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The technology disconnect within the supply chain

by James Gherardi on 17 Sep 2018
supply_chain

The results of BIE's Supply Chain Risk Survey 2018 indicate that there is a disconnect between the use of technology and businesses embracing the potential technological advantages they could be using to optimise their processes and people activities.

Supply chain professionals recognise that having an influence on responsiveness and a high level of efficiency within their supply chain provides a significant competitive advantage, yet also poses one of their biggest challenges. Conventional lean initiatives in the supply chain have focused on improving efficiencies and reducing cost through the elimination of waste.

However, today’s supply chains are more vulnerable to events that previously may have only caused minor and local disruptions. They are also slower and less responsive to market changes and fail to innovate at the pace demanded by their customers.

When creating a vision for the future, businesses need to embrace uncertainty and develop dynamic systems capable of adjusting quickly to volatility arising from multiple fronts: trade wars, trade barriers, commodity pricing, cyber security, demand volatility – the list goes on. The question is: “Can this vision become a reality?” Are businesses prepared to disrupt and transform the status quo?

It is imperative for businesses to recognise that they have the opportunity today to invest in transforming their supply chain strategies, processes, competencies, and culture if they are to prepare for the rapidly changing and evolving uncertainty of the future. Technology should be invested in as an enabler of supply chain resilience and adaptability to a changing world.

The results of our survey indicate that Artificial Intelligence (AI) remains near the bottom of the list of challenges both in the last three years and over the next three years. Although many organisations are actively talking about the challenges of AI and big data, they appear to be a less significant risk for the supply chain compared to other factors such as increased customer expectations and cost pressures.

Is it an IT issue?

Some significant risks are being stored up across global supply chains, particularly with a move towards online and non-owned IT infrastructure. For example, if a big manufacturer of pharmaceuticals has everything automated and provided by online platforms, they need an incredibly robust IT security around those systems to prevent malicious attacks.

Now let’s say this manufacturer was making a Beta-Blocker. If someone were able to get into those systems and change the amount of active ingredient in the end-product, it would have catastrophic implications for the millions of people taking it. There is a considerable risk here. But is it a risk that sits with the CIO or the CSCO instead?

It would be naïve of the supply chain to think that they didn’t have a part to play in managing this risk. Particularly when they are controlling where the raw material comes from, how that raw material is moving through your business and around the globe and ultimately how a finished product is delivered to the end customer. There are a lot of points of failure that we need to be very secure about. The supply chain can have a valuable part to play in mitigating the risk of counterfeit too, but businesses need to be a lot more proactive in how they go about engaging the customers and authorities as well.

AI as a competitive advantage

There is no doubt that technology and AI can present a significant advantage for the supply chain. With changes to the macroeconomic dynamics and the retail landscape there is a need to create much shorter supply chains and reduce time to market. Technology should be seen as the enabler of this.

Optimised technology platforms effectively integrated across organisations should result in the automation of repeatable data-heavy processes. For example, demand forecasting that allows people to focus on managing the exceptions. This liberates your planning teams so that they can engage in some of the interesting work around fully integrated business planning and value-add activities.

A problem that’s too big to tackle?

So why isn’t the supply chain seeing AI as one of their biggest challenges? Perhaps it’s seen as a problem that’s too big to tackle?

The survey results show that one of the biggest goals for organisations is to decrease operating costs. If the focus is to reduce costs by stripping out working capital and inventory, then going to the board with a blueprint to invest in a new, untested piece of AI may not be met with the response you were hoping for. There is a push to go back to delivering what the business wants with short and medium-term strategies that are reactive to the market.

There is a realisation that although technology can have the same output, you can decrease your operating costs by streamlining your workforce and having people working in value additivity rather than reactive activities. There is this focus on having fewer but better quality people and retaining talent so that you don’t lose the IP with them as soon as they walk out the door.

Technology advancements like AI present an enormous opportunity for the supply chain in reducing time to market and operational costs, as well as protecting against data breaches and other external threats. It's important that the supply chain function recognise their role in these areas and develop strategies to manage them.

In our Supply Chain Risk Survey 2018 we explored the biggest challenges for the supply chain function, how organisations are dealing with current risk factors, and how much of a role transformation is playing within the function. To download your copy of the report, click the link below.

Supply Chain Risk Survey Report 2018

Topics: Supply chain, Technology

James Gherardi

Written by James Gherardi