Digital technology is poised to revolutionize supply chain management in the coming years. The advances will be dramatic. Implementing the technology poses considerable challenges across industries, including knowing what applications to prioritize. Industries could benefit significantly from targeted academic research to make sense of their options.
With this in mind, Michael Feldman, an Executive MBA 2019 graduate in Global Supply Chain from the University of Tennessee, Knoxville’s Haslam College of Business, asked noted leaders in five industries to weigh in on what they felt were the most promising applications of digitalization. The industries included representation from heavy equipment manufacturing, logistics, automotive manufacturing, power generation manufacturing and food and beverage. They also discussed the potential costs and challenges they will face in trying to implement those digital applications.
Compiled by Feldman, their answers provide a window into the current state of digital supply chain management across industries and point out areas worth further exploration.
Opportunities and Challenges—Common Threads
Although many issues cited by the interviewees were unique to their respective industries, common themes emerged. Three areas offer significant promise for improvement through digital technology across industry: supply chain planning, customer experience and transportation optimization.
- Supply chain planning is central to any organization’s success, and predictive analytics and artificial intelligence can dramatically improve accuracy and reduce costs. The effects of using the right digital tools for planning are so wide-ranging that it is difficult to quantify and evaluate them. Digitalization can free up the flow of information in previously siloed organizations and close gaps in complex supply networks.
- Customers—whether business, consumer or internal—are increasingly savvy and sensitive to disruptions in service, and digitalization can keep an organization tightly connected to end users and their needs. Focusing on how the supply chain can improve customer experience will help define successful firms in the future.
- Freight costs were a common pain point across industries, and using digital technologies to optimize transportation will prove critical as those costs continue to rise. Clarity in the transportation chain can give firms a much better understanding of their short-term and long-term ROI.
Robotic process automation and blockchain technology also promise to transform the way supply chain business is done, but each still faces a hindrance to implementation. Many companies view automating support tasks as a threat to the job status of good employees. The relationship of blockchain technology to the latest data privacy laws also is still largely untested, but the ecosystem is changing rapidly. Companies must prepare now for the eventual impact of these technologies on their supply chains.
Leaders also cited the same major challenges in converting traditional supply chains to a digital format: high costs, the need for change management and finding and hiring individuals with the right talents to conceive, implement and maintain changes over the long term.
Insights by Industry
More from industry leaders about digitalization in their own firms:
Heavy Equipment Manufacturing
Most promising areas for improvement: process automation via artificial intelligence, robots and autonomous vehicles; customer experience; supply chain planning; transportation optimization
Criteria for choosing areas to improve: identifying areas with high complexity and high visibility, which translate into high-value opportunities; putting customer experience first
Areas where the firm is already taking action: converting a legacy process system to new digital platforms; using AI on equipment that triggers the procurement of parts for preemptive maintenance
Challenges and limitations: extracting data from legacy systems; helping teams embrace change; finding the right talent to implement solutions
Major costs: time and money spent extracting data from systems and integrating into a cloud provider; global project management; third-party resources to aid in the integration process
Key observation: In terms of personnel, it takes a must-have mix of skills to drive digital application in supply chain management. You need creators who can deal with ambiguity and start initiatives from scratch, fixers/implementers who can take product from the creators and drive improvement and maintainers who drive incremental change across the firm.
Logistics
Most promising areas for improvement: cost and pricing models, continuous improvement initiatives based on data analytics, design of digital solutions for in-warehouse issues, smart warehouses for digital inventory management
Criteria for choosing areas to improve: detailed mapping to understand all supply chain stages and identify gaps; analyzing short-term and long-term ROI
Areas where this firm is already taking action: using advanced analytics to negotiate business deals; implementing automation to improve manual processes
Challenges and limitations: change management, planning, bridging the gap between theory and practice, talent diversification (integrating those who are good at business with those who are good at tech and finding new talent who understand both)
Major costs: training (and retraining) those who use legacy systems
Key observation: Good planning is critical. We had an ongoing project for a couple of years where we kept missing on the execution, being reactive and doing things on the fly. We created a lot of rework for ourselves through learning by fire. Better planning would have led to much better development and deployment.
Automotive Manufacturing
Most promising areas for improvement: automation of logistics, inventory management, identification of high-risk suppliers, transportation traceability, artificial intelligence to track parts and containers with an industry-wide common tool
Criteria for choosing areas to improve: identifying chronic issues and assessing their impact on performance, for example, suppliers who routinely lose containers, specific vehicle parts that must be mobilized quickly in the event of a recall, etc.
Challenges and limitations: scaling solutions, prioritizing improvements, change management, capital expenditure requirements and talent recruitment/lack of internal resources to implement change
Major costs: integrating legacy systems into new systems; using warehouse management system tools that are owned by 3PL providers rather than internally
Key observation: Capital expenditures are always a challenge. We have hard and fast rules regarding capital expenditure investments, and the business use case must be well developed before we pursue it. We’re trying a strategy of breaking down the use case into smaller parts, so we can reduce upfront investments, fail fast and execute in small chunks.
Power-Generation Product Design, Manufacturing and Distribution
Most promising areas for improvement: visibility and traceability in the supply chain; product connectivity in the field to trigger proactive maintenance; understanding demand signals; creating digital replicas of every product in inventory
Criteria for choosing areas to improve: recognition of pain points across the supply chain
Challenges and limitations: limited resources, prioritizing improvements, data mapping and cleansing, finding and hiring in-house resources
Major costs: relying on outside vendors to implement and maintain digital solutions
Key observation: It’s one thing to identify the things that need improvement. It’s another to understand the full costs of implementing a digital solution. It’s critical to scope out the project completely so that you capture all the costs to determine future ROI.
Food and Beverage
Most promising areas for improvement: integrated data analytics, predictive insights, negotiating with suppliers, risk management, customer experience
Criteria for choosing areas to improve: start with the needs of the end user and work backwards to understand what tools, processes and people you must have to meet those needs
Challenges and limitations: knowing your business case and what you’re actually trying to achieve; having a plan that’s too high-level rather than granular; social norms and culture change; generational differences
Major costs: market research, new personnel
Key observation: Elements of the value chain that connect supplier to consumer are becoming more and more independent. Being able to understand those relationships through digital applications allows you to focus on the variables so that you can produce a better customer experience.
This article is based on information drawn from an organizational action project (OAP) by Michael Feldman, Executive MBA in Global Supply Chain, 2019 in the Haslam College of Business at UT.
Michael Feldman (EMBA-GSC, 2019) is the Director of Autonomous Transportation (U2C Programs) at the Jacksonville Transportation Authority, which recently used Autonomous Vehicles to transport COVID-19 tests safely from drive-through testing stations to laboratories at Mayo Clinic in Florida.
CONTACT:
Scott McNutt, business writer/publicist (rmcnutt4@utk.edu)