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How are new technologies changing the supply chain?

12 November 2020 | 10 min read

Today, the supply chain can extend over a large geographical area and contain many players, from raw material suppliers to our client’s customers, including subcontractors as well as carriers. The communication between these stakeholders is difficult to set up, and even more difficult to maintain, without the help of new technologies.

For the past few months, the COVID-19 global crisis have been revealing the vulnerability of the traditional supply chain with the shutdown of certain production lines, the increase in the cost of raw materials and the closure of borders. In 2020, more than ever before, many manufacturers have become aware of the importance of providing real-time updated data for the entire chain to avoid any disruptions.

In concrete terms, how can we ensure real-time data transmission throughout the supply chain? What solutions can optimize the flow of a product throughout the chain to ensure quick availability to the customer? These are the questions to which we will provide answers in this article.

What is the supply chain?

A supply chain is a group of stakeholders who contribute to the production of a good. At the beginning of this supply chain, we find the suppliers of the raw materials that make it possible to manufacture goods. The supply chain does not stop there, since it also includes many other areas: procurement, storage, goods handling, order picking, relations with suppliers, subcontractors, carriers and consumers.

The main areas composing the supply chain:

• Purchase ;
• Manufacturing ;
• Stock management ;
• Distribution ;
• Marketing ;
• Customer Service.

At first glance, these areas seem to have a perfectly independent function, but is it really the case? Well, the supply chain efficiency cannot be achieved without close collaboration between these different areas. The companies which manage to master this interdependence are the most competitive today.

Therefore, as you will have understood, the company is part of a “network” made up of suppliers, carriers, subcontractors and consumers. But this interdependence between stakeholders is also a risk for the supply chain. Indeed, many incidents can occur throughout the supply chain and impact all areas.

A truck being delayed due to disrupted traffic, a carrier strike, a truck failing to load all the goods, or a customer being absent, are all incidents that can occur during transportation. Obviously, these incidents will also impact customer service as customers may be dissatisfied due to late delivery. This is why the digitization of the supply chain must be the core the strategy of companies that want to improve efficiency.

What is digital supply chain transformation?

The poor transmission of information weakens the supply chain

As a Supply Chain Manager, your objective is to optimize the flow of a product throughout its life cycle to make it available to the customer as quickly as possible and efficiently to ensure the profitability of each process. This objective is only achievable for supply chains whose stakeholders are integrated with good transmission of information. To achieve better levels of interaction, increase transparency between these functions and improve customer service levels, companies must consider digitizing the supply chain.

In 2017, the McKinsey consulting firm carried out a study on digitization in various fields of activity. This study reveals that few companies have exploited the potential offered by new digital technologies to improve the performance of their supply chain. The level of digitization of the supply chain is the lowest of the five areas studied, with a level of digitization of 43%. Furthermore, only 2% of the executives surveyed said that the supply chain was at the center of their digitization strategy.

The access to updated information for all stakeholders

The traditional supply chain is often weakened by a lack of information. This is why, implementing a digitalization strategy with a near real-time exchange of information is necessary to make the supply chain efficient. Finally, it is the instantaneous transmission of information that constitutes a breaking point between traditional supply chain and supply chain 4.0.

The main objective of the digital supply chain is to improve visibility, i.e. to allow access to reliable and up-to-date information for all the areas that make up this supply chain. Achieving this transparency between stakeholders is not an easy task. But as soon as you reach this objective, the gains can be significant for your company. In concrete terms, the digitization of the supply chain means more flexibility and lower costs.

The digital transformation of the supply chain is the consequence of the development of IT and depends on the deployment of many digital technologies: predictive analysis, cloud-computing, 3D printing, robotics, Internet of Things and many others that we will detail below. The ultimate goal of digitization is to link the areas listed above into a single and fully integrated global supply chain.

Which technologies are contributing to the digitization of the supply chain?

#1 Big Data

In 2020, the Big Data phenomenon is more than ever a reality. The boom in the volume of data coming from IT, telephony or connected objects represents a great interest for companies that want to gain efficiency. Even better, this data processing is not only reserved for the marketing field!

Beyond the marketing stakes, data analysis helps to avoid stock shortages, anticipate commercial opportunities or reduce operational costs associated with transport.

For example, real-time access to data such as the selling price of raw materials, stock market fluctuations, increases or decreases in demand or shortages of raw materials, allows you to make the right decisions at the right time and thus avoid possible stock shortages. In addition, the analysis of data related to traffic conditions, vehicle geolocation or the addresses where goods are delivered enables optimal management of delivery operations and thus compliance with deadlines.

#2 Predictive analysis

Exploiting the incredible amount of data from the Big Data enables companies to develop advanced analytics solutions to anticipate future needs and make better decisions throughout the supply chain.

In concrete terms, how is predictive analysis revolutionizing the supply chain? It combines the exploitation of internal data (sales history, state of industrial machinery, real-time traffic on a website page) and external data (market trends, real-time traffic conditions, political crisis). It is the combined analysis of these data that allows the development of a predictive analysis that leads to better decision making.

The predictive analysis can be used for the following areas:

• Analysis of the demand ;
• Optimization of merchandise stock management ;
• Optimization of maintenance on industrial machines ;
• Planning of production ;
• Optimization of deliveries ;
• and many others…

A Supply Chain Manager, who is informed in near real-time of an upcoming change in demand, can react instantly, for exemple. He can have an overview of the impact on the supply of raw materials, on merchandise stocks, on the ability to meet this growing demand and quickly make appropriate strategic decisions.

#3 Cloud computing

A growing interest in SaaS solutions

In recent years, we have seen an increase in the number of solutions offered in SaaS mode, i.e. directly accessible via the Internet. These solutions now cover the entire supply chain: Warehouse Management System, Advanced Planning System, route optimization software.

The advantages of cloud solutions compared to software systems directly installed on the company’s local network:

• SaaS software can be used from any computer with internet access, even without the latest operating system.
• In case of computer failure or loss, the user can always access this data from another computer using his login and password.
• Updates are automatic and do not require any additional cost.
• SaaS solutions usually have online help and support via an online chat system.
• Software in SaaS mode is easier to use: a few hours are enough to train a newcomer.

360-degree supply chain management

The cloud computing enables 360-degree supply chain management through collaborative platforms. Indeed, web services offer the possibility to communicate with different technologies: ERP, applications, CRM, intranets, etc. Information is then transferred in real-time to the stakeholders in the various fields: suppliers, subcontractors, carriers and customers.

For instance, there are today a multitude of platforms in the field of distribution. The first that comes to mind is probably the following: transportation management software, also known as Transport Management System (TMS). But cloud computing has enabled the development of new, even more powerful solutions.

Today, route optimization solutions make this distribution process more efficient thanks to state-of-the-art algorithms. In particular, this software allows to maximize the loading of vehicles to avoid empty transports while meeting the expectations of consumers through the respect of the ETA. These tools are usually aimed at professionals who have their own fleet of vehicles. However, you should be aware that there are route optimization solutions which are connected to freight exchanges, allowing you to delegate the organization of deliveries to a local carrier who is already equipped with this solution.

#4 Internet of Things

Most of the stakeholders in the supply chain agree that the development of connected objects will transform the supply chain as we know it today. The IoT (Internet of Things), closely linked to the Big Data phenomenon, is becoming increasingly popular among Supply Chain Managers.

The data transferred in real time by the various devices gives a better knowledge of the flow of goods, thus offering many strategic advantages: visibility on stocks, reduction of supply costs, improved customer satisfaction, compliance with deadlines and regulations. Today, there are several innovations that enable real-time data transmission.

Radio Frequency Identification of goods

Let’s take the example of Radio Frequency Identification. A Radio Frequency Identification system allows you to save and retrieve data remotely. The system consists of two elements that communicate with each other. An RFID tag is placed on the merchandise to be identified and allows an identification at several meters, even tens of meters, via RFID readers. A simple transfer of electromagnetic energy activates this system.

In other words, the RFID reader, equipped with an aerial, emits a radio signal to activate the RFID tag, which then transfers a set of data. This revolutionary technology makes it possible to initially track items within factories and warehouses, and then throughout the distribution process.

Multiplication of smart sensors

In addition, smart sensors positioned on equipment allow the collection of a multitude of data which are analyzed in real time in order to trigger automated actions. For example, when a sensor, which is placed on an industrial machine, detects an anomaly, an action to order a spare part is automatically triggered. The objective is simple: avoid costly breakdowns.

The use of sensors does not stop at the doors of the factory and warehouse. Sensors are also placed on goods to measure temperature, vibration and humidity as they travel in a truck or plane, but also as they cross oceans on a cargo ship.

#5 3D printing

In recent years, the 3D printing has become a must. A study carried out in 2014 by the audit firm PwC, reveals that 22% of manufacturers in the United States believed that 3D printing would lead to a reorganization of the supply chain. The 3D printing is attracting as it offers many advantages: production relocated in-house, management of stocks, creation of prototypes before the industrialization of production, etc.

Let’s take the example of spare parts. The demand for spare parts is punctual and particularly fluctuating as you never really know when an industrial machine will break down. Therefore, manufacturers maintain considerable stocks of spare parts in their warehouses. And of course, the cost of storage is significant for companies. The digitization of the supply chain will first of all make it possible to prevent possible breakdowns on the machines thanks to the sensors mentioned above.

But that’s not all! This is where 3D printing comes in. The technology allows these parts to be quickly produced in-house at any time as needed using digital models. So you will have understood that stocks are no longer physical but digital. And that means: a significant reduction in the costs associated with the storage of spare parts. Warehousing is particularly expensive as it is labor-intensive with a high number of possible errors.

The enthusiasm for 3D printing was confirmed during the covid-19 pandemic. Companies believe that 3D printing can overcome supply chain delays due to border closures. There is no longer any doubt that this technology will continue to transform the supply chain over the next few years.

#6 Robots

For many years, manufacturers have been using robots in manufacturing. With the digitization of the supply chain, robotics is even more present in the industry. The idea of robots working side by side with humans is no longer in the realm of sci-fi. Autonomous robots has now an important place in the industry. They are very helpful in carrying out the most difficult tasks in the supply chain. They improve productivity and also enable us to respond more quickly to customer needs. And concretely, how can robots and people work together? The answer is simple: use employees to perform high value-added tasks and delegate others to robots.

Robotics transforms warehousing

Today, robotics is present at every stage of the supply chain, but is particularly transforming the field of warehousing. There is one thing for sure: warehouse of the Industry 4.0 will no longer be like the one we’ve known until now. Today, order picking robots are the most widespread in connected warehouses. They work together with the order pickers to carry out many tasks: picking goods, transporting heavy goods, packing, shipping orders, etc. Finally, the robot does not replace the human being, it simply helps him to limit the drudgery of certain tasks.

Some companies are going even further in the use of robotics. For example, traditional carts are being replaced by automated stacker cranes (storage and retrieval machine) that can store goods several meters high. These robots are particularly fast and efficient in performing warehousing tasks. Thus, they increase productivity in the storage and picking stages.

Although a robot is autonomous, it is still necessary to give it instructions. And what computer systems are used to coordinate robots? Well, they are numerous. But it is mainly SaaS solutions that stand out. Companies can use SaaS software in different areas and regardless of their size.

What about tomorrow? The development of delivery robots…

Robotics should be reinforced in the field of delivery. The unmanned delivery robots and drones will be the trend in the industry of the future. This concept of delivery by drone is already a reality for some manufacturers.

For example, Amazon, DHL and UPS are already conducting trials to offer UAV delivery services. In addition, Plus.AI has successfully operated an unmanned delivery truck for 4,500 kilometers in the United States. This technical achievement was made possible by the use of a large number of sensors.

The increase in online sales, intensified by the covid-19 crisis, should reinforce the development of these technologies. And finally, what will be the benefits for the company? A reduction in operational costs linked to the delivery of the last mile, which is currently the most expensive step.

Supply Chain 4.0: flexibility and transparency

All of these technologies, whether used together or individually, have great potential for increasing supply chain efficiency.

For example, the Internet of Things allows the development of intelligent sensors to be placed on industrial machines. These sensors provide information in real time to prevent a possible failure. When an anomaly is detected, the 3D printers manufacture the spare parts in record time thanks to digital models. Finally, the autonomous robots, driven by SaaS solutions, are in charge of recovering the parts and carrying out the replacement.

In conclusion, combining these tools produces incredible results and we are still at the beginning of the digital transformation of the supply chain. The future should still offer us great technological achievement.

Digitalizing your supply chain is a long and costly process, but it is well worth it. It is undoubtedly the next step you will have to take to remain competitive in your market. Digitizing the supply chain is not always easy, but you will quickly see the benefits.