Realities in the adoption of Supply Chains technologies

Roger OakdenLogistics Management, Procurement, Supply Chains & Supply NetworksLeave a Comment

Supply Chain Analytics

IT needs of different groups

Supply Chain professionals must be aware of current and new technologies that can improve the movement and storage of goods, but also be aware of the realities concerning adoption and implementation.

Each group in a supply chain (shippers, LSPs and product sellers) has a role in many supply chains, but their technology needs will differ, although there will always be overlaps in requirements. For example, the previous blogpost identified developments of three current technologies that are likely to improve supply chain planning and operations for shippers, while reducing the risks concerned with ownership and control of proprietary information.

However, whatever the needs and preferred approach to implementing technologies, supply chain professionals must also take account of realities when considering future IT decisions.

Realities in supply chains

A role of media is to provide information concerning possible future developments; in this case, IT for supply chains. However, journalists and commentators can ‘hype’ a technology that builds expectations among potential buyers. And so, the IT research firm Gartner developed their Hype Cycle. Some realities to consider are:

5G communications: The reality is that standalone 5G networks carrying medium and high frequency traffic (those with the highest charges) are unlikely to be readily available before 2025. This will have an influence on the rate of adopting and implementing Edge computing (discussed in the previous blogpost) that can utilise high frequency 5G.

Artificial Intelligence (AI): for many applications in supply chains, the technology used will be Machine Learning (ML) – the ability to learn and develop from experience without programming i.e. process optimisation. A subset of ML is Neural Networks, that is mainly concerned with pattern matching and identifying outliers to a pattern.

Reading the previous paragraph tells us that to develop AI solutions requires a high level of human intelligence and mathematics capability. The reality will be that except for large multi-nationals, businesses will have difficulty attracting and retaining qualified and knowledgeable AI personnel. It is therefore more likely that AI capability will be embedded in purchased supply chain applications, rather than developed in-house. The skill required of supply chain professionals will therefore be to ask the probing questions concerning the structure of and potential biases within AI algorithms.

eCommerce: there is an emphasises around the supposed demand by consumers for near instant delivery at no cost, but how important is this to consumers? An early 2000 survey of 2000 consumers in Australia found that only 8 per cent of consumers consider that same day home delivery is the most useful choice and only 6 percent of respondents agreed that Click and Collect in 2+ working days is the most useful delivery option.

Also in Australia the Hubbed parcel pick-up and drop-off (PUDO) network with about 2000 locations analysed data derived from more than 2 million parcel collections. The analysis showed that only 36 percent of on-line shoppers collected their parcels on the day of delivery to the collection point. 47 percent collected their parcel between two and four days after notification of delivery and 17 percent waited more than five days to collect.

This indicated that most shoppers choose same-day delivery as more of a guarantee that the delivery will arrive. And collection points are viewed as a secure storage until consumers can collect their parcels at a convenient time.

In recent months, LAL has purchased different items on-line that required delivery. The shortest actual delivery was seven days and longest quote was 12 weeks for a piece of furniture (‘assemble to order’ is not known!). No product was delivered according to the instructions provided.

These two examples indicate a variance between the assumed need and the reality of eCommerce. Assuming that all consumers want near instant delivery has a cost to the seller that is rarely discussed.

Visibility through supply chains is another popular topic. Building Supply Markets Intelligence takes time and incurs costs; but rarely discussed is the additional capability required in an organisation to take corrective action when an event occurs that threatens supply of an item.

Articles about visibility often assume there is equal access and use of technology through a supply chain, but is this correct? A recent study indicates that of the world’s 4,900 ports, 80 percent (mainly the ‘tier 2 and below’ ports) continue to use manual, paper-based processes, whiteboards and Excel spreadsheets to arrange and execute jobs. They also rely on personal interaction and paper-based transactions for shipboard, ship-port interface and port-hinterland based exchanges. This results in issues concerning interoperability, where various systems are incapable of talking to each other.

As this is the situation with ports, it is likely to be similar at level 3 and 4 suppliers, which can be located anywhere. So, even if you are able to identify a tier 4 supplier that ships through a ‘tier 2 or below’ port, it is quite likely that a timely notice will not be received about disruptions in their part of the supply chain.

Blockchain technology is designed to overcome this deficiency and provide visibility of orders. However, Gartner considers that Blockchain technology is currently at the ‘peak of inflated expectations’ in the ‘Hype Cycle’ and will not enter mainstream supply chains until the second half of this decade.

This provides time for supply chain professionals to understand the technology and its potential use in their business. There is also time to identify the minimum requirements, including the capability to scale-up and to validate purchasing contract clauses – that is, ‘smart contracts’.

The next step will be to identify available ‘commercial off the shelf’ (COTS) Blockchain applications and talk with tier 1 suppliers and LSPs to identify the application with most appeal and that would encourage wider adoption.

The nature of supply chains means that businesses at both nodes and links in a supply network have to live with uncertainty. Even if they know about their customers, suppliers and LSPs through each supply chain, the action(s) taken at each node and link in a chain, in response to a disruption (from whatever cause), within or outside the chain, are unpredictable. Also, outside of its tier 1 suppliers and LSPs, a business often has little or no commercial leverage that it can use on its upstream suppliers and LSPs.

Therefore, as you consider the cost/benefit to your supply chains of future investments in IT technologies and applications, the importance of supply chain (procurement, operations planning and logistics) principles will not diminish.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

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