The electronics supply chain, for the past year, has been marked by component shortages, lead-time extensions and tariff uncertainties. Nevertheless, it’s been a good year for component manufacturers and distributors—many of which have reported record quarterly sales during 2018. In 2019, IDC projects, the supply chain writ large is poised to transition from a cost center to an “opportunity center” as digital transformation accelerates.
“If you go back—and I’ve been in the supply chain for a long time—one of the shifts I have seen in recent years is the supply chain is no longer about the lowest cost,” said Simon Ellis, IDC program vice president for global Supply Chain Strategies. “The challenge has been ‘How do I do what I do as inexpensively as possible?’ Now we have moved into the digital era where [the supply chain’s task] is to deliver to customers’ expectations. That’s where we see opportunity.”
Computer manufacturer Dell first viewed the supply chain as a competitive advantage back in 1997. IDC characterizes 2018 as a year of transition where old, analog processes were replaced by digital. “Digital transformation (DX) was the key overriding theme and will continue to be for 2019,” Ellis said, “but the supply chain is increasingly viewed by manufacturers and retailers as a critical function for their future success. If companies are going to embrace new business models, or digitally enable older ones, they are going to need a modern, capable supply chain to do it.”
Predictions for 2019 IDC’s center around expansion in the use of AI, data, automation and networking.”The supply chain continues on its journey of almost unparalleled levels of change,” said Ellis. “Digital transformation is now the overriding priority for most manufacturers and retailers, with the adoption of digital technologies aimed at improving efficiency and effectiveness as well as providing the opportunity to either disrupt their market segment or be resilient to others that may try.”
IDC’s predictions for 2019 are:
Predictions for 2019 IDC’s center around expansion in the use of AI, data, automation and networking.”The supply chain continues on its journey of almost unparalleled levels of change,” said Ellis. “Digital transformation is now the overriding priority for most manufacturers and retailers, with the adoption of digital technologies aimed at improving efficiency and effectiveness as well as providing the opportunity to either disrupt their market segment or be resilient to others that may try.”
IDC’s predictions for 2019 are:
1.By 2024, more than 60 percent of G2000 manufacturing organizations will rely on artificial intelligence platforms to drive digital transformation across the supply chain, leading to productivity gains of more than 20 percent.
Machines won’t be taking over the supply chain anytime soon, but AI will automate many tasks to free up workers for more strategic activities. “These are narrow tools within certain pre-defined constraints that allow it to make decisions for the supply chain,” Ellis said. “I view AI in the supply chain as automating a lot of routine or rote decisions.” For example, a shipment delay could, based upon pre-defined policies, be expedited or redirected automatically without involving a person. These systems will also increase in intelligence as they “learn” from past decisions to make better decisions moving forward, he added.
2. By 2022, more than 40 percent of manufacturers worldwide will be integrating data from product life-cycle apps into their supply chain data to improve overall after-sales service levels, achieving increases of 60 percent.
The supply chain plays a role in enabling innovation, and in getting ideas from the point of being an idea to shipping something to the customer, and yet it generally doesn’t play a big role in the development of that idea,” Ellis said.
Product lifecycle management (PLM) systems collect information that, when used properly, identify connections between PLM and the supply chain. This data can be used to create a holistic view of the process that takes a product from concept through delivery. “By managing the full life cycle of the product, we can do a better job of connecting all the pieces as a manufacturer and ultimately create products that perform better and require less service,” Ellis said.
3. By 2020, 65 percent of ecommerce operations will make use of autonomous mobile robots within their order fulfillment processes, thus helping increase productivity by more than 100 percent.
Traditional order fulfillment involves a lot of movement that adds little value, such as people manually picking products from shelves scattered throughout the warehouse. Further, demand/seasonal spikes can make human staffing difficult. In these areas, robots add value. “If we expect customer-direct and e-commerce to continue to grow, we’ll have to see more robotics in the supply chain,” said Ellis.
More vendors are delivering autonomous mobile robots, connected to mobile devices, to help ecommerce fulfilment centers deploy flexible automation that is scalable, easy to use, and cost effective, Ellis added.
4. By 2021, smart supplier life-cycle management solutions will automate 50 percent of suppliers’ enterprise activities, from onboarding to exit, thus improving both performance and relationships.
Organizations often have trouble getting visibility into their supplier relationships, particularly into the second and third tiers. “The supplier’s life cycle, credentials, and partnership are not always understood in the organization,” the IDC report said. “Supplier onboarding, performance indicators, audits, tier-n visibility, contracts, SLAs, and supplier status have been only partially automated. This has hindered the organization in terms of visibility, time to market, customer satisfaction, and profitability and revenue.”
A variety of technologies, including machine learning, natural language processing and artificial intelligence will be increasingly leveraged to create business processes that are more efficient, smart and autonomous.
5. By 2024, one-third of large manufacturers will have moved to using actual demand data instead of short-term forecasts, resulting in an on-time in full (OTIF) delivery improvement of 2 percentage points on average.
Historically, the supply chain has used historical information and trends to forecast future needs. Now, however, with the availability of real time information, organizations can be more agile. “As we get more real-time information in the supply chain, it reduces the requirement to forecast,” said Ellis. “If, for example, we know what’s being pulled from the shelf, we can measure it rather than forecast it.”
6. By 2020, half of the large manufacturers will have begun shifting their supply chain applications from enterprise centric to network centric, driving productivity gains of 2 percentage points.
Historically, enterprise resource planning (ERP) systems have been at the heart of supply chain applications, said Ellis. “Many applications are designed to connect with ERP, which is fundamentally the system or (of?) record,” he explained. “While ERP won’t go away, it won’t be the center of the supply chain.” Instead, supply chain networks (SAP Ariba, e2Open, etc.) offer a way to participate in multi-enterprise supply chain networks to create strong connections with suppliers.
7. By 2022, digital technologies will have enabled the automation of repetitive operational tasks, leading to 50 percent less planner intervention and “touchless” sales and operations planning.
Integrated planning and execution will quickly become table stakes in the supply chain. Planning should reach beyond the organization itself and include players across the value chain. “Supply chain planning has tended, historically, to be a high-touch, intellectually intense activity within the supply chain,” the IDC report said. “It was not too many years ago that PhDs in forecasting were commonplace. But a lot has changed. Modern supply chain planning systems now provide much of the algorithmic knowledge, and deep expertise has largely given way to broad business knowledge and strategic expertise.”
8. By 2023, talent shortages in the supply chain for 75 percent of the top 500 manufacturers worldwide will largely have been mitigated using supply chain digital assistants.
Although there is fear in the supply chain that automation will eliminate jobs, there is perhaps a greater fear of the looming gap between the demand for talented supply chain professionals and those coming out of the education funnel. “Fundamentally, automation is, on some level, replacing people we don’t have,” said Ellis. “More often, though, technology augments the work people do. Smart software tools can help people do their jobs better.” Repetitive, boring, manually intensive tasks can be automated, enabling people to concentrate on interesting and more strategic work.
9. By 2019, 25 percent of manufacturers will have doubled investments in distribution automation in reaction to dramatic increases in single-item orders originating from the growth of online marketplaces.
Increasingly, customers are demanding products that exactly meet their needs and expectations, making customized products an increasing reality. “Continued offerings of customized goods and an increased focus on postponement strategies or single-minute exchange of die (SMED) methodologies have put pressure on manufacturers and retailers alike to create and move more goods faster and further with similar levels of resources,” the IDC report said. “If facilities are not growing, and labor can’t create or move items faster naturally, then organizations must turn to automation.
10. By 2020, track-and-trace investments will have increased by 30 percent to improve forecast accuracy and customer experience metrics and real-time order visibility will have become the norm for consumers.
Ultimately, supply chains thrive on predictability since predictability leads to solid planning. “When things change, that’s when things get screwed up,” said Ellis. “As we get better track and trace into the supply chain and understand with more accuracy where things are and when they are going to arrive, it reduces the bullwhip effect. That makes us better at predicting and forecasting what we should do next to provide reliable and predictable service levels.” Enhanced track and trace allows organizations
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