Three parts of a supply chain.
To start a new year, I have been reading various commentators predictions of ‘new’ and different supply chains. But, think back over 2016 concerning the new and exiting supply chain events which occurred – did they change your supply chains? Change takes time and perseverance.
When discussing change in supply chains, recognise that a supply chain has three parts; the:
- underlying processes and principles. An example is buying and selling items; the speed at which the buying, paying and delivery are done does not change the underlying process – place an order for an item that meets a need, agree delivery parameters and make and accept payment. For example, eCommerce is not ‘new’, but a higher speed mail-order process. The advent of new technologies in the form of railways, a parcel post system and the telegraph enabled the first mail-order businesses to become established in Europe and America from the 1860s. When mail-order companies opened their own retail shops, the warehouse supplied both mail-order customers and the shops – now re-invented (hopefully with more sophistication) as ‘omni-channel’.
- structure – the location of nodes and links in an organisation’s supply network. Rather than efforts to improve operational optimisation and efficiency in supply chains, the structure can be more influenced by changes to currency exchange rates and national government pronouncements concerning tariffs, non-tariff barriers and taxation rules
- technologies used and being considered. Do not assume that a new or developing technology must and will be accepted. So,, not only understand the underlying technology, but more important, what it could achieve for your organisation. Even if benefits are identified, the potential purchase must be internally evaluated against equally strong capital expenditure (Capex) requirements from other parts of the business
Of the three parts, the second is the most likely to undergo change; because changing suppliers and logistics service providers (LSPs) could be considered by senior management as relatively easy to accomplish. But, the revised supply chains would not be seen as ‘new’.
New supply chains
For a ‘new’ supply chain model to be identified requires technologies to support a change in the underlying processes (similar to the introduction of mail-order previously mentioned). From articles I have read, the technologies applicable to supply chains that may underpin ‘new’ supply chains’ are:
- Additive manufacturing: 3D printing using an increasing range of materials. The technology can enable Make to Order (MTO) manufacturing and customisation close to the point of consumption, providing reduced distribution and inventory costs
- Augmented reality: create virtual environments that represent the physical reality. Using technologies such as 3D simulation and visualisation tools may assist planners
- Automated vehicles: Robotics, driverless vehicles and drones. These may reduce logistics cycle times, variability and rework
- Connected devices providing ‘big data’: Intelligent devices, sensors, machine to machine communications (M2M) and the Internet of Things (IoT). These technologies could assist visibility through supply chains
- Predictive analytics and pattern matching of ‘big data’: There are challenges concerning the interpretation capability and accuracy of algorithms; how connected devices communicate, are secured and work together. May lead to enhanced automation of processes and enhance predictive maintenance
- Distributed ledger (sometimes referred to as ‘Blockchain’): allows two or more parties, operating through an open, trusted network to view, track and trace commercial transactions and decisions. Data storage is decentralised and visible for all parties involved; the shared (distributed) ledger structure increases the authenticity (therefore trust) of the viewed information
- Mobile and wearable technologies: Used in large areas, such as distribution centres and large facility maintenance, plus for non-supervised employees i.e. truck drivers. The challenge is to integrate mobile sources of data with more traditional sources
- IT capabilities: Bring your own device (BYOD) and social media, software as a service (SaaS) and cloud based services are examples of IT capabilities which may facilitate remote, ’24×7′ management of logistics and planning of supply chains
While each technology can make an impression in its environment, I consider the three technologies with the capability of changing supply chains are: Additive manufacturing; Connected devices and Distributed ledger. With each in its infancy concerning development and acceptance, it will be more than the five years forecast by pundits before a market penetration figure of eight percent is reached. Marketing literature considers this penetration level is required to more readily gain acceptance by the remaining prospective users for items offered.
So, for the majority of us, read and learn about ‘new’ supply chains, but question all claims concerning rapid acceptance. Allow ‘first mover’ organisations to find the challenges, but where possible and to assist your organisation’s learning, implement non-critical versions of appropriate technologies. While learning about the value of technologies, focus on implementing the critical processes and principles to understand and plan your supply chains, including Sales & Operations Planning (S&OP) – the heart of your organisation.
I enjoyed my recent ‘down under’ summer break, which provided time for me to think through blog topics and eBooks and so keep Learn About Logistics relevant for you, the readers. I hope that your Gregorian or Lunar new year is good one for you personally, because it may be an ‘interesting’ year for those engaged in supply chains.