Last year, supply-chain disruptions hit a record high, with North America at the top of the list as the most affected region. In fact, 1,069 events took place within just the first six months of the year – the highest since 2010.
As new markets open up or change, even more significant risks may come to the fore. It is more critical than ever for companies to increase visibility not only into their own operations, but also their supplier and vendor ecosystems as well. With so much risk in play, any technology that helps companies stay immune to forces of disruption is well worth the investment.
Many organizations have yet to take advantage of the strategic role of technology and its potential to reduce risk. A recent Deloitte survey reveals that 51 percent of respondents in the manufacturing sector believe that digital maturity of their supply chain is above average compared to their competitors. Only 28 percent, however, have begun digitizing their supply-chain operations.
Such a disconnect can result in devastating consequences for organizations that fail to recognize the implications of inactivity and the potential for disruption. The good news is we are also in an era of unprecedented opportunities. Artificial intelligence (A.I.), cloud computing, low-cost sensors, data analytics, and mobility have all fueled innovation advances in the supply-chain landscape. Even blockchain – the distributed ledger technology that underpins cryptocurrencies such as bitcoin – is being tested for potential supply-chain applications.
Identifying the right technologies to implement and drive supply chain value is a considerable challenge. The impacts of each of these technologies will vary. Some may serve as enhancements to existing processes, others may have only niche applications, and a few may eventually prove to be disruptive. Of course, the big question is which technology will drive the greatest benefit to your operation.
Of all the technologies with the potential to transform supply chain operations, we focus on a few that look especially promising.
Over the past few years, A.I. has emerged as a technology that people use every day without even realizing it. A.I. is poised to transform industry operations, including supply chain and logistics. A 2017 survey by Vanson Bourne reveals that operations and supply chain to be the top processes where businesses are driving revenue with A.I. investments.
A typical supply chain has repetitive tasks at different phases of production, distribution, and procurement. A.I. has the potential to simplify time-consuming activities such as vendor screening and prequalification through intelligent automated systems, helping companies to reduce turnaround times, improve safety and save costs.
A.I. technology creates self-learning systems unbound by rigid rules or standard operating procedures like conventional enterprise resource planning (ERP) systems. It is this cognitive reasoning ability that makes A.I. a natural technology solution for simplifying strategic sourcing. Cognitive procurement advisors (CPAs), for instance, can provide audit summaries as well as recommendations about everything ranging from supplier qualification and performance management to compliance audit and risk management.
Cognitive A.I. is expected to achieve higher levels of trend analysis with risk modeling used to predict risk patterns, such as contractor insurance verification. In a centralized repository containing contractor insurance credentials, an A.I. system could cross-check every insurance certificate entered, and instantly flag any inconsistencies or mistakes in documentation. In fact, the system can also keep both operator and contractor updated about the error on a real-time basis, compared with days of response time required when done manually.
Next-generation A.I. technology can also bolster organizational decision-making from historical data, known failure points and other information. IBM’s Watson Supply Chain Insights shows how deep thinking and machine learning together foster new possibilities for supply-chain management. According to IBM, this new technology combines a high-end analytical engine with A.I. to serve as a forecasting machine. The system captures regulatory reports, traffic reports, and weather updates to help supply-chain professionals predict risk factors. Similar systems can help shippers analyze and correlate vast streams of data, to better anticipate the impact of traffic and weather on the entire supply chain.
As companies expand their footprint across continents, the operations of global procurement and logistics teams become increasingly complex and challenging. Inconsistent vendor onboarding, delayed shipments, and inefficient inventory management are common bottlenecks. In this context, big data and analytics offer a promising solution.
Collecting, verifying and storing supplier data – starting from when a new supplier is onboarded – is the first step toward ensuring supplier risk management. A high-end analytics engine can analyze this data to generate supplier performance reports, empowering sourcing professionals to easily monitor the supplier and vendor pool, credentials such as certificates of insurance (COIs), and their compliance status.
Combining supplier analysis data with analytics can help organizations make better decisions. For example, a centralized data architecture of critical supplier information, complemented by an analytics engine, helps decision-makers identify suppliers associated with higher costs or better performance.
Cloud computing and the Internet of Things (IoT) have already transformed the way that manufacturing operates, and they have the potential to do the same for the supply chain. These technologies can deliver both operational efficiencies and additional revenue opportunities by improving transparency.
A cloud-based worker management system can help organizations easily manage their vendors down to the individual worker, across geographically dispersed worksites. By serving as a common link between an operator and a supplier, a cloud-based system allows an organization to take control of the supply chain with employee-level prequalification and training.
Cloud systems can also help companies respond to supply chain needs in real time. With spreadsheets or paper files, information might be weeks or months out of date. A cloud-based, mobile-enabled solution enables supervisors to fill in information from the worksite, notifying operators immediately.
A blockchain-driven supply-chain ecosystem can help every stakeholder securely save information regarding product price, location, quality and certification. The availability of this critical data within a network can enhance traceability in the material supply chain, reduce losses from counterfeits, and enhance compliance on, and visibility into, outsourced contract manufacturing.
Recent innovations around this technology promise even greater gains. In one recent case, a “supply-chain-as-a-service” platform provider teamed up with an IoT solutions provider. The resulting SCaaS platform is a blockchain-based ecosystem that leverages IoT solutions to assign a digital identity to physical items and enable tracking of goods throughout the supply chain. I believe we will see increasingly more of these announcements in the coming seasons.
The prevalence of internet-based and other new technologies has already created high transparency standards and made end-to-end supply-chain visibility a reality. At the same time, the risk of reputational loss from compliance violations or poor vendor quality is higher than ever. Employees and customers are expecting more, and because technology enables you to ensure high standards, the time to act is now.
Every organization needs to develop a futuristic vision for its supply chain, carry out a systematic evaluation of current process performance, and chart out a long-term digital transformation roadmap. This enables you not only to drive better outcomes in terms of mitigating risk and brand damage, but also to automate activities and achieve increased cost savings.
Richard Parke is Senior Vice President, Global Supplier Services for Avetta, a provider of supply-chain risk-management services.