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2017: Do or Die for Digitizing Your Supply Chain?

Being a fast-follower could be deadly for businesses in the digital age

The fourth industrial revolution is here, spurred by digital technologies that promise to optimize supply chains and accelerate innovation. Whether you call it supply chain digitization, Internet of Things, or Industry 4.0, all require a “smarter” supply chain — connected devices, connected assets, and masses of data turned into actionable insights.

In its realized state, a digital supply chain will inform actions that prevent line failures, improve speed, quality and service, and reveal untapped potential in products or processes. Expressing that in numbers, IDC predicts that, by 2020, digitally-mature companies will achieve $430 billion in productivity gains over their less connected peers.1

Aggressive as corporate plans may be, Forrester predicts that data security concerns and lack of specific skill-sets will slow overall progress.2 Yet there have been gains. A recent UPS study of industrial manufacturers3 showed that 51 percent say they have begun transforming their operating model via new digital capabilities. Still, that leaves almost 50 percent who are lagging behind their peers in their digital evolution.

Digitization Will Touch Every Industry, and Every Supply Chain

With an estimated 12 billion smart devices in use today and another 18 billion more expected by 2020,4 it appears that no industry will remain untouched.   Take the chain of connected laundromats that has sprung up, WASH Laundry, which enables facility owners to monitor operations and manage pricing through a cloud-based network.5  Smart thermostats and security systems are gaining popularity, as are wearables for healthcare and service industry applications. Just under half of professional services firms say they’re investing in technology to increase revenue by improving customer service, employee collaboration, and enterprise management.6

Wherever and however supply chains are going digital, the catalyst is the same: Connecting with and learning from the supply chain and customers is becoming a prerequisite for innovation, efficiency, and profitability.

The Risks of Being Late to the Digital Supply Chain Party

Predicting and quantifying future steps is a risky proposition, but as the business world proves every day, so is inaction. Looking far into the future of supply chains, to the year 2030, to be exact, Aberdeen Group projected the state of the future supply chains7 by using the actions of “best-in-class” companies as a likely predictor of the future best practices. Two of the highlights:

  • 86 percent of best-in-class companies understand the tradeoffs between service levels and inventory, compared to 47 percent of others
  • 86 percent make demand forecasts that predict true customer demand within accepted tolerances, compared to 68 percent of others.

These findings imply that best-in-class companies have superior visibility into their supply chains, as well as faster or real-time access to vital data and insights. Conversely, the remaining 80 percent of companies have a great deal of ground to cover to reach parity.

Making Up Ground

Perhaps the wind at the back of high-achievers is that 67 percent are more likely to outsource some or all of their logistics through their partner network. Charlie Covert, vice president of UPS customer solutions for manufacturing customers discusses ways that companies can also leverage partners to accelerate their digital capabilities.

Says Covert, “The technology we offer provides inbound and outbound visibility, but we also add value with services that aren’t necessarily specific to shipping.”  He references demand planning consultation and contract services to help improve efficiency and customer service, such as distribution and field stocking locations. “Because UPS invests in the facilities and state-of-the-art technologies, and staffing, if needed, we can often help customers advance their capabilities faster, and with less capital investment.”

Alan Amling is vice president of corporate strategy at UPS, and one of the company’s pioneers of its digitally-networked 3D Printing capabilities with Fast Radius. He highlights the potential of on-demand 3D printing to reduce the expense of “just-in-case” inventory and to improve response times. “Today, UPS customers can transmit a CAD drawing to our onsite Fast Radius facility in Louisville which could then ship out the next morning.” He adds, “On-demand manufacturing is just one example of the many ways our personal and business lives are getting more connected and smarter by the day. There is no question that businesses will need smarter supply chains to keep up.”

See how UPS can help you keep up with the pace of digital disruption.

2 Internet of Things (IoT): 2017 Predictions from Forrester,” Gil Press, Forbes.com, November 1, 2016.
4 “The 5G Revolution: The Internet of Things Meets Everything,” Simona Jankowzki, Goldman Sachs video, May 2016.
5 “Data Sharing and Analytics Drive Success with IoT,” Stephanie Jernigan, et al., MIT Sloan Management Review, September 8, 2016.
7 “Supply Chain 2030: Considerations for the Future,” Aberdeen Consulting, November 2016.

 

The Wall Street Journal news organization was not involved in the creation of this content.