What is supply chain and logistics technology?
Supply chain & logistics technology refers to the software and hardware used in the following activities:
- Efficiently receiving raw materials, transforming them into finished goods and delivering them to customers.
- Managing inventory run rate
- Managing S&OP
The advancement of technology in this arena is primarily driven by a need for increased efficiency, predictability and speed of operations.
3 Trending supply chain technologies in 2020
The trends we mention below have been making the news over past several years and seek in a way to address long time issues with supply chain networks that organizations have been grappling with for decades.
- Artificial intelligence. Planning for demand and supply is almost an art, with companies aiming for minimum supply response time while maintaining a little buffer stock as possible in inventory. Poor planning processes result in unnecessary warehouse costs, poor utilized manufacturing facilities and in many cases bottom line impact due to scraping of excess stocks nearing expiry. Hence, many supply network functions in big multinational corporations have started experimenting with artificial intelligence in areas of supply and demand planning. Using statistics collected over the years, algorithms have been designed to better understand customer order patterns taking into account several factors that themselves have intangible values. While AI in supply forecasting and management is still in its infancy stages, it is slowly being incorporated into planning activities in companies across the world. A successful implementation of AI in planning will result in tremendous cost savings for large multinational corporations.
- Real time supply chain visibility. Combining process discipline, RFID technology and GPS tracking with global wireless connectivity – solution providers are able to design and provide comprehensive platforms that offer granular visibility to support shipment location tracking. Some solution providers are even able to provide real-time 24/7 video monitoring of their shipments. Such solutions provide increased security and predictability throughout the supply chain, allowing for companies to plan alternate supply arrangements quickly when they find out that a shipment has encountered problems while on route to the customer.
- Warehouse automation. The use of robotics in warehouses is a recent trend that has captured the attention of warehouse operators everywhere. The allure of eliminating recurring manpower resource costs while enjoying human error proof warehouse activities with zero chance of accident and risk to employees has a strong attraction to warehouse owners. Advanced automation solutions will allow robotics handle end to end warehouse operations, including put away activities, pick pack, container stuffing planning, cargo weighing and even inspection damage.
Should companies invest in the latest technologies?
Not all developments in supply chain and logistics would be worth the cost and effort for all companies to pursue. Companies have to review every new opportunity for its merits and critically assess its benefits independently. This decision should be taken by a team of experienced specialists who take into account every aspect of pursuing a new solution that results in a significant process change.
Many aspiring transportation and logistics executives often attempt to implement radical new projects in order to increase their visibility within the organizations they work for, with little consideration for the actual benefits to business these projects bring. This results in projects that get abandoned, very often with no way to recuperate expenses.
Using the 3 trends we mentioned above, let’s look at some examples where implementation of these technologies would be of little value to the organization.
- A vendor selling a single products such as Christmas trees would have limited benefits with a big robust AI planning solution since demand is highly predictable and seasonally dependent.
- A seller of bulk commodities would not really need to install GPS trackers to get detailed real time visibility on cargo especially if they ship via chartered vessels, since the chartered vessel would already have sophisticated tracking technology installed that they can depend on to know where their cargo along route.
- A small warehouse run by a team of 3 operators in a country where labour is cheap would not really enjoy a significant increase in efficiency or experience any value creation from upgrading to a fully robotic warehouse.
A few parting words…
When evaluating the business case of adopting any new technology, companies must consider the return of investment on capital costs and the ongoing cost of operations.
One important aspect of change that companies often overlook is whether the investment is future proof.
For example, a fully automated warehouse would be costly to expand or upgrade to include cold storage features. A real time visibility solution may require some cooperation and coordination with freight forwarders, making it difficult to switch forwarders in future. An AI planning solution may require the company to hire a software engineer and as the company grows in size, they may have to hire more such engineers in a country where cost of labor is high.