Megatrends (Possibly) Shaping Supply Chain Trends: Technology
Megatrends (Possibly) Shaping Supply Chain Trends: Technology
Feature Article by IDC Insights Asia Pacific
Deciding whether to invest in new tech is challenging …. ???
…..Too early, and you risk being on the bleeding edge leading to high investment and minimal return. ……….Too late, and you could be left behind by competitors and have to play catch up.
The necessity of having a technology scan every few months is becoming essential in today’s world. In doing so, use cases and new tech announcements are gathered and shared across the organization and used as inputs driving the technology roadmap. Analyzing the potential business impact is essential for understanding the implications for technology investment – whether it will enable incremental improvement, or fundamentally change business models (or somewhere in between). This evaluation also needs to consider sourcing the technology, implementation and support services necessary to enable the desired outcomes. This article highlights five technology developments shaping the future supply chain.
Hyper-connectivity is occurring today and already impacting supply chains. IDC’s Future of Connectedness research considers connectivity between people, things, processes and applications as creating a state of hyper-connectivity. The term refers to the use of multiple means of communication where all things that can or should communicate through the network will communicate through the network. The trend is fueling large increases in bandwidth demand and changes in communications because of the complexity, diversity and integration of new applications and devices using the network.
5G network implementations are delivering orders of magnitude increases in bandwidth and capacity while enabling low latency and increased network availability. Further, segmentation of traffic through network slicing and delivery of private networks enable enterprise use cases. These changes, taken together, impact the evolution of supply chains.
Network slicing allows cellular 5G networks to deliver dedicated virtual networks across a single physical infrastructure, reducing costs, segregating traffic and enabling delivery of quality of service metrics like latency, bandwidth and congestion management. This becomes increasingly important when we look at the overall digitalization trend, with factory data expected to grow by 400% from 2021 to 2025 (source IDC Manufacturing Insights).
Whilst much of this will remain in the factory, similar trends are occurring between supply chain partners, with a shift to increasing connections across the entire supply chain resulting in increased data flow as equipment and processes connect to external partners and their systems.
The ability to transfer large amounts of data across multiple assets and equipment in environments where there are many connections using high bandwidth applications is fundamental to the delivery of use cases including autonomous vehicles in a busy smart city environment. Other use cases could be the deployment of autonomous factories, mine sites, oil rigs, ports, ships etc.
There are examples of all of these starting to appear, but mainstream adoption is currently low.
Artificial Intelligence (AI) and Automation.
The use of data for decision making goes through three phases. What has happened?, what is happening?, what will happen? As we strive to enable predictions to support supply chain decision-making, we still need to ensure we have the data to know what has happened and is happening.
This collection of data is the base level from which we can build a responsive supply chain. However, organizations are currently a long way from achieving this. While we have seen a proliferation of IoT devices, the transition to all equipment being connected and “smart” is still some time away.
Once we have the data, what do we do with it. Almost 40% of Asia/Pacific manufacturers are still using spreadsheets to manage transportation, warehouses, and suppliers. With this limitation, visibility and connectivity with tier 1 suppliers is limited.
For those that do connect with suppliers, there is a lack of visibility further down the chain, where data collection is still manual with email being the prime way of sharing data. Coupled to this is the need to integrate with various other systems, where synchronization is still occurring through copy and paste.
The future state is one of integration and automation. Whilst this may seem aspirational, advances in technology have made this more realistic. More and more equipment is smart, and as factories and warehouses refit, “smart” equipment replaces their “dumb” counterparts.
These future facilities are taking data from smart assets and creating virtual models or digital twins of the process, allowing for real-time monitoring as well as simulation using real-time data for optimization. The deployment of learning algorithms on the floor also allows for equipment to become self-learning. A combination of inspection systems, guided by algorithms that include manufacturing parameters, leads to the real-time adjustment of machinery and equipment to improve productivity, yield, and quality.
However, improvements to supply chain processes involving integration and automation do not necessarily have to begin with significant technology investments. For example, when it comes to sharing data and connecting systems, the use of software robots (robotic process automation) is an effective first step to synchronizing data between systems without the need for application process interfaces (APIs). This means parties in the supply chain can connect to different systems far more easily than in the past.
Considering physical automation and the use of robotics, spending on robotics and drones has increased dramatically, and growth across the APJ region is expected to double from 2022 to 2026. The use of robots across the region can be seen across all aspects of the supply chain – from automation in factories to retail warehousing, to “last meter” delivery in restaurants – the continued cost reduction combined with increasing labor cost pressures is making automation an ever more attractive option.
Web3 and the Metaverse
The emerging tech trends of web3 and metaverse are intertwined. The metaverse will give us a virtual representation of the physical world while Web3 will give us access to data securely and confidentially. Web3 will be able to simplify and enhance customer experience through more manageable access to profiling information and data, moving the pressure of securing data away from organizations, as it is already more secure.
The metaverse is evolving. Currently, we think of the metaverse as a “highly immersive future environment that blends the physical and digital to drive a shared sense of presence, interaction and continuity across multiple spheres of work and life.” [understanding the metaverse, Mar 2022] The key to success will be the augmented / virtual reality (AR/VR), 5G networks, and Web3. So how does this impact supply chains? The metaverse will be a place where people and AI interact, and it will consist of many different “verses” that are interconnected. The metaverse’s fundamental strength will be the ability to provide seamless, immersive digital experiences. In supply chain terms, this means a virtual space where product and process digital twins exist. This is what we can call the “industrial metaverse.” Building a digital twin of the entire ecosystem becomes possible as these digital twins “plug” into each other enabling visibility across the entire chain.
Coupled with the industrial metaverse is the civil metaverse, where we see retailers setting up shop. At this year’s National Retail Federation (NRF) show, the metaverse was a significant theme. Retailers such as Nike indicated their intent to sell virtual branded sneakers with consumers in the metaverse buying digital products for their presence in the metaverse. However, from a supply chain perspective, the exciting point relates to the combination of physical and digital products being purchased together. For example, Penfolds winery has launched a bottling of rare wines available as a non-fungible token (NFT) purchase. The digital bottle can be converted into a physical bottle, all traceable through blockchain. Retailers will also be using their presence in the Metaverse to gather data about consumer and product demand.
Keeping up to date on new technology is critical in ensuring up-to-date roadmaps. Being aware of what the future skill or partner needs for the organization is crucial, as these take time to develop and manage. The different technologies highlighted are in varying stages of development and deployment. Hyperconnectivity comprising 5G is already being deployed across the region.
However, the “killer use case” – the one that will accelerate deployment – has still not been defined. Artificial Intelligence is becoming more commonplace, with AI increasingly embedded in software. Automation will continue to grow, both from a software and hardware perspective.
The Metaverse and Web3 are coming, but whether this will be the next big thing for the supply chain is still a question mark. Supply chain participants need to be aware of technology developments and their impact on their ecosystem partners in addition to their own capabilities, as they can change critical aspects of supply and demand, with implications up and down the supply chain.
Developing a futurist perspective that keeps these developments in view allows organizations to determine timely investment opportunities to capitalize on trends that support existing strategies while supporting future innovation and growth.