Inside Logistics

Disruption = ‘always-on’ supply chains

MHI report looks at technologies that keep the supply chain moving

June 14, 2016
by Emily Atkins

A host of potentially disruptive technologies is creating digital “always-on” supply chains that will provide better efficiency, visibility and customer service across a variety of industries, while challenging companies to find the talent to manage them.

The 2016 MHI Annual Industry Report, Accelerating Change: How Innovation is Driving Digital “Always-On” Supply Chains, offers insights into trends and technologies that are having a dramatic impact on supply chains and the people who run them.

“The ‘always-on’ supply chain has the potential to deliver massive economic and environmental rewards for our industry and society,” said George Prest, CEO of MHI. “It can boost productivity and sustainability, drive new markets, encourage innovation and create new, high-paying jobs. As with all change, the devil is in the details.”

The report explores eight key emerging technologies, including updates on their adoption rates, their ability to create competitive advantage and case study examples on how companies are using them. It also looks at the barriers to implementation of innovations and existing and future levels of investment in them.

The report offers recommendations for supply chain leaders to help manage this change.

For the third year running, supply chain leaders identified “hiring and retaining a skilled supply chain workforce” as the biggest challenge facing supply chain professionals. Fully 58 percent of respondents cited this challenge.

Customer demand for faster response times was cited by 56 percent, and customer demand for lower delivery costs was cited by 56 percent.

The industry leaders surveyed viewed the eight technologies studied as an even greater source of competitive advantage and disruption than they were just one year ago. The technologies are:

  • Predictive analytics
  • Robotics and automation
  • Sensors and automatic identification
  • Wearables and mobile technology
  • Driverless vehicles and drones
  • Inventory and network optimization tools
  • Cloud computing and storage
  • 3D printing

At least 83 percent of survey respondents (up from 75 percent last year) believe at least one of the eight technologies in the report could be a source of competitive advantage or disruption for supply chains in the next 10 years.

“The innovations driving ‘always-on’ supply chains are initially disruptive, but they can empower firms to optimize processes and improve efficiency, creating a more flexible experience for workers and driving measurable business outcomes,” said Scott Sopher, principal at Deloitte Consulting LLP. “According to the survey findings, adoption of the technologies covered in this report will grow dramatically over the next six to 10 years.”

Again this year, industry leaders identified “lack of a clear business case,” as the major barrier to investments in new technologies, with 43 percent citing it—up from 36 percent last year. This was followed closely by “lack of adequate talent to use technologies effectively”, cited by 38 percent, and “cultural aversion to risk”, cited by 35 percent of respondents.

Despite these barriers, more manufacturing and supply chain companies are increasing investments in these technologies. New technology investments over $1 million have increased from last year’s survey. Fifty-two percent of this year’s respondents said they planned investments in excess of that amount (versus 49 percent in the 2015 study).

Three percent of respondents said their companies would spend at least $100 million on new technologies over the next two years.

Industry leaders surveyed identified four top technologies that provide a competitive advantage for “Always-On” supply chains:

  • Robotics and Automation (51 percent of respondents cited, up from 39 percent last year);
  • Inventory and Network Optimization Tools (cited by 48 percent of respondents, up from 45 percent last year);
  • Sensors and Automatic Identification (cited by 47 percent of respondents, up from 42 percent last year);
  • Predictive Analytics (cited by 44 percent of respondents, up from 38 percent last year).

The survey uncovered shifts in the growth of some technologies. Namely, robotics and automation and driverless vehicles and drones are making bigger impacts on the supply chain sooner than previously predicted, with both technologies seeing a 12 percent growth spike over last year’s report.

This year, 51 percent of survey respondents said that robotics and automation has the potential to either create competitive advantage or be a disruptive force in their industry, and 77 percent said it will have some impact. Adoption is currently 35 percent. It is expected to rise to 74 percent over the next six to 10 years.

While driverless vehicles and drones are still emerging technologies, 59 percent of survey respondents said they are having some impact on supply chains, and 37 percent said they have the potential to provide competitive advantage or disruption. Adoption rates are expected to grow to 50 percent over the next six to 10 years.

Cloud computing and storage and sensors and automatic identification are leading technologies in terms of current adoption rate—with 45 percent and 44 percent, respectively. But looking at the next six to 10 years, six of the eight technologies covered in this report have predicted adoption rates of 74 percent or higher.

Only driverless vehicles and drones and 3D printing have lower predicted adoption rates over the six-to-10 year time horizon, but they are still 50 percent and 48 percent, respectively. This accelerated pace of change will dramatically alter the way supply chains work and how they are managed in the future.

The report concludes that while retail and consumer companies get the most publicity in discussions about disruptive technologies, they will impact all industries including manufacturers and business-to-business enterprises. The report identifies potential benefits of these technologies across a wide range of industries.

Recommendations for supply chain leaders
The study makes several recommendations for companies looking to remain competitive in the manufacturing and supply chain space, including:

  • Invest in, test and learn these technologies
  • Partner with solution suppliers, universities and trade groups
  • Determine where to start generating data
  • Determine how current your data needs to be
  • Make sense of the data so you can act on it
  • Nothing is more important than talent management

“Of all the recommendations we offer leaders in the supply chain industry, the most important is the need to proactively manage talent,” Prest said. “The growth in digital, ‘always-on’ supply chains will only widen the talent gap that already exists in our industry. We need to train a new breed of supply chain professional who has technical, analytical and problem-solving skills. Much of MHI’s work is focused on providing resources to help the industry close the talent gap through education and training programs and industry collaborations.”

The study is based, in part, on responses from 900 supply chain industry leaders.