Study: Traditional Supply Chains Undergo Radical Transformation by 2025
On the heels of ProMat 2015, innovations like predictive analytics, 3D printing and wearable technologies are changing the supply chain landscape, according to a study conducted by MHI, the Charlotte, N.C.-based host of the ProMat show, and Deloitte Consulting, LLP, Chicago. In fact, on average, companies surveyed expect to invest heavily in new supply chain technologies over the next two years, with the top 17% spending over $10 million.
According to the 2015 MHI Annual Industry Report titled “Supply Chain Innovation — Making the Impossible Possible,” firms should embrace this transformation and focus on investing in new technologies to help compete and thrive as their supply chains continue to face constant pressure to do more with less.
“The speed at which supply chain innovation is being adopted—coupled with rising consumer expectations for anytime, anywhere service—is stressing traditional supply chains to near-breaking points,” says George Prest, chief executive officer of MHI, an international trade association that represents the material handling, logistics and supply chain industry. “Companies that continue to use traditional supply chain models will struggle to remain competitive and deliver orders that are accurate and on time.”
This report identifies the realities many companies face and the disrupters that are likely to drive even more change over the next 10 years.
“Through this report, we aim to help companies identify these disruptive factors, find the best options and make the right investments to manage their global supply chains,” says Prest.
Technologies that are re-shaping the supply chain landscape
The survey focused on eight technologies that are driving next-generation supply chains:
- Inventory and network optimization tools.
- Sensors and automatic identification.
- Cloud computing and storage.
- Robotics and automation.
- Predictive analytics.
- Wearable and mobile technology.
- 3D printing.
- Driverless vehicles and drones.
“I believe that we are at the dawn of an innovation wave that will soon hit the material handling industry," says Scott Sopher, principal, Deloitte Consulting. "The convergence of big data, faster and cheaper computer power and the increasing demands of customers will likely accelerate the adoption of innovative products and services in the material handling industry.”
The report groups these innovations into three categories—maturing, growing and emerging—based on current adoption levels and anticipated adoption over the next five years.
Maturing technologies include inventory and network optimization tools, sensors and automatic identification, cloud computing and storage, robotics and automation.
“Maturing technologies can create dramatic improvements in efficiency and service. For instance, inventory and network optimization tools can reduce supply chain costs by 10% or more, with larger potential reduction in total inventory costs,” says Sopher. “Current adoption levels are significant, with 35% or more of companies using these maturing technologies.”
Adoption levels of these maturing technologies are expected to reach 80-90% by 2019.
Growth technologies are classified as predictive analytics and wearable and mobile technology.
Adoption levels for such technologies are only at about 20%, but are expected to grow significantly over the next 3-5 years, according to the study.
The current adoption level of 24% for predictive analytics is expected to reach 70% in 3-5 years and 77% after six years.
Adoption levels for mobile and wearable technology, including smartphones, wireless devices and smart glass, sits at 23%, but is expected to reach 64% in the next 3-5 years.
Emerging technologies include driverless vehicles and drones, as well as 3D printing.
“Although current adoption hovers around 10%, company leaders should understand the current and near-term uses of technologies like drones and 3D printing and prepare for significant industry disruption over the next six or more years,” Sopher says.
Driverless vehicles and drones
“In reality, this idea is not new to the supply chain. Autonomous vehicles have been used in material handling applications for years, and many related systems are already in use today within the trucking industry,” adds Prest.
Examples include electronic stability control (ESC), collision avoidance technology and rear- and forward-view camera systems.
By 2017, the survey states that 20% of logistics organizations are likely to exploit drones as part of their monitoring, searching and event management activities.
By 2030, vehicles capable of driving autonomously are expected to represent approximately 25% of the passenger vehicle population in mature markets.
“Today, we are seeing the most significant applications of 3D printing in aerospace and defense, automotive, healthcare, consumer products and retail,” says Sopher.
Top uses from companies surveyed include new product prototyping (19%), small runs of high-value replacement parts (10%) and complex personalized products (6%).
Barriers to adopting new technologies
Leaders surveyed in the study identified two key barriers to adopting these new technologies—36% cited “the lack of a business case to invest,” while 31% said there is “lack of adequate talent to utilize the technology effectively.”
Important considerations for next-generation supply chains
The study makes several recommendations for companies looking to remain competitive in the supply chain space.
“Companies that are early adopters of the innovations and technologies identified in this report can improve both their cost and service creating a strategic advantage,” says Prest. “Our industry makes supply chains work, and MHI pledges to be at the forefront of these developments to help our members and their customers boost efficiency, performance and business results.”
Make smart decisions about where to invest. According to the study, deciding where and when to invest in technologies is crucial to survival over the next decade. This year’s survey found that 46% of respondents are developing partnerships with vendors, analysts, consultants and trade groups to help them understand evolving technologies and develop business cases for where to invest.
Align with customer needs. As many companies expand their global footprints, adjust their trade flows and try to meet their customers' ever-rising expectations for faster response times, they should invest in forward- looking technologies and capabilities that can help them assess and redesign their complex supply chain networks to help satisfy the demands of a constantly changing marketplace.
Collaborate across blurring boundaries. With cloud computing, predictive analytics and other advances, there are significant opportunities for companies to collaborate with value chain partners. Companies should invest where these collaborations can yield the best returns.
“Some of the best companies in the world use collaboration to create high-performing, customer-oriented supply chains. This collaboration not only provides visibility into the customer experience, but [also] drives innovation by producing a more complete view of their products and supply chain,” Prest says.
Invest in workforce hiring and training. According to the survey data, 31% of respondents cited the lack of adequate talent to implement and deploy the technologies as a significant barrier to their implementation.
The supply chain workforce crisis is likely to only accelerate as new technologies demand a labor pool with increasingly advanced skill sets.
“Multiple factors are contributing to the talent shortage, including an aging workforce,” says Prest. “But, the changing skill sets needed for jobs in the supply chain is the biggest factor. Our industry needs a sophisticated and well-trained workforce to operate leading-edge equipment and systems.”
An estimated 600,000 manufacturing positions in the United States are unfilled for a lack of qualified workers. In addition, the report predicted that, between now and 2018, there will be 1.4 million new jobs in the logistics and supply chain field.
“MHI has focused on the talent shortage for years, and works with the universities and other trade associations to address this critical issue,” says Prest. “Together, with the Material Handling Education Foundation Inc. [an independent charitable organization dedicated to encouraging and supporting the study of material handling, logistics and supply chain, exposing students to the vast array of opportunities in the industry and offering training programs at the high school, vocational-technical school and community college levels], MHI pledges to continue to lead the way in addressing the workforce crisis.”
This second annual study is based on interviews with more than 400 supply chain executives from a wide range of industries nationwide.
CLICK HERE for a rundown of the latest solutions introduced at this year’s ProMat show.