Digitalisation is rapidly becoming the buzzword of 2018, but what does it really entail? Malory Davies investigates
At first sight the notion of a digital supply chain seems absurd – the common perception of “digital” is from computing and appears to have little to do with physically moving goods around. Perhaps it’s better not to worry about the semantics and simply focus on how digital supply chain can transform operations through the application of Industry 4.0 innovations such as internet of things, artificial intelligence advanced robotics and analytics.
“Digitalisation allows us to simplify processes so we can deploy technologies to better plan and execute operations while eliminating suboptimal steps and redundant actions,” says Kris Kosmala, Quintiq’s general manager, Asia Pacific.
“Predictive planning and accurate execution is critical to the success of the modern end-to-end supply chain. Using algorithms to automatically compare an extremely large number of alternative decisions and outcome scenarios, optimisation helps find the best option that matches or exceeds the stated KPIs.”
Hans-Georg Kaltenbrunner, vice-president industry strategy for manufacturing, EMEA at JDA, says: “When it comes to digitalising the supply chain, many companies tend to use technologies that will enhance existing capabilities. Technological processes such as the Internet of Things (IoT) allows businesses to digitise the supply chain by binding data from the likes of sensors, smartphones, GPS, satellites and radars. This use of this technology produces live and predictive insights to transform their supply chain performance.”
However, data by itself does not add value, points out Henry Canitz, director of product marketing & business development at Logility. “It is what you do with the data that adds value. So, building a robust foundation of supply chain planning and optimisation capabilities is key in a company’s efforts to digitise the supply chain. The most effective way to build a foundation is through an integrated supply chain planning and optimisation platform.”
The challenge, of course, is to incorporate these developing technologies to enhance existing supply chains. And knowing where to start is a challenge.
“WMS is absolutely mission critical but lots of people have already implemented something to some degree,” says Craig Summers, UK managing director of Manhattan Associates.
“However, cloud-native order management (OMS) offers the quickest return as there are huge businesses benefits of gaining a single view of inventory across both warehouse and stores. It is also a technology that can be implemented relatively quickly and it enables customers to stay current with new functionality updates at the same time as giving them full flexibility to embed their own custom enhancements.”
Martin O’Grady, director of Unipart Supply Chain Consultancy, highlights the importance of SaaS solutions. He points out that these are available through relatively moderate subscriptions, are creating a level playing field for small and mid-sized companies – allowing them access to advanced technology that gives them agility and may offer them competitive advantage. “This is leading to many businesses adopting a ‘patchwork’ of interconnected SaaS products to drive the supply chain.”
The point is taken up by Guy Courtin, vice-president industry solution and strategy at Infor: “Most technology today is cloud based, which makes implementation much easier than the days of licence and install software.
“Cloud based transport and warehouse management solutions have become very mature and depending on scope of the initiative can be easy to implement, however companies should not underestimate the complexity that comes with any supply chain, especially those that are global.”
Supply chain planning and optimisation is another area where solutions are mature and easy to implement. Canitz says: “These have been available for many years, provide mature capabilities and have been successfully implemented by companies in all industries.”
Kosmala also highlights optimisation and prescriptive analytics. But he warns that despite appearing easy to implement if the user has large data sets, “the difficulty arises when the quality of that data is not as high as imagined or not complete enough for optimisation systems to solve the problem. If data problems do not exist, optimisation will guarantee a return of investment within a short period.
“Slightly less mature are automatic image and language processing technologies. These are incredibly useful tools in robotised warehousing and offer real time visibility into the inbound-outbound movement of goods. The cost of warehouse robotics is still quite high, while the location and function-specific programming adds to the overall cost of the projects. In countries where labour costs are still manageable, warehouse robotics projects are likely considered too expensive,” says Kosmala.
In the procurement space, Alex Saric, chief marketing officer at Ivalua, highlights source-to-pay suites which have been around in one form or another for around 20 years, and have reached a high level of maturity. Although room remains for technological innovation, these tools have proven valuable to many leading companies across the globe.
“Digitalisation of the full process can take a long time and is normally addressed in phases, targeting the most critical areas for an organisation first. It is not just technology implementation that must be considered, but also on-boarding of suppliers and employee adoption. Due to having a smaller set of users and limited integration to suppliers, the solutions tied to the up-front portion, spanning sourcing, contract management and supplier risk and performance management tend to be easiest and fastest to implement. Procure-to-pay requires on-boarding of all of a company’s suppliers, which for large organisations number easily in the tens of thousands, so is normally a longer process to full digitalisation, though quick initial progress can be made,” says Saric.
Getting started with digitalisation is also a challenge. Martin O’Grady argues that rather than talking IT, talk business needs. “Understand what it is that you need to digitise, identify the most suitable platform to fit the process or business need, and be clear on what success looks like.”
Alex Mills, sales and marketing director at Chess and ProSKU, says: “Applications, whichever technology is used and however they are configured, only exist to support the business and its processes. It follows that the first step is ensuring the business has the right processes in place and that new applications support these without forcing the business to change.”
To get started, you need to build a digital journey map that identifies the core business problems that need to be resolved and the financial value to be gained, argues JDA’s Hans-Georg Kaltenbrunner. “It is also paramount that businesses can determine which systems and digital technologies will be required to support this transformation.
“Additionally, as the digital supply chain becomes commonplace, businesses will have to recruit talent with digital science skill sets, as well as plugging into a partner ecosystem with access to data both within and outside your company. These steps will be critical success factors to enable this evolution,” says Kaltenbrunner.
Darren Baxter, group chief executive of Indigo Software, says: “The stages involved are the same as any business transformation project, firstly to establish a long term vision of the ideal scenario and then work backwards to assess the organisation’s current state. The resulting road map outlines how to get to the end result, what changes and investments are needed, including resources, talent and technology.”
Choosing the right partner for the project is a critical issue, says Mohit Paul, senior vice-president EMEA at BluJay Solutions.
This must include “people with the expertise to execute the transition for you, will facilitate a smooth transition for the business. The right partner should understand your business and guide you through the process of transformation with minimal impact to the day-to-day workings of the supply chain,” says Paul.
Infor’s Guy Courtin argues that the first step should be to light up the network with a visibility solution. “From there, companies will be able to see the weak spots and were to focus their digitisation efforts. The effort to connect and digitise a global supply chain should not be underestimated.
“It is important to treat any digitisation with the same discipline that they’d use for any major IT initiative including strong project and change management.”
There is plenty of technology available to help with the process of digitalisation. Quintiq’s Kris Kosmala points out that having a platform approach rather than a point solution creates more value at a much faster rate. “Digitised processes have a significant positive impact on the bottom and top lines of companies.”
Darren Baxter highlights the opportunity to use machine learning systems to support operational management with decision making, for example, suggesting order processing schedules to reflect anticipated demand.
“Automation enables workloads to be better streamlined and allows management to focus less on routine fire-fighting, and spend more time on more valuable strategic activities,” he says.
Control towers have played an increasingly significant role in logistics operations for years, so the use of a digital control tower is a logical development.
JDA’s Hans-Georg Kaltenbrunner says a digital control tower enables central visibility and traceability across all supply chain nodes, giving real-time insights into inventory and asset positions. “This will become increasingly important as manufacturers and retailers alike, adapt to new planning and execution requirements.
“The availability of cloud computing will also help companies to digitally transform. Cloud computing enables “limitless” computing power, and it will continue to become cheaper to store big data in the future. Additionally, cloud computing is always-on, secure and reliable and can be coupled with managed solution services for various supply chain activities,” says Kaltenbrunner.
“The use of sensors is another good example of the type of technology that will benefit those looking to transform the supply chain. Sensors enable continuous visibility and monitoring.
“This type of technology has already become a mandate for temperature-sensitive products such as pharmaceuticals and food, this type of tracking will eventually extend to all inventory types. Sensors can also be used to continuously monitor inventory quality and maintenance needs of equipment,” says Kaltenbrunner.
Scouring the market
A wide range of technologies on the market means working out the best return on an investment
Darren Baxter of Indigo Software urges companies to review their operations and assess whether their processes need changing or data sets need to be integrated before investing. Often companies fail to see expected returns “because fundamental processes needed revamping first,” says Baxter.
There are impressive ROI stories across all technologies, says Guy Courtin of Infor, but companies have yet to full recognise the value potential of end to end visibility as few have fully implemented it.
Kris Kosmala of Quintiq says: “The best and fastest (ROI) stems from optimisation of the planning and scheduling movements in the supply chain.” Optimisation lowers the levels and operational costs, decreasing the capital tied in inventories.
“Companies relying only on inventory management systems without supply chain planning optimisation applications will not access this benefit,”adds Kosmala.
“Having an integrated supply chain planning platform streamlines the digital transformation of supply chain management operations,” says Henry Canitz of Logility.
In the retail sector, Craig Summers of Manhattan highlights the contribution that order management systems can make. Many “retailers still suffer from a lack of visibility of inventory,” and many processes still run separately rather than from one OMS system, he says.
Although a WMS is central to the supply chain it is unlikely that investment elsewhere will have maximum impact unless the WMS is able to utilise the additional information being generated, says Alex Mills of Chess and ProSKU. Thus, “investing in WMS and keeping it up to date will always be a good investment.”
BluJay’s Mohit Paul highlights the fact that cloud-based systems installations are time and cost effective so they offer one of the fastest ROI times, of around 6-9 months.
“Investing in one system that provides a single view of supply chain data gives companies the edge they need to spot their next big opportunity sooner.”
On the horizon?
In the next few years, we’re expecting supply chain visibility to become mainstream as mature Internet of Things and big data analytics solutions become more viable. We are also anticipating more widespread supply chain segmentation as companies look to further segment their stakeholders according to their value to the business.
Drones and connected autonomous vehicles (CAVs) offer exciting prospects for the future. In effect, CAVs could become mobile warehouses. In the not so distant future, it may be that your indispensable smart phone breaks down and it’s a CAV that is dispatched to collect your faulty device and issue you with a replacement one. Equally, it could be a drone that lands in your garden. This is the future.
Martin O’Grady, Unipart Supply Chain Consultancy
In terms of machine learning and automation, there is set to be some significant investment as retailers look to increase efficiency in the warehouse. Artificial Intelligence is also very much entering the world of retail and is a conversation retailers must be having to keep up.
I expect there will be further development of planning and optimisation platforms as well as a greater use of machine deep learning applied in the execution of a broad range of processes.
Kris Kosmala, Quintiq
Arguably the most impactful innovations are coming from artificial intelligence, including technologies such as machine learning and natural language processing. AI is finally getting to the point that it can add real value, and a broad set of applications for supply chains exist. Another promising technology to watch is Blockchain. The technology is not as developed as AI, especially when it comes to supply chains, but it has the potential to effectively track shipments through the supply chain and ensure verification of source of supply.
Alex Saric, Ivalua
It is likely that blockchain will become popular in the future. One aspect of blockchain that will be significantly different is that more information will attach to, and remain with, an item as it moves through the supply chain. Another is that information is processed in distributed systems rather than silos as at present. This will change the nature of the supply chain execution systems. At the very least, it implies a high degree of integration will be necessary to ensure information is processed effectively at each step.
Alex Mills, Chess and ProSKU
The next big thing Industry 4.0 can offer the logistics industry is analytics. We are already seeing how embracing big data can help managers understand their supply chains better. The next step is to automate more of the insight process.
Natural voice interfaces
similar to Google Home and Amazon Alexa will be applied to supply chain platforms to enable conversational planning and analysis. In addition, augmented reality is bridging the gap between humans and machines, letting us experience the real world in entirely new ways. AI-equipped machines making and executing supply chain decisions are not far off.
Capabilities built around small, web-enabled devices (IoT), mobile apps and machine learning are becoming mature and show promise.
Guy Courtin, Infor
This article first appeared in Logistics Manager, June 2018