The Supply Chain of the Future

The paradigm of Industry 4.0 of a more and more connected company ecosystem impacts also the way companies organize their supply chains. Trends such as the expansion of markets into emerging regions such as South East Asia, a wider consciousness concerning climate change and the individualization of customer demands are impacting the supply chains. Besides, also “internal” factors such as an aging workforce and the decrease in skilled labor availability will contribute to changes in the management of the supply chain. Currently, manufacturing companies are not fully exploring the potential which their supply chains hold. According to Bain & Company, they forgive between 5 and 10 percentage points of gross margin due to underperforming supply chains. All these factors will necessitate that supply chains need to become integrated, faster, more precise, more individual and flexible.

Integration means the inclusion of all members of a company`s supply chain end-to-end. This can be done by implementing a platform to perform joint tasks like demand and logistics planning. Demand planning needs to be “outside-in” incorporating external sources and data reaching from consumer trends, demographic data, weather and traffic data to transportation data, depending on the planning focus. Therefore, advanced forecasting approaches will be applied based on predictive analytics to speed up planning. Amazon is pursuing an interesting approach with its “predictive shipping”. The products are shipped before the customer places an order. The customer order is then matched with a shipment that is bound for the region the customer is located in. Based on the order the matching product will then be shipped to the customer. Flexibility is gained by minimizing the planning cycles and frozen period by establishing a continuous process flexible enough to react to changing customer requirements. This could be supported by crowdsourced transportation capacities involving a pool of service providers. Granularity will be achieved by pushing micro-segmentation of customers and customization of deliveries for example by the use of drones. End-to-end transparency concerning the supply chain is the prerequisite to improve its accuracy. Real-time information will be processed in data analytics-based systems to identify anomalies and potential risks in the supply chain execution. Artificial intelligence and machine learning will help to mitigate risks before they occur. Autonomous Material Robots will help to automate material handling and picking processes in warehouses. Autonomous trucks will procure for the optimization of the utilization of transportation capacities.

Although the future looks bright for the digital optimization of the supply chain, existing ways of working have to be abandoned. Manual data handling needs to be replaced by system-based data handling procuring for the required completeness and up-to-dateness. The integration of the supply chain participants is king to make the supply chain transparent and performing. The collaboration between machines and humans needs to be improved requiring employees to adopt technology and understand it as critical for their work. By acknowledging these factors, supply chain performance will live up to its potential.