There are few sectors likely to experience the effects of technology developments in 2018 as greatly as the supply chain industry.
This is primarily due to the steady transition of the supply chain industry to an IT-driven environment. This means that the rapid changes occurring across a range of technologies including artificial intelligence, Internet of Things, robotics and automation, and Big Data will all have large flow-on impacts on supply chain personnel and processes.
The changes are particularly important in the Asia Pacific region because APAC remains the driving force of global economic growth.
APAC was the largest contributor to global growth in 2017 and this looks set to continue in the coming years as the Chinese middle class continues to expand and the efficiency gains of technology developments and e-commerce are realised throughout Southeast Asia and Australasia.
Opportunities and challenges
While the longer term effects of automation and AI-based efficiency gains are undoubtedly positive, these types of rapid changes often initially result in challenges for business leaders and managers as they recognise that systems need to be upgraded to higher and more sustainable standards. This can be daunting if legacy systems have not been upgraded for some time, let alone attempting to predict which technologies will come to dominate the industry and become the new standards. These types of changes are also associated with high capital expenditures, changing customer expectations, and the need for new staff and equipment training programs.
However, done correctly, making the necessary changes to supply chain infrastructure can yield huge competitive advantages. This is born from improved capital efficiency, alignment of systems, more accurate growth strategies, and more effective ways of managing complexity and uncertainty. In short, having in place modern infrastructure and processes make your organisation smarter and more profitable.
There are huge opportunities for companies working across both developed and emerging markets. The two main factors driving these opportunities are the expansion of the consumer population and the mass expansion and adoption of smartphones. Both of these factors act as strong drivers for the need to modernise the approach to logistics management.
The key issues and trends
The following section outlines the major issues facing the industry in 2018, as well as highlighting some of the technologies that are transforming it.
The era of useful artificial intelligence (AI) has well and truly arrived as algorithm-based decision making and data analytics are essentially being adopted across every type of industry. In the supply chain industry, AI technologies offer the possibilities of near-continuous production as well as the benefits of reducing human error, reduced staffing costs, as well as improving the working life of the modern generation of factory and warehouse staff.
We are now seeing the development of new working relationships between human workforces and AI. For organisations, AI offers the opportunity to restructure workflows so that workers can be more focused and productive in their roles with the support of technology, while being able to move away from many of the more menial tasks such as tracking products or processing large volumes of product data. High-level AI derived from continually evolving algorithms, also offer company directors and decision makers the ability to make more informed strategic decisions driven by AI.
DHL is using predictive AI technologies to enable “anticipatory logistics”, which can shorten delivery times and boost efficiency by anticipating demand before an order has even been placed. Global supply chain managers can use these types of AI technologies to reduce bottlenecks at every stage of the supply chain and to be proactive rather than reactive during peak periods.
Blockchain technologies are being widely adopted everywhere from fintech applications to global development projects. One benefit of the permanent, secure record that blockchains can provide to benefit supply chains is being realised in agriculture. Bext360 is using blockchain technology to develop automated kiosks, which evaluate produce such as coffee, negotiate a price, and make the payment via digital currency – all automatically. The digital payments are made directly to each stakeholder along the entire supply chain from the farmers, transport companies, banks, and purchasers. These types of systems can also be used to verify the source of goods. Another company, Provenance, is using blockchain systems and a specialised app to track Asian tuna supply chains, so that regulators and consumers can transparently see where the tuna is being sourced from.
ICOs in blockchain software
Initial Coin Offerings (ICOs) are increasingly being used as a means to quickly source capital to launch blockchain based companies and software. This process avoids the need for lengthy and often costly venture capital funding in a process similar to traditional IPOs but without the need to give up partial ownership of the organisation via shares. Instead, the coins, which are essentially utility tokens, are supplied in exchange for invested funds, which can then be traded on exchanges or used to directly purchase goods or services from the blockchain company.
WABI has used the ICO process to launch its blockchain powered goods tracking platform, with the aim to tackle the more than USD $450 billion worth of imported fake goods in circulation around the world. This is especially an issue in China where counterfeit goods are particularly problematic, extending to pharmaceuticals and food products, including baby food. The platform uses an RFID tracking system to link digital and physical assets through the RFID labels that incorporate anti-copy features. Consumers can then authenticate the product using their smartphone.
The pace of technological change
Technologies are advancing faster than we know how to use them. The boom in e-commerce has provided customers with a larger array of product options than ever before and an increasingly simple way of finding them and having them delivered without ever having to leave home. It has also led to changes in customer expectations and demands, which has had flow-on effects onto the way that warehousing needs to be managed and operated.
With heightened customer demands and fast, low-cost delivery options from e-commerce giants such as Amazon, customers increasingly expect rapid or even same day deliveries. The logistics industry, therefore, needs to respond to these expectations in order to remain relevant and in favour of customers. Reliable infrastructure, combined with the utilisation of technology developments is the only way that companies wishing to succeed in the supply chain industry can keep up with these changes.
Martell Hardenberg, CEO of e-commerce retailer Lazada, sees online and mobile commerce as being the primary means of customer purchasing in the future and believes that people will continue the transition to online and then mobile device based shopping. These trends are also extending to new areas once dominated by the traditional shopping experience such as for grocery items. Shoppers are moving to purchase all types of products online, even large home appliances.
Internet of Things
The Internet of Things (IoT) term has come to be associated with connected home appliances such as smart speakers or home lighting and electronics but it is, in fact, a very broad landscape that includes all the benefits of connected sensor and tracking technologies. McKinsey research indicates that the potential economic impact of IoT applications will be in excess of US$11 trillion by 2025 and as much as US$3.7 trillion of this will be related to factory environments.
Ashish Pujari is the general manager and vice president of SAP (Asia Pacific and Japan) and believes that the key benefit that IoT brings will be the enablement of informed manufacturing. This means that all products, people, and processes within an organisation can be seamlessly integrated and information shared in real-time to create smarter, more streamlined, and more automated processes.
Sensor technologies such as Near Field Communication (NFC) tags are also increasingly being recognised for their potential to improve efficiencies across multiple industries including logistics, biomedical, and marketing. Its potential to accurately tag and track items makes it a vital tool for improving company workflows while also providing enormous potential for organisations to better understand and engage with their customers. Companies can use NFC chips, barcodes, and UHF RFID tags to connect products, software, and hardware systems to the cloud, allowing far greater insights to be drawn from company workflows.
Automation and robotics
While task-specific robots have been used for decades in processes such as automotive manufacturing, the latest generation of robots have the ability to learn how to perform various tasks, making them potentially far more useful. This attribute means they can be utilised almost anywhere along the supply chain. Combined with evolving and advancing AI technologies, this offers flexibility in the manufacturing process as well as the potential for reducing staff costs, especially related to repetitive or dangerous tasks.
The 2017 Telsyte ANZ Robotic Process Automation Study 2017 found that the Australian robotics market, which is currently worth around $216 million, is set to expand rapidly to $870 million by 2020. And while ANZ may not be the first company you would expect to be implementing robots in its workforce, it is in fact leading the way in Australia by rolling out a series of robot software systems that can take over the work of employees across a range of roles from helpdesk support, customer service, and payroll administration.
There is essentially an unlimited way in which Big Data can be used to track and measure performance but in the supply chain industry, one way in which it is being used most effectively is by accumulating information in real time to build a picture of a factory’s performance. Historically, surveying workers accurately has been difficult without putting an entire factory or warehouse under surveillance, but modern sensors and networks can provide insights that would have been difficult or impossible to reveal in the past. Aggregated and personalised data on individual workers allows managers and directors to identify problems more easily and make changes to processes for all staff to improve productivity.
By removing bottlenecks in the manufacturing or delivery process, it also improves the lives of workers by streamlining their roles and preventing time wasted on unnecessary or frustrating tasks. This type of system is being implemented by companies such as the product design and procurement specialist, Matrix, where the transition to data-driven process design has been a game changer in creating a leaner business model and reducing wastage. The role of Big Data driven decision making will continue to advance throughout supply chains across the Asia Pacific.
3D printing has huge potential for use in prototyping of new products and designs. It is now being used by companies such as Unilever, which was able to nearly halve its prototype production time after investing in 3D printing technologies. Previously, its production team would have to wait many weeks for the prototype parts to be created using the traditional tooling process, which has implications right down the supply chain. Not only does this lengthen lead times but also increases costs as further iterations are required. With 3D printing technologies, it is possible to apply design iterations to the moulds within hours, not only speeding up production times but also allowing for closer engagement of product designers with the manufacturing team to create better products.
The next step
Technology is transforming supply chains and ensuring advantages are maintained as competition expands across the global stage. Supply chains across the Asia Pacific need to leverage the benefits of technology and use them to enhance the productivity and happiness of their employees. Ongoing investments need to be made in IT to ensure compatibility and flexibility across the supply chain and new approaches need to be taken in storage and delivery systems.
Organisations, especially small and medium enterprises, need to make careful decisions about where to invest in new technologies and where to outsource, to ensure they can keep up with the pace of change without overextending capital budgets.
Bastian Consulting has a deep industry focus on senior level supply chain roles in the APAC region. Managing Director, Tony Richter, is an expert in the supply chain industry with 7+ years executing senior supply chain search across APAC. He works only with a small portfolio of exclusive clients and uses a transparent, credible, and focused approach to establish trust with all his clients and candidates.