A host of potentially disruptive technologies are creating digital “always-on” supply chains that provide better efficiency, visibility and customer service across a variety of industries, while challenging companies to find the talent to manage them, according to a new study by MHI, the Charlotte, N.C.-based producer of the MODEX tradeshow, and Deloitte, New York.
The 2016 MHI annual industry report, titled “Accelerating Change: How Innovation is Driving Digital ‘Always-On’ Supply Chains,” provides new insights into trends and technologies that are having a dramatic impact on supply chains and the people who run them.
The report explores eight key emerging technologies, including updates on adoption rates, the ability to create competitive advantage and case study examples on how companies are using them; barriers to implementing these supply chain innovations; and levels of investment in these technologies.
The report also provides recommendations for supply chain leaders to help them manage through this period of exponential change.
“The ‘always-on’ supply chain has the potential to deliver massive economic and environmental rewards for our industry and society,” says George Prest, chief executive officer of MHI. “It can boost productivity and sustainability, drive new markets, encourage innovation and create new, high-paying jobs. As with all change, the devil is in the details. That is why MHI provides this annual report as a resource and guide for our industry, as it manages this unprecedented level of change.”
Key findings include:
Lack of skilled talent remains the industry’s biggest challenge. For the third year, supply chain leaders identified “hiring and retaining a skilled supply chain workforce” as the biggest challenge facing supply chain professionals, with 58% of respondents citing this as an industry challenge. “Customer demand for faster response times” (cited by 56%) and “customer demand for lower delivery costs” (cited by 56%) also continued to rank as key challenges for the industry.
Eight technologies enable “always-on” supply chains. The industry leaders surveyed viewed the eight technologies studied as an even greater source of competitive advantage and disruption than they were just one year ago. The technologies are predictive analytics, robotics and automation, sensors and automatic identification, wearables and mobile technology, driverless vehicles and drones, inventory and network optimization tools, cloud computing and storage and 3D printing. A full 83% of survey respondents (up from 75% last year) believe at least one of the eight technologies in the report could be a source of competitive advantage or disruption for supply chains in the next 10 years.
Barriers to innovation remain the same. Again this year, industry leaders identified “lack of a clear business case” as the major barrier to investments in new technologies, with 43% citing it (up from 36% last year). This was followed closely by “lack of adequate talent to use technologies effectively” (cited by 38%) and “cultural aversion to risk” (cited by 35% of respondents).
Companies are investing heavily in new technologies. Despite these barriers, more manufacturing and supply chain companies are increasing investments in these technologies. New technology investments over $1 million have increased from last year’s survey; 52% of this year’s respondents said they planned investments in excess of that amount (vs 49% in the 2015 study). Three percent of respondents said their companies would spend at least $100 million on new technologies over the next two years.
“The innovations driving ‘always-on’ supply chains are initially disruptive, but they can empower firms to optimize processes and improve efficiency, creating a more flexible experience for workers and driving measurable business outcomes,” says Scott Sopher, principal at Deloitte Consulting LLP. “According to the survey findings, adoption of the technologies covered in this report will grow dramatically over the next 6-10 years.”
Top 4 technologies that provide a competitive advantage
Industry leaders surveyed identified Top 4 technologies that provide a competitive advantage for “always-on” supply chains:
1. Robotics and automation (51% of respondents cited, up from 39% last year)
2. Inventory and network optimization tools (cited by 48% of respondents, up from 45% last year)
3. Sensors and automatic identification (cited by 47% of respondents, up from 42% last year)
4. Predictive analytics (cited by 44% of respondents, up from 38% last year)
Fastest growing technologies
The survey uncovered shifts in the growth of some technologies. Namely, “robotics and automation” and “driverless vehicles and drones” are making bigger impacts on the supply chain sooner than previously predicted, with both technologies seeing a 12% growth spike over last year’s report.
This year, 51% of survey respondents said that robotics and automation has the potential to either create competitive advantage or be a disruptive force in their industry, and 77% said it will have some impact. Adoption is currently 35%, and is expected to rise to 74% over the next 6-10 years.
While “driverless vehicles and drones” are still emerging technologies, 59% of survey respondents said they are having some impact on supply chains, and 37% said they have the potential to provide competitive advantage or disruption. Adoption rates are expected to grow to 50% over the next 6-10 years.
Predicted adoption rates are dramatic
“Cloud computing and storage” and “sensors and automatic identification” are leading technologies in terms of current adoption rate—with 45% and 44%, respectively. But, looking at the next 6-10 years, six of the eight technologies covered in this report have predicted adoption rates of 74% or higher. Only “driverless vehicles and drones” and “3D printing” have lower predicted adoption rates over the 6- to 10-year time horizon, but they are still 50% and 48%, respectively. This accelerated pace of change will dramatically alter the way supply chains work and how they are managed in the future.
Impacts go beyond retail and consumer goods
The report concludes that while retail and consumer companies get the most publicity in discussions about disruptive technologies, they will impact all industries, including manufacturers and business-to-business enterprises. The report identifies potential benefits of these technologies across a wide range of industries.
Recommendations for today’s supply chain leaders
The study makes several recommendations for companies looking to remain competitive in the manufacturing and supply chain space, including:
- Invest, test and learn in these technologies
- Partner with solution suppliers, universities and trade groups
- Determine where to start generating data
- Determine how current your data needs to be
- Make sense of the data, so you can act on it
- Nothing is more important than talent management
“Of all the recommendations we offer leaders in the supply chain industry, the most important is the need to proactively manage talent,” Prest says. “The growth in digital, ‘always-on’ supply chains will only widen the talent gap that already exists in our industry. We need to train a new breed of supply chain professional, who has technical, analytical and problem-solving skills. Much of MHI’s work is focused on providing resources to help the industry close the talent gap through education and training programs and industry collaborations.”
About the study
This study is based on interviews with 900 supply chain executives nationwide, from a wide range of industries. The study explores the current state of the supply chain and identifies key trends and technologies that will have a profound impact on the future of the supply chain over the next 10 years.