Digitalization Is Disrupting the Supply Chain

June 25, 2018
A range of technologies have changed the industrial landscape. Companies that can successfully manage those technologies will also change the way they manage their supply chain.

My last three articles analyzed the relationship between digitalization and the manufacturing execution system (MES), considering MES as a key component of any digitalization initiative. At the time, I touched only briefly on the impact MES has on the supply chain. For this blog, I want to spend some more time on how digitalization is impacting and probably disrupting the supply chain—or at least the traditional concept we have for supply chain.

When we spoke of supply chain over the past 40 years, we mostly thought of logistics. Optimizing the supply chain was basically optimizing the flow of materials, from the first supplier of raw materials to the distribution center of the finished goods, whatever they may be. Efforts have been put mostly on reducing stocks and lead times, guaranteeing the availability of the components at each stage of production. Delocalization of production and globalization have created new challenges in managing supply chains, introducing new complexity in logistics and quality control. The main challenge has become finding the right combination of low production cost, necessary quality of products or semi-finished goods and reasonable transportation costs, guaranteeing at the same time the availability of the products when needed.

Recently, things have changed. A significant reason for that is the availability of new technologies that changed the industrial landscape:

Real-time Big Data and analytics. A massive amount of data will be available, along with systems and tools to collect, analyze and transform that data into information. Even more important, the information will be available in real time, enabling companies to make decisions on product design, manufacturing, distribution and even prices.

Mobility. The information to manage the supply chain will not be generated by desktop devices anymore. Mobile devices are already frequently used in logistics, but their usage is growing day by day. Mobile devices provide the ability to collect and deliver information in real time wherever the user is. The impact of mobile order and delivery information entry in the coordination of the supply chain is critical. It dramatically changes how orders are received and processed, with a critical impact on production organization and scheduling.

Internet of Things (IoT). The number of sensors used in any kind of industry is rapidly growing. Because of the rapidly decreasing cost of devices that can be considered smart because of their embedded computational capabilities, they are being incorporated in an increasing number of products. Most of these devices can be connected to the Internet and can become an incredible source of information that would otherwise not available. Only a few years ago, it was common to participate in surveys aimed to understand how products were used by end users and how they could be improved. Today, many products provide this information themselves while they are being used.

Social media. The information coming from the products can be related to the sentiment of users collected on social media. Many companies monitor—manually or automatically—social channels to understand what their clients think of their products, and use the information to tune design, production, logistics, or marketing and communication.

3D printing. 3D printing is an emerging technology that is becoming quite common in many different kinds of industries. Automotive, aerospace and medical device industries are increasing the usage of 3D printed components in their products. Other industries, like the food industry, are just starting to experiment with the use of 3D printers. It can be an extremely disruptive technology that permanently modifies the existing supply chain in some industries. It allows the transfer of information instead of material goods and moves component production close to where the assembly takes place. This basically virtualizes all the logistics. Moreover, 3D printing allows low-cost product customization and allows the production of micro lots or single products to be sustainable.

Drones and self-driving vehicles. The use of drones has already significantly modified the supply chain in areas and markets where transportation was a critical bottleneck. One of the best examples is the delivery of blood bags in some areas of Africa. Ground transportation was unacceptable because it took too much time, especially during the rainy seasons. Drones can deliver blood bags in less than 30 minutes in an area big enough to serve a significant amount of population from a single dedicated warehouse. Something similar is happening with self-driving vehicles. They are pretty common inside production plants, where automated guided vehicles (AGVs) or laser-guided vehicles (LGVs) are used to move goods. Interesting experiments are in progress in several cities, both to address the last mile issue or the transportation to distribution centers.

Companies that will be able to correctly manage the opportunities provided by these technologies will significantly change the way they manage their supply chain. They will change the way they collaborate with their suppliers (even tier three and four). But what is even more impacting is that they will start to collaborate with end users, which will speed up the innovation of products and/or services.

The hard work done in the past to optimize the supply chain in a delocalized environment is almost useless in the new world enabled by the usage of the technologies that have become available and affordable. A new approach—and especially a cultural shift—is needed in considering the end user as an active and driving part of the supply chain itself.

Luigi De Bernardini is CEO at Autoware, a certified Control System Integrators Association (CSIA) member based in Vicenza, Italy; and president of Autoware Digital. For more information about Autoware, visit its profile on the Industrial Automation Exchange.

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