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IDEAS MADE TO MATTER | SUPPLY CHAIN

5 supply chain technologies

that deliver competitive
advantage
by Beth Stackpole | Feb 14, 2020

Why It Matters

Innovation is upending every aspect of the

supply chain. Here are the technologies to
watch — and adopt — as the decade
unfolds.

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Facing globalization, increased product complexity, and

heightened customer demands, companies are taking up

advanced technologies to transform their supply chain

from a pure operations hub into the epicenter of business

innovation.

Using sensors and ever-improving internet connectivity,

forward-thinking companies are collecting data at every

checkpoint, from the status of raw materials flow to the

condition and location of finished goods.

Machine learning, artificial intelligence (AI), and

advanced analytics help drive automation and deliver

insights that promote efficiencies — making on-the-fly

route changes to accelerate product delivery, for example,

or swapping out materials to take advantage of better

pricing or availability.

3D printing allows firms to localize production of goods

closer to customers, allowing for faster turnaround,

reduced transportation costs, and greater

personalization. Additive manufacturing is also opening

doors to easy production of spare parts, enabling

companies to slash inventory, cut costs, and create

supplementary revenue streams.

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These advanced technologies are serving as a

springboard for new business models — for example,

many firms are piggybacking off the "internet of things"

(IoT) to offer predictive maintenance services that

guarantee product uptime while generating recurring

revenue.

“Looking into the future, it’s about resiliency and an

ability to adapt to changes in the marketplace and new

business models,” said Simon Ellis, program vice

president with IDC Manufacturing Insights, a market-

research firm. “If a competitor comes along with a next-

generation, digitally fueled capability, [companies] need

to find a way to avoid being disrupted.”

Here are five of the top technologies poised to overhaul

supply chain operations:

The internet of things (IoT)

With IDC projecting double-digit annual growth for

worldwide IoT spending through 2022, there is ample

opportunity for connected and sensored “things”— think

finished goods, shipping containers, or warehouse

stations — to communicate information and deliver

insights that will upend traditional supply chain

practices.

IDC expects discrete manufacturers, process

manufacturers, and transportation companies to spend

the most on IoT deployments, primarily to support

manufacturing operations and the management of

production assets, and, in the transportation space, for

freight monitoring and fleet management.

By tracking location, weather conditions, environmental

status, traffic patterns, and more, suppliers can leverage

AI and advanced analytics to determine, for example, if a

shipment of refrigerated goods is at risk for equipment

failure. Armed with such knowledge, suppliers can

automatically reroute delivery to a closer distribution

center or proactively dispatch a repair crew to prevent

spoilage.

Change, although good, always comes

with risk. People have to go in with
their eyes open.
Stuart Madnick | Professor, MIT Sloan

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The ability to monitor assets throughout the logistics

journey also helps eliminate misplaced inventory and lost

shipments, further reducing risk and revenue loss.

“With just-in-time manufacturing, we care a lot about

where a product is, when it’s going to arrive, and how it

fits into the overall logistics flow,” said Stuart Madnick,

an emeritus professor of information technologies at the

MIT Sloan School of Management. “IoT devices,

combined with the cloud and AI, make all that much

more effective and comprehensive.”

On the downside, IoT opens the door to increased

cybersecurity risks, and even worse, physical exposure,

especially for large-scale, mission-critical industrial

assets.

“The more IoT becomes a part of manufacturing and

logistics systems, the risk isn’t just in data attacks, but

physical dangers” like an oil rig or manufacturing line

explosion, said Madnick, the founding director of the

Interdisciplinary Consortium for Improving Critical

Infrastructure Cybersecurity.

“Change, although good, always comes with risk. People

have to go in with their eyes open,” Madnick said.

Blockchain
While primarily associated with cryptocurrencies,

blockchain, the distributed ledger technology, also ranks

high on the list of technologies poised to bring improved

visibility and transparency to supply chain processes.

Because blockchain creates an immutable record of

transactions, the technology is well situated to track the

provenance of goods and establish trust in shared

supplier information, especially when the parties have

competing agendas and don’t particularly engender trust.

“What blockchain brings to the table is the notion of

immutability — nothing can ever be erased,” Madnick

said. “It also goes back to the issue of trust — nothing is

ever lost or altered.”

FURTHER READING: BLOCKCHAIN, EXPLAINED 6

Blockchain can establish an audit trail that is far more

effective than traditional methods like email or simple

electronic record keeping, proponents say.

As a result, blockchain’s biggest potential is for

facilitating track-and-trace applications that help

companies document the chain of custody of goods.

Doing so can prevent leakage, help identify counterfeit

items and fraud, pinpoint at-risk suppliers, demonstrate

that regulatory requirements are being met, and create

transparency around sourcing.

IDC projects that a quarter of OEMs will leverage

blockchain to source spare parts by 2023 — a move it

predicts will improve accuracy of usable parts by 60%

and lower costs by 45%.

A lot of early blockchain supply chain use cases are food

related. For example, Walmart is running a pilot project

with IBM’s Food Trust Solution to track lettuce from its

suppliers to Walmart shelves on the heels of recent E. coli

outbreaks. SAP and Bumble Bee Foods are collaborating

to use the SAP Cloud Platform Blockchain service to

trace the journey of yellowfin tuna from the point of

catch to the store shelf to address consumers’ demands

for safe and sustainably sourced food.

One of the biggest hurdles to leveraging blockchain is

that it takes a village. In most cases, it’s not one company

implementing blockchain to garner traceability for its

singular supply chain. Rather, to succeed, efforts will

require an industry consortia-backed initiative that

benefits a variety of competing partners.

AI, machine learning, and analytics

Every modern supply chain has a vast treasure trove of

data that can unlock insights into complex global supply

networks.

By harnessing a combination of technologies like AI,

machine learning, and predictive analytics, companies

can automate warehouse operations, improve delivery

times, proactively manage inventory, optimize strategic

sourcing relationships, and create new customer

experiences that increase satisfaction and boost sales.

“In the past, the problem was we didn’t have enough data

— now we have massive amounts of data, and the

problem relates to what can we do with it,” said Sergio

Caballero, a research scientist at the MIT Center for

Transportation and Logistics.

That’s where AI and machine learning come into play.

Using algorithms and predictive methods, companies can

parse through larger data sets and garner insights at a

granular level — all with little to no human intervention.

According to IDC, half of all manufacturing supply chains

will invest in AI by the end of 2021, garnering a 15%

productivity spike.

READ MORE AI COVERAGE 6

Consider the logistics nightmare of coming up with a

transportation plan for thousands of product SKUs

needing to ship out to hundreds of warehouses and

distribution centers scattered across the globe. “You need

a way to automate the collection and analysis of data

[other than] manually,” Caballero explained. Using

machine learning to optimize the SKU data, “you can

come up with a master shipping plan that’s truly

optimized.”

Predictive analytics are also a high priority. Deloitte’s

2019 Supply Chain Digital and Analytics Survey found

that surveyed companies are investing in predictive

analytics primarily to drive cost reduction (cited by 81%

of respondents) and improve customer experience (60%).

The most promising use cases for supply chain analytics

cited by respondents: Inventory visibility and

optimization (32%), strategic sourcing and optimization

(26%), and real-time product intelligence (22%).

While most understand the big-picture potential of the

technology trio, supply chain managers tend to

underestimate what’s required in terms of skills and

boosting data quality to deliver real business value,

Cabellero said. “Many companies still don’t have a clear

business case for the technology or understand how it

can be beneficial,” he said.

Robots and automation

Robots have long played a role in the supply chain, used

to move goods and materials throughout a warehouse,

during transport, and as part of the fulfillment process.

But as AI technologies push robots to higher levels of

sophistication, machines will be assigned many manual

tasks now owned by humans, from picking and packing

orders to automating heavy loading tasks.

AI, machine learning, and IoT connectivity are helping to

significantly improve the precision and mobility of

industrial robots while aiding in safety, allowing for a

new generation of cobots (collaborative robots) that can

work alongside humans as opposed to being cordoned off

in a separate safety zone.

COBOTS, DEFINED 6

The potential for human-robot collaboration is fueling

large-scale deployments throughout the supply chain.

According to IDC, by 2023 some 65% of warehouse

activities will employ robots and situational data

analytics to help with storage optimization, increasing

warehouse capacity by over 20% and cutting work order

processing time in half.

That same research predicts that over 60% of global

manufacturers will invest in AI-enabled robotic process

automation by 2023, resulting in increased productivity

and helping to close the ongoing talent gap for supply

chain skills.

Amazon, the poster child for logistics and fulfillment, has

bet big on warehouse robots, as showcased by its 2012

acquisition of Kiva Systems.

To the extent you have hardware and

software running facilities, you still
need people to maintain, monitor, and
operate them.
Stephen Graves | Professor, MIT Sloan

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Kiva robots, used to transport inventory pallets from one

place to another, are designed to work with human

warehouse workers — not replace them. The robots bring

heavy pallets to human workers for unpacking, with

workers no longer having to log significant warehouse

miles to get their job done. “This eliminates a tremendous

amount of waste in a traditional warehouse that is

associated with people walking,” said Stephen Graves, a

professor of management science at MIT Sloan.

The e-commerce giant has expanded its use of robots

with cobots that help pick, sort, transport, and store

packages, and it recently introduced robots that scan and

box items for shipment into some facilities this year,

touting an ability to pack at four to five times the rate of

the average human worker. Amazon also claims robots

make it possible to store 40% more inventory, allowing it

to meet Prime delivery promises.

While inching closer, even Amazon is still years away

from “lights out” operations that require little or no

human intervention, and experts like Graves question

whether that’s ultimately the right goal.

“This is somewhat of an open question, but to the extent

you have hardware and software running facilities, you

still need people to maintain, monitor, and operate them,”

Graves said, while adding, “of course, there will be some

exceptions.”

3D printing
Consumers’ appetite for personalized products, coupled

with a push for made-to-order and localized production,

is focusing attention on 3D printing.

Thanks to new materials, metal additive manufacturing

technologies, and less expensive hardware, supply chain

players are ramping up investment in the technologies,

allowing them to decentralize production and make

product and parts in local assembly hubs.

Making products closer to where there is demand allows

companies to cut back on logistics and transportation

costs, reduce their carbon footprint, sidestep geopolitical

risks and tariffs associated with offshore outsourcing,

and get products to consumers faster — a competitive

upside in today’s instant-gratification society.

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The ability for on-demand production of parts, and in

some cases, full product, has great appeal to lots of

players in the supply chain, from OEMs to dealers.

Moreover, with advances in materials, less expensive

hardware, and new AI-driven software design tools,

companies can produce fully functional parts, not just

prototypes, that are lighter with less material waste than

was possible with traditional technologies.

“On-demand production avoids tremendous investments

in warehouses and inventory and allows companies to

provide better customer service,” said MIT Sloan’s Graves.

A high-stakes makeover
While there’s still a huge learning curve with some of the

more advanced technologies, there’s no question that the

supply chain is in the midst of a high-stakes makeover.

That said, IDC Manufacturing Insights’ Ellis reiterated

the cautionary tale of focusing too much on technology

at the expense of what’s good for the business.

“Technology is the bright shiny object, but at the end of

the day, it must either solve a business problem or put

the company in a possible to seize on new opportunity,”

Ellis said. “It all goes back to the goal of resiliency and

pursuing new business models.”

FOR MORE INFO

Tracy Mayor
Senior News Editor & Writer

(617) 253-0065
[email protected]
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