A few weeks ago I discussed some key takeaways from ChainLink Research’s Digital Displacement report, which examined how digital advancements are affecting manufacturers’ products. Today, I want to take a look at the follow-up report, Your Supply Chain Is Calling You. It’s a deep dive into how digital connectedness will impact manufacturers’ supply chains in the future. I recommend that you take a look at the report; it’s well worth the read.
The report estimates that the digital connection between billions of customers and products will drive trillions of transactions. A few takeaways to consider as you explore how this level of digital connectedness will impact your supply chain and your response to the Internet of Things (IoT):
- The simplicity/complexity paradox. It’s a great time to be a consumer. It’s never been easier for your customers to research, price compare or shop. There are infinite choices — in terms of products, as well as delivery options — as a result of companies investing heavily in improving the customer experience. However, what has been designed to simplify the process for consumers has resulted in a complex back-end fulfillment process for retailers (and increasingly, for manufacturers who choose to sell direct). As consumers’ expectations for same-day/next-day and free shipping continue to grow, we’re seeing this complexity shift upstream to manufacturing partners and suppliers due to the increased pressure to ensure this last mile of fulfillment is profitable. Manufacturers will need to be prepared to experiment with new supply chain and logistics strategies — such as providing greater inventory visibility via RFID, offering drop-ship options, or investing in pop-up or seasonal warehouses — to ensure that the last mile is fulfilled intelligently and profitably.
- It’s time to find your 3D glasses. As the digital and physical supply chains converge, the path from order to fulfillment is no longer linear. To make sure the last mile of fulfillment is profitable, manufacturers need to start thinking about their supply chains as a highly flexible and adaptable grid. This grid-based approach creates a multi-directional supply chain network of interconnected decision paths, processes and systems that enables companies to maximize customer focus and profitability. This flexible foundation supports dynamic information sharing with and across trading partners, distribution and fulfillment points, providing internal business units with greater visibility to upstream and downstream nodes (thus breaking down silos). As the adoption of IoT increases, the type and amount of information shared across nodes will grow dramatically. Using the grid-based supply chain approach, manufacturers’ systems will need to connect beyond individual factories — instead interconnecting multiple production facilities, across regions and even continents. Not only will this provide manufacturers with greater flexibility to overcome the challenges inherent in competing in today’s omni-channel environment, but it will also enable them to react quickly when unplanned events occur.
- Big brother is here. Thanks to Big Data, social sharing, search analytics and more, companies now have endless possibilities to get to know their customers better. Plus, IoT promises even more opportunities for consumer insight, as products are designed to transmit information that will impact future supply chain strategies. This is a boon for manufacturers as traditionally they have not had direct access to this type of information. Manufacturers are being enabled to gain access to more contextual information on their customers than ever before; the question is whether their systems and processes are set up to take advantage of this new data to drive value from the technology enhancements.
- Robots are not taking over, at least not yet. The upside to technological innovation is that it is elevating the importance of comprehensive supply chain management to heights not seen before. Supply chain executives now report into the C-suite in many companies, and their influence will only continue to grow as the supply chain becomes a critical differentiator for companies. This is good news for supply chain managers. Automation won’t replace their jobs; on the contrary, it will free them up to focus more on strategic planning. Supply chain practitioners will need to be able to translate KPIs and metrics into financial terms that resonate with the CEO, bringing human insight and analytics together in a way that automation cannot. Also, manufacturers will see the impact of the millennial influx firsthand, as these digital natives will bring a fresh perspective on innovation. They’ll also expect the technology used in their professional lives to mirror that which dominates their personal lives.