Lessons from Leaders: Gartner’s Top Supply Chain Trends for 2017
Learn what areas supply chain leaders are focusing their time, attention and investments
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Each year, our analysts research the supply chains of hundreds of companies. Through this work, we note the trends: What are the leaders focusing on, where are they investing time and effort, and what can be applied broadly? Three key trends stand out this year for these leaders that are accelerating their capabilities and further separating them from the rest of the pack.
Digitalization of Supply Chain
We’ve seen a massive shift in companies creating digital connections within and across their supply chain operations over the past few years. Leading companies view digitalization as an opportunity to not only provide agile support for existing products, but also to reduce time to market for new ones. Some of the most disruptive and impactful technologies we see leaders adopting include solutions combining Internet of Things (IoT) sensors, cloud computing and advanced analytics. Simulation and optimization capabilities have moved into the mainstream and now cognitive computing capabilities, including machine learning are in the labs of the most advanced supply chains. This broad category of innovations also covers advanced automation in the form of robotics, self and remote-guided vehicles, virtual and augmented reality, 3D printing and supply chain sharing platforms for resources such as warehouse space and last-mile delivery services.
Some leading high tech and industrial companies have built “lights out” manufacturing plants where everything from materials handling to production flow and quality management is automated in sequence through the delivery of finished goods to a warehouse. Overall, in the past five years, there has been a triple-digit explosion of growth in the use of industrial robots in manufacturing and warehouse environments particularly in North America, Europe and Asia.
One large industrial company has started using artificial intelligence (AI) to run its factory robots. The system detects quality issues with products flowing through the assembly line and corrects them, where possible, at workstations further down the line. Embedded sensors also track the performance of manufacturing equipment and machine learning is used to drive productivity improvements over time. Multienterprise connectivity helps this company drive a one-piece flow across its extended supply network, helping it realize the full potential of lean manufacturing. Automated adjustment of machine settings has also dramatically reduced equipment change-over times from hours to mere seconds.
Another application of digital supply chain capability in CP relates to shelf visibility. Some CP manufacturers use shelf-based sensors and analytics to visually assess the completeness of a display planogram or understand the availability of different products based on weights and volumes measured at different retail display points. Planners then process this data, along with other demand signals, in planning tools that use advanced algorithms to better recognize and support shifting demand patterns over time. Amazon is still testing its Amazon Go store’s technology, but it portends the future of brick-and-mortar retail. Through a combination of computer vision, sensor fusion and deep learning. Amazon automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart. Shoppers can just leave the store when they are finished and be billed automatically.
Beyond factory, warehouse and customer points of sale and use, sensors and tracking technology have, likewise, become the foundation of digital logistics networks. This type of visibility, when combined with alert management allows suppliers, partners and customers to better manage the risks and performance of shipments flowing between their locations. The digital pieces of the supply chain puzzle are coming together in a way that will enable more holistic, real-time management of the entire ecosystem.
Adaptive Organizations and Capabilities
Interrelated with digitalized supply chains is the ability of companies to be more adaptive to changes in their value chains. More specifically, leaders are creating adaptive organizations and capabilities to survive and win independent of future supply-related constraints or customer needs.
In terms of organizational structure, the largest difference between more and less mature supply chain organizations is typically a broader span of control that includes strong relationships with functions such as customer service and product development, in addition to traditional planning, sourcing, manufacturing and logistics. More significant differences emerge in the scope of responsibility for functional owners and how they partner internally and externally to manage end-to-end (E2E) business process flows such as design-to-launch, requisition-to-settlement and order-to-cash.
Some of the more impressive supply chain organizations have created a modular supply chain service model that allows for variants of functional capabilities to be combined into “plug-and-play” segments, such as make-to-stock, configure-to-order or engineer-to-order manufacturing profiles. This approach allows them to more quickly and flexibly support different business needs and outcomes and speeds up activities such as M&A integration.
In addition to flexible business process design and management, adaptive organizations take a bimodal approach to addressing new customer and business requirements. Beyond traditional operational continuous improvement efforts and transformation projects using off-the-shelf tools, these leaders fund more open innovation with venture capital type budgets and governance, they hold hackathons with self-identified innovators to rethink how they run the business and use agile project methodology for new product and business process development.
One high tech leader recently achieved a breakthrough in terms of the time it takes supply chain engineers to help develop new products using this agile-based approach. Facing a saturated market, the company needed to triple new product introductions per year. By focusing on function versus form, using regionally colocated teams that hand-off designs around the clock and allowing out-of-cycle capital requests, this company now meets new customer needs in record time. In another case, a leading industrial company is increasing its agility by leveraging 3D printing technology for on-site rapid prototyping of high-value production equipment parts such as dies and molds. The new approach allows for designs not possible with conventional methods, higher quality and reliability and less need for inventory.
The leading companies in our study realize that supply chain success hinges on the health and well-being of the critical ecosystems within and around them. Sustainability is the watchword in terms of people, planet and the partnerships formed to deliver customer solutions. The people aspect of supply chain ecosystems has many dimensions. It applies to relationships with suppliers, partners, employees and customers along the value chain. Leading supply chains spend as much time focused on ethical sourcing and supporting customer well-being as they do on talent acquisition and development, for instance.
Maintaining healthy people ecosystems is also highly interrelated with the digitalization of supply chains. An inflection point is coming, where we’ll need to more deeply explore the pros and cons of heading further down the digital path. Globally, we face unprecedented challenges, such as aging populations, and an explosion in the number of people with special needs requiring long-term care. On the positive side, advanced technologies may be the breakthrough required to solve our largest societal issues. With the rise of automation and AI, we are becoming more sophisticated and efficient in terms of how we deliver goods and services. On the other hand, if our machines need fewer human collaborators working alongside them, there will be major disruptions to how we live and support ourselves. For the time being, it is full steam ahead for the leaders pursuing these advancements.
Environmental sustainability is another priority for the top supply chain organizations on our list. They set ambitious stewardship goals in the areas of emissions, water and other natural resources. More mature supply chains focus on outcomes such as eliminating hazardous waste from factories and making material supply chains more circular. In general, the companies we see as further along in developing mature CSR practices have moved beyond mere regulatory compliance and have figured out how to link these efforts back to support for their underlying corporate strategies.
In high tech, industrial and, increasingly, other industries, the most successful companies deliver holistic customer solutions through an ecosystem of partner companies. These types of federated partner arrangements are popular, particularly in the realm of smart products where solutions for monitoring equipment or infrastructure in the field requires specialized skills in chip and sensor technologies, software design, analytics, cognitive computing, and solution design and integration. Consider cloud computing data centers, where software algorithms optimizing traffic loads across networks are just as valuable as the hardware devices they manage. Accordingly, the lead orchestrator of these alliances will vary depending on which elements are considered the most valuable in the overall solution. As with people and the physical environment, partner relationships are another critical asset for supply chain leaders to develop and protect.
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