Four Strategies to Extract More Value from the Supply Chain
Industry 4.0 is challenging businesses to rethink the supply chain, which can now deliver capabilities beyond the mundane operating functions of the past. Emerging technologies are enabling processes, partners, products and services that deliver previously unimagined value.
Supply chain efficiency has long been vital to keeping customers happy and loyal. Its importance has increased recently with the growing demand for more personalized products and services, delivered exactly when and where customers specify, quickly and at exceptionally low cost.
We believe that the importance of the supply chain is growing further in the digital era known as Industry 4.0, as the need to create a more holistic and better-connected ecosystem becomes absolutely pivotal for enterprises across industries. This is particularly true as the physical and digital worlds merge.
Traditional supply chain models, therefore, must evolve. For starters, supply chains are not linear today; indeed, they haven’t been for some time. They’re often networks of interconnected entities that involve businesses, physical and virtual systems, and people — all cooperating to deliver raw material as finished goods.
The better the supply chain, the more competitive the organization. Naturally, technology is key. To that end, we’re highlighting strategies (shown in Figure 1) that help today’s highly evolved supply chain meet increasing challenges — and unlock additional value.
Create a robust integration platform for services that work in harmony
As noted, supply chains consist of myriad interconnected processes, partners, products, services and people, reflecting a wide range of stakeholders. Getting a product into the hands of an end user represents the cumulative effort of multiple organizations. These organizations broadly are suppliers, producers, distributors, retailers, customers, and service and support providers.
Technology is transforming interactions among this new, interconnected supply chain. For a business, it’s advantageous to ensure that all the moving parts in its supply chain are orchestrated well to reduce the risk of disruption. It is then about forming a perfect orchestra that works in harmony to deliver the right notes. As organizations strive to develop and deliver that ideal, superior differentiated offering to their market, supply chain participants will need to experiment with several services and technologies until they achieve perfect pitch.
A robust integration platform improves connectivity between supply chain actors — people, processes, systems and technologies — within a cross-enterprise ecosystem. An integration platform plays the role of an orchestrator that pulls in the various components and services of the IT ecosystem. As organizations work to incrementally modernize systems, each may possess its own data format and protocols, requiring robust orchestration. To meet scalable business demands, IT organizations must standardize the integration layer to limit technological complexity and ease maintainability.
With cloud and software as a service (SaaS) in particular, ever-improving software features and functions are more quickly delivered to market. Standardized connectors, integration patterns, and application programming interfaces (APIs) for data, applications and devices make things easier. APIs in particular have eliminated the need for point-to-point integrations and help make the various services in the ecosystem more discoverable and usable.
Let RPA handle the mundane
Robotic process automation (RPA) is about intelligent software undertaking high-volume, repeatable and time-consuming tasks, and doing so efficiently.
Supply chain automation offers many opportunities to increase efficiency, reduce costs and improve performance. It involves systematizing part or all of a workflow to improve processes, using technology as the central driving force. RPA is being increasingly adopted within the supply chain to mimic the actions of human employees: capturing, replicating and processing data; communicating with customers; and, even making judgments and learning from past actions.
With RPA, processes can adapt to demand and scale operations faster. Costs are cut due to reduced administrative overhead. Higher quality can be achieved by eliminating human error and duplication in processes and workflows. The idea is to shift human effort away from low-value, repeatable tasks to value-added activities that generate revenue and drive other improvements.
Already, RPA is used extensively in the supply chain. For example, businesses are using it to create, update and manage contract and other data for better supplier management. Some companies have also turned to RPA to research the supplier and manufacturer markets using consistent criteria, improving supplier selection. Payments and invoicing, order fulfillment and inventory updates, onboarding of partners, invoicing, customer service (including tracking generation and email confirmation), selling across multiple channels, and applying bulk actions for high-order volumes—all have been streamlined via RPA.
For RPA to truly succeed, organizations must pull sub-processes into one cohesive end-to-end journey, especially when the ecosystem consists of disparate enterprise systems. Manual hand-off points between process elements tend to be error prone.
Embrace blockchain adoption
Blockchain promises to fundamentally alter the way business is conducted. A blockchain is a distributed ledger that records transactions in a series of blocks that are bound to each other using cryptographic principles, forming a chain of immutable records. The blockchain exists in multiple copies spread over multiple computers, typically known as nodes. Blockchains make it possible for ecosystems of collaborators to share and agree on important business-related data without intermediaries.
Our research indicates that as blockchain technology matures, decision-makers across industries worldwide view its lofty promise as reason enough to invest time, money and effort in experimenting with distributed ledger databases, consensus algorithms, and public key infrastructure (PKI) cryptography technology to prepare for the future. The applicability of blockchain to the supply chain is reflected in the evident commonality in their names: a “chain” of dependent activity.
Three key capabilities vital to supply chains that blockchain delivers are:
Cryptographic security, which enables information immutability and credibility. Transaction records stored on blockchain are thus tamper-proof, reliable and verifiable by all parties at any time. Data confidentiality and privacy are ensured through permissioned access rights for trade participants.
Distributed ledger architecture, which provides transaction transparency and traceability. This increases visibility into data status for tracking, enables automated execution of contractual obligations through smart contracts, and ensures that networks are resilient to downtime and manipulation risks.
A network consensus mechanism, which provides a single source of truth through the network, uniformly available to all parties.
Use cases for blockchain in the supply chain are compelling. Cryptocurrency aside, the careful documentation of a product’s journey from its point of origin to its suppliers and eventually to its end destination makes for strong transparency and trust. Documentation of product identity, quantities, purchase orders, receipts, product quality standards, stage of progress in the logistical chain, and financial information such as taxation in an immutable, automated manner reduces manual time-consuming activities.
Because blockchain acts as a ledger of trusted information, shipment tracking is one obvious use case to track the movement of goods from the producer to retail within the production cycle. Companies can see where each batch of products comes from, each processing and storage step in the supply chain, and the products’ sell-by date. In the event of a product recall, the company can also see which batches are affected and who bought them. Entries in a blockchain database could trigger other tasks downstream, such as docking storage area information.
Blockchain solutions that establish a digital identity for suppliers in the procurement value chain are also being developed. Smart contracts enabled by blockchain can be used for instant settlement of payments and can reduce the time and costs associated with intermediary processing.
Monetize data with the Internet of Things
The Internet of Things (IoT) blurs the lines between the physical and software worlds. It is a collection of interconnected physical devices that can monitor, report on and send and exchange data. These devices are typically connected to computer systems via mobile data or WiFi networks. With improved network connectivity, smart products and solutions fueled by the IoT touch many aspects of our lives.
In this data-obsessed digital ecosystem, creation of actionable intelligence is what makes IoT so irresistible. It begins with capturing data and identifying actions. Soon, many of these IoT-based products and solutions will think and even do things for us. There is significant work under way to allay privacy concerns regarding sensitive customer data, including:
Better threat modeling.
Reviewing attack surfaces and attack routes.
Implementing security throughout the lifecycle with secure boot and hardware-based security controls.
Device authentication and secure data management.
Robust governance policy frameworks.
Securing over-the-air updates.
Using a layered security design that covers networks, apps and devices.
Network and power, two key IoT requirements, have been making steady progress. Data from IoT-driven devices has the potential to become a key input into supply chains. And suppliers, manufacturers and distribution centers are beneficiaries of this intelligence.
The IoT fulfills a key piece in a digital supply chain—creating a digital endpoint where none existed while also making it easier to generate data. This data is then converted to actionable intelligence and monetized, usually downstream.
The power of the IoT is undeniable, and it’s blazing a path of infinite promise in the digital ecosystem. It is most certainly a “thing” for enterprises to bet on for the future.
Each technology strategy highlighted here requires careful consideration and planning if it is to deliver the value intended across various supply chain processes and components. Further, in the delivery of these solutions, product development needs to be fast, iterative and continuous. Execution — broad conceptualization, analysis/synthesis, design, build and validate — must embrace modern software engineering principles. A strong foundation can ensure that an organization stays the course in executing a sound digital strategy.