The supply chain continues to undergo almost unparalleled levels of change. The older measures—productivity, quality and service—still apply, but we now see digital transformation poised to change everything.
The supply chain has increasingly become a critical function for companies to realize their business aspirations and is a competitive weapon in the modern, digital economy. Advanced supply chain capabilities can support more efficient and effective current business approaches as well as new business models that translate directly to business performance that is tangible and measurable.
Each year, IDC Manufacturing Insights provides manufacturers and retailers with the top 10 predictions and underlying drivers that we expect to impact IT investments in the supply chain in 2020 and beyond. For the second consecutive year, digital transformation was the key overriding theme in our annual 10 predictions. The 2020 worldwide supply chain predictions are:
Prediction 1: By the end of 2021, half of all manufacturing supply chains will have invested in supply chain resiliency and artificial intelligence (AI), resulting in productivity improvements of 15%.
Prediction 2: By 2022, firms will dedicate 35% of their logistics business process outsourcing services budget to process automation, focusing on order, inventory and shipment tracking.
Prediction 3: By the end of 2020, half of all large manufacturers will have automated supplier and spend data analysis, resulting in a 15% procurement productivity gain.
Prediction 4: By 2023, supply chain micro-application extensions will account for one-third of all new technology investments in manufacturing and retail.
Prediction 5: By 2023, 65% of warehousing activities will use robots and situational data analytics to enable storage optimization, increasing capacity by over 20% and cutting work order processing time in half.
Prediction 6: To lessen stress on the service supply chain, by 2023, 25% of OEMs will leverage blockchain to source spare parts, improving accuracy of usable parts by 60% and lowering expedite costs by 45%.
Prediction 7: By 2023, 60% of G2000 manufacturers will invest in AI-infused robotic process automation to automate tasks through increased productivity and address supply chain skills deficit.
Prediction 8: By 2024, 75% of all consumer-facing companies will have developed the ability to customize at scale within their supply chains, resulting in, on average, a 2–3 percentage point increase in market share.
Prediction 9: By 2022, the number of companies offering flexible warehousing options will have increased by 50%, which can help address seasonal demand challenges and lower fixed overhead costs by over 20%.
Prediction 10: By 2024, for transparency and efficiency, 40% of customs agencies will join private blockchain and API-powered trade platform ecosystems to achieve a 50% increase in cross-border compliance.
There are a number of actions that we would recommend manufacturing companies take that revolve around thinking about the future of the business, the likelihood of industry disruption, and the specific capabilities technology would be able to add for your supply chain:
● Invest in technologies that provide efficiency/effectiveness today yet enable future capabilities that can enhance resiliency or identify new opportunities.
● Not “technology for technology’s sake” but solving business problems or seizing on opportunities. Are you a technology company? If the answer, as it often is, is “no,” then work with a technology partner and focus your efforts on how technology helps solve existing business problems or in anticipation of future problems.
● Work with small and large partners to accelerate your IT capabilities and serve the line of business. External resources and expertise can help you move quickly and effectively, which is essential in today’s global marketplace. Expand your horizons to include smaller, app-driven capabilities as extensions to broader systems.
● Review your supply chain to make sure it’s ready for increasing levels of digitally enabled products and processes. This isn’t just your applications, datacenters and networks; it’s also about core enterprise architecture and infrastructure decisions, such as integration and security.
● Evaluate your relative maturity in the adoption of new technologies and, more importantly, your ability to translate those technologies into digital transformation. You’ll probably move more quickly with some technologies, such as the Internet of Things and machine learning, but make sure you’re experimenting with all of the technologies we identify as innovation accelerators.
● Be clear organizationally that modern, digital technologies are not about replacing people but replacing tasks and freeing up people to focus on more impactful things.
Manufacturers and retailers are rethinking and reimagining products, services and processes because of the new capabilities that a digitally enabled thinking supply chain can offer. But it isn’t enough just to have technology for technology’s sake. Manufacturers must continue to innovate and create value from their investments in solving business problems or enabling new offerings.
The coming years will greatly alter the technology landscape for business functions in the manufacturing and retail industries. While the predictions offered here largely focus on the near term to midterm (2020–2022), the impact of many of these predictions will be felt for years to come.
Simon Ellis is vice president of IDC Manufacturing Insights.