The Future of Supply Chain Management is Here. Are You Ready?
Despite claims to the contrary, supply chain management (SCM) is far from dead. In the provocatively named “The Death of Supply Chain Management” article in the Harvard Business Review, the authors predict that the supply chain function itself will be obsolete in five to ten years, replaced by a self-regulating utility that manages itself.
While artificial intelligence, predictive analytics, machine learning, sensor data from the Internet of Things (IoT), robots, and other technological advances will certainly change how the supply chain is managed—potentially in ways that haven’t yet been foreseen—one thing is certain: there will always be a supply chain in some form and it will always need to be managed in some way (whether by humans, machines, or both).
That said, we agree with the vision of the future of supply chain management expressed in the article, one in which high quality, real-time data will fuel end-to-end visibility into global supply chains, with humans managing exceptions while the rest of the supply chain is self-regulating.
SCM Software Will Facilitate, Not Replace Humans
Instead of the supply chain being dead, it’s probably more accurate to say that the way supply chains are managed and the legacy SCM tools used to manage them are dead or dying. That’s because in today’s hypercompetitive, dynamic environment, companies can no longer afford to have blind spots throughout the supply chain, with inaccurate data and/or long latency in receiving supply chain updates.
Today’s complex supply chain is impossible to manage effectively and efficiently without visibility across the entire ecosystem. Companies that lack end-to-end visibility can only react to unplanned events once they happen and are unable to plan and manage risk proactively.
The Impact of Digital Innovation on Supply Chain
According to a survey by research and consulting firm Bain & Company, 70 percent of executives expect digital innovation to have a significant impact on their supply chains during the next five years.
SCM Tools Will Center Around Visibility
To transform the SCM function, leading companies are adopting new technologies and SCM software across the entire supply chain. According to analyst firm Gartner, “technology innovation—from artificial intelligence to blockchain—is intertwined with supply chain management (SCM) strategy and operations. This means SCM is on its way to becoming technology-centric as opposed to simply technology-enabled.”
The centerpiece of the digitally transformed supply chain is real-time, end-to-end visibility. In fact, Gartner predicts that end-to-end supply chain visibility will become mainstream in the next two to five years, giving companies timely, accurate, and complete views of plans, events, and data across the entire supply chain, including external partners.
Bain & Company reports that end-to-end visibility is one of the seven trends transforming supply chains, with “digital processes and tools allowing companies, suppliers, and customers to respond to real-time updates of all activities.”
AI and Machine Learning Are Optimizing Supply Chain
According to BSR (Business for Social Responsibility), a nonprofit that works with companies and partners to build a just and sustainable world, “Technological advances are catalyzing the digitalization of supply chain management, changing how products and services are made and delivered, and enabling the creation and sharing of supply chain information in new ways by a more diverse set of actors.”
However, digitization of the supply chain is not enough to deliver end-to-end visibility. Gaining real-time, end-to-end visibility requires even more advanced technologies; specifically, it takes artificial intelligence and machine learning to do what humans alone cannot.
Companies that are still reluctant to transform their supply chain with advanced technology such as artificial intelligence will find themselves in the laggard category when it comes to performance in the near future. Gartner writes, “For years there has been an ongoing debate in the supply chain industry as to whether technology is, or should be, a competitive advantage. That debate may well be over. In a recent Gartner survey of supply chain professionals, 65 percent said the answer is yes.”
In fact, consulting firm McKinsey predicts that artificial intelligence will create $1.3 trillion dollars in economic value in supply chain operations in the next 20 years.
What are artificial intelligence and Machine Learning?
Artificial intelligence (AI) is the umbrella term for a number of ways machines are trained to mimic the behaviors of humans, while machine learning is a subset of AI where machines actually “learn” through training on data fed to them.. Unlike other systems, machine learning lets machines or software automatically learn and improve from seeing more and more data.. It works by learning the way humans do, recognizing patterns and making decisions in the same ways, but at speeds at which no human is capable.
SCM software is one of the most promising areas for applying AI and ML technologies. Some of the top use cases include:
Data cleansing and enhancements
Predictive analytics for better decision making, automation of manual tasks, and improved business outcomes
Image recognition for inventory management
Automating manual, repetitive processes
Cost and price optimization
Virtual agents/assistants for supply chain questions
The ROI of SCM Software is Real
Deploying technology such as artificial intelligence, machine learning, the IoT, and more to gain end-to-end visibility is already being shown to deliver tangible business value to companies integrating it into the future of their supply chain management. For example, the Boston Consulting Group reports that improved visibility creates value by allowing companies to:
Increase revenue by improving demand fulfilled by 4 to 6 percent
Reduce manufacturing, warehouse, and distribution costs by as much as 20 percent
Decrease inventory levels and reduce working capital associated with inventory by as much as 30 percent
Where is the Future of Supply Chain Management Headed?
Visibility is not the only SCM software that will impact supply chain management in the future. Social learning platforms, solution-centric supply chains, targeted segmentation, and SCM process-as-a-service are all emerging trends and technologies predicted to affect SCM in the next two to five years.
Find out more about these and other emerging trends [DOWNLOAD] our infographic “The Future of Digital Supply Chains.”
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