Assimilate the SCM 4.0, before the new SCM 5.0 floods us

Barcelona, September 17, 2019.- The debate on what will be the SCM 4.0 has been treated in the last three years with more studies, congresses, success stories, trends, etc. Surely each company has designed how to digitize its supply chain. For this reason, we highlight the reflections of a great expert and the possible SCM 4.0, seen by a great consultancy. Both materials are interesting to read and understand before we all start talking about SCM 5.0.

Martin Lofvers is founder of Supply Chain Media and Chief Trendwatcher at the Dutch Supply Chain Magazine and the European quarterly Supply Chain Movement. He is a regular speaker on the topic of supply chain strategy road mapping at international conferences.

Why has SCM 4.0 become so crucial to so many organisations?

I doubt whether companies are using the phrase SCM 4.0 or know the rather broad definition of it. But they look at the possible applications of new intelligent technology because it might give them a competitive edge or otherwise to their competitors.

What types of SCM 4.0 platforms exist today and where are they mostly applied?

SCM 4.0 platforms comprises Internet of Things applications with the use of (RFID or other) tags and/or Blockchain, supply chain visibility software solutions in connected through common APIs in the cloud and Machine Learning applications with the integration with external (big) data like the weather and traffic information. These platforms are applied in all kinds of environment (manufacturing, procurement, planning and logistics) and industries, most depending on the company’s strategic direction (Operational Excellence, Product Leadership or Customer Intimacy).

What can companies do to overcome the organisational and internal barriers to truly innovate and embrace these technologies?

The best approach for (supply chain or any other) digitalization is a start-up, scrum approach with short sprints and a clear strategic goal in mind. Fail fast and learn from it.

Are there any specific technologies are start-up companies you think will transform the supply chain industry in the industry?

There are a lot of supply chain start-ups and scale-ups in Europe that will have a big impact on business. It’s too hard to predict which one will make it. The winners of the European Supply Chain Start-up & Scale-up Contest in 2018 and 2019 stand a good chance.

What are you currently working on or are most excited about?

Supply Chain Media is working on a supply chain knowledge bank with Machine Learning for individual content recommendation. Several well-known multinationals are very excited to collaborate in (paid) pilot, especially for the onboarding of new employees and tracking the interests of colleagues.

McKinsey: Vision of the future state

Mckinsey & Company conducted its own analysis of what will be the SCM 4.0. The digitization of the supply chain enables companies to address the new requirements of the customers, the challenges on the supply side as well as the remaining expectations in efficiency improvement. Digitization brings about a Supply Chain 4.0, which will be …

  • faster. New approaches of product distribution reduce the delivery time of high runners to few hours. The basis for these services is built by advanced forecasting approaches, e.g., predictive analytics of internal (e.g., demand) and external (e.g., market trends, weather, school vacation, construction indices) data as well as machine status data for spare-parts demand, and provides a much more precise forecast of customer demand. Forecasts are not carried out on a monthly basis, but weekly, and for the very fast-moving products even every day. In the future we will see “predictive shipping,” for which Amazon holds a patent – products are shipped before the customer places an order. The customer order is later on matched with a shipment that is already in the logistics network (being transported towards the customer region) and the shipment is rerouted to the exact customer destination.
  • more flexible. Ad hoc and real-time planning allows a flexible reaction to changing demand or supply situations. Planning cycles and frozen periods are minimized and planning becomes a continuous process that is able to react dynamically to changing requirements or constraints (e.g., real-time production capacity feedback from machines). Once the products are sent, increased flexibility in the delivery processes allows customers to reroute shipments to the most convenient destination.

    New business models, such as Supply Chain as a Service for supply chain planning functions or transport management, increase the flexibility in the supply chain organization. Supply chain can be bought as a service and paid for on a by-usage basis instead of having the resources and capabilities in-house. The specialization and focus of service providers allow them to create economies of scale as well as economies of scope and also attractive outsourcing opportunities.

    For example, we will see an “Uberization” of transport: crowd-sourced, flexible transport capacity, which will lead to a significant increase in agility in distribution networks.
  • more granular. The demand of customers for more and more individualized products is continuously increasing. That gives a strong push towards microsegmentation, and mass customization ideas will finally be implemented. Customers are managed in much more granular clusters and a broad spectrum of suited products will be offered. This enables customers to select one of multiple “logistics menus” that exactly fits their need.

    New transport concepts, such as drone delivery, allow companies to manage the last mile efficiently for single and high-value dense packages.
  • more accurate. The next generation of performance management systems provides real-time, end-to-end transparency throughout the supply chain. The span of information reaches from synthesized top-level KPIs, such as overall service level, to very granular process data, such as the exact position of trucks in the network. This range of data provides a joint information basis for all levels of seniority and functions in the supply chain. The integration of data of suppliers, service providers, etc. in a “supply chain cloud” ensures that all stakeholders steer and decide based on the same facts.

    In digital performance management systems, clean-sheet models for warehousing, transport, or inventory are used to set targets automatically. To keep the aspiration of targets also in case of supply chain disruptions, systems will automatically adjust targets that cannot be achieved anymore to a realistic aspiration level. We will see performance management systems that “learn” to automatically identify risks or exceptions and will change supply chain parameters in a closed-loop learning approach to mitigate them. That enables the automatic performance management control tower to handle a broad spectrum of exceptions without human involvement and to only leverage the human planner for the disruptive events/new events – with this, a supply chain is continuously developing towards its efficient frontier.
  • more efficient. Efficiency in the supply chain is boosted by the automation of both physical tasks and planning. Robots handle the material (pallets/boxes as well as single pieces) completely automatically along the warehouse process – from receiving/unloading to putting away to pick, pack, and ship. Autonomous trucks transport the products within the network. To optimize truck utilization and increase transport flexibility, cross-company transport optimization is applied to share capacities between companies. The network setup itself is continuously optimized to ensure an optimal fit to business requirements.

Sources:

Internet of Business 

Mckinsey & Company 

AndSoft 

Supply Chain Digital

Supply Chain Quarterly 

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