 minutes or less. Amazon also opened up four university bookstores and entered into the world of retail brick and mortar with big plans to open 300-400 new bookstores this year. Rest assured that this is just the tip of the iceberg, as the company is only getting started on its national quick-response assault.
2. 3D printing
In many ways, 3D printing represents the other extreme of traditional manufacturing. It produces objects by adding, rather than subtracting, material and allows us to seemingly create objects such as shoes and toys out of thin air. Supply chains have typically been all about warehousing and shifting products outwards from the point of manufacture.
Consumers today love to customize everything and anything, from iPhone cases to chocolate to sneakers. And 3D printing makes all of this both possible and affordable. Printing your Instagram photos on chocolate bars and your jersey number on your basketball shoes is undeniably sexy.
3. Driverless cars
Self-driving cars, also known as autonomous vehicles (AV), represent an array of exciting possibilities for economic change. On a personal level, they appeal to those of us who strongly dislike driving. They also have significant potential impacts on the extended supply chain.
Accordingly to a 2015 McKinsey study, AV technologies could help to optimize the industry supply chains and logistics operations of the future, as players employ automation to increase efficiency and flexibility. AVs, in combination with smart technologies, could reduce labor costs while boosting equipment and facility productivity. What’s more, a fully automated and lean supply chain can help minimize load sizes and stocks by leveraging smart distribution technologies and smaller AVs.
Remember “The Dress?” The outcome of this short-lived but high-profile event went beyond Internet noise to significant sales revenue. The dress manufacturer, Roman Originals, presumably never knew what hit it when thousands of orders flooded in from all over the world for the $77 dress. Such viral fashion phenomena have become both a blessing and a curse for the fashion industry. Can they be predicted or, at the very least, anticipated? How can production and inventory fulfillment be ramped up quickly to meet demand? Brands with healthy and responsive extended supply chains will be better prepared and able to meet consumer demand.
5. Social media
With the digital economy comes digital demand signals, both structured and unstructured, from customers placing orders to making comments via social media on mobile devices. The ability to capture and analyze this new, unstructured “sentiment” data is a key capability in getting closer to the customer and fulfilling real-time demand.
Demand is exceeding supply for many resources around the world. Raw materials such as water, minerals, oil, and gas are key components to many supply chains, but it is often challenging to obtain them. We also see an aging and shrinking workforce that struggles to adapt to the changing skillsets required by the extended supply chain, creating a form of human resource scarcity.
Sustainability in the supply chain is a hot topic in boardrooms all over the world, as executives have deemed it as essential to delivering long-term profitability. It has replaced monetary cost, value, and speed as the dominant topic of discussion among purchasing and supply professionals.
7. Internet of Things
Companies are embedding sensors in their products and, as a result, are becoming more and more technology-focused, hiring software engineers and re-thinking the value delivered by their products. For example, John Deere tractors are now equipped with sensors to transmit moisture and temperature data from the fields.
The Internet of Things (IoT) and Industry 4.0 are changing traditional business models by connecting people, products, and assets. Manufacturers are investigating how these new technologies can help their customers get more value and how new business engagements can change established business models.
What’s next for supply chains?
In the connected world, where every company is rapidly becoming a technology company, smarter products, assets, and services will drive new processes and opportunities across the extended supply chain.
If you would like to hear more about the future of supply chains, I invite you to attend an upcoming Webinar on February 18: “Disruptions in Supply Chain – Are You Ready for 2016?” In the session, Simon Ellis of IDC and Hans Thalbauer, SVP for Extended Supply Chain at SAP, will discuss:
- Why the current supply chain is poorly equipped to manage high levels of customization.
- Why the future of the supply chain is one of an outwardly networked and collaborative organization that will sit at the center of three lobes – a demand network (“demand-aware”), a supply network (“supply-visible”), and a product network (“innovation-connected”).
- How cloud-based business-to-business platforms, and other technologies, are key enablers to reimagining operations and the supply chain.