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Where Are Retail Supply Chain Investments Heading?
A Gartner global survey of 499 supply chain leaders taken late last year finds 65 percent anticipate it will be easier to fund new technology investments, with 73 percent of supply chain IT budgets this year to be allocated to growth and performance enhancements, on average.
“The last three years of uncertainty have blurred the line between business and technology strategies to the point that they must be considered together,” said Simon Jacobson, VP analyst in Gartner’s supply chain practice.
Gartner’s analysts came up with eight supply technology trends driven by three motivations: to pioneer new forms of engagement, optimize for resilience and scale performance that enables technology to be delivered “any place and any time.” Those trends are:
- Actionable AI, which delivers better data-driven decisions by mimicking human problem-solving and keeping humans in the loop for validation.
- Mobile asset optimization, which maximizes an enterprise’s mobile assets by combining business process software, sensory technologies and operational research techniques for optimization and business intelligence.
- Smart operations, which extend the concept of smart manufacturing to encompass all core operational capabilities, including manufacturing, service and logistics spanning warehousing, transportation and global trade;
- Industry cloud platforms, which combine software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS) with specific functionality for vertical industry use cases.
- Employee engagement, which is a set of tools and applications to help companies improve frontline worker performance, satisfaction and retention.
- Composable business applications, which are designed to follow the core design principles of modularity, autonomy, orchestration and discovery with a specific business use case.
- Cyber resilient supply chains, which add additional supply chain partners, vendors and service providers to their “digital” supply chain.
- Supply chain integration services, which encompass technology platforms, integration teams, strategic decision-making on which applications to connect (different integration strategies) and cloud services to manage these integrations.
Discussion Questions
DISCUSSION QUESTIONS: Which of Gartner’s eight supply chain technology trends is most critical for retail? Where do you expect retailers to focus their near-term supply chain technology investments?
Poll
Loading …BrainTrust
Dave Wendland
Vice President, Strategic RelationsHamacher Resource Group
Melissa Minkow
Director, Retail Strategy, CI&T
Which one reduces costs? Which one reduces waste and pollution? Which one reduces the time/action calendar, which will make more data on more products more actionable?
To me, actionable AI feels like it will have the most impact on retail. AI will accelerate use cases and adoption of most of the other capabilities on this list. The ability to sense issues and create solutions in real-time will have a profound impact on in-stocks and supply chain reliability.
One would assume that AI would be included in “smart operations.” I can’t understand the distinction. But there is NO DOUBT that we need better and more real time information and forecasting in our supply chains.
While AI is (and has been) the bright shiny object people are looking at….some basic visibility and projections would be nice.
Here are my top 3:
Actionable AI – and I really like that phrasing. No one wants ‘AI’ to just ‘do things’ without it being explainable. So AI should be developed in a way that keeps humans in control.
Employee engagement – attraction and retention are key. We’re seeing a lot of emphasis on UI modernization and ‘gamification’ to help drive labor productivity.
Composable business applications – because there is a lot of legacy tech in supply chains, so modernization will need to be an iterative process, not a big bang.
Actionable AI can drive better predictions and decision-making for logistics and cost savings.
AI and supply chain integration are retail priorities for productivity and industrywide alignment.
Companies can no longer afford to work in silos; collaborative technology is vital for data-sharing.
DISCLOSURE – I work for Microsoft
Most critical in my experience is composability to allow organisations to rapidly change and adapt as business needs change.
However – partly due to the level of technical debt – this may not be where investments are made.
Investments are likely to be made in areas that help QUICKLY identify and resolve issues in the wider supply chain due to the impact that disruption has had in the past few years – which most business leaders anticipate will continue into the future.
While I agree that technology and business strategies must be considered together to prevent the waste that results from misalignment I don’t believe that they must be considered together as an implication that one necessitates the other. For example, I still maintain that many companies invest in technology thinking that it will address a business problem which equates to buying a Ferrari in hopes of going faster at rush hour. I’d like to see retailers identify the business challenges they wish to address (the what) and consider technology as one of the many options to address them (the how). I suspect many retailers will invest in the most prominent trends, like AI, without much consideration or understanding of the type of AI they need or the problem for which they need it Absent knowing each individual retailer’s situation and given the overall challenges retailers are currently facing with employment, I’d expect more than a few to focus on employee engagement technology.
We have been advocating since 1986 that real-time information was key to understanding and controlling the supply chain (although I don’t believe that we are using that term then). Know how much of what is where is the best information retailers can have about their purchases in transit and on-hand inventory. Sounds too simple to be true.
Eight trends is a lot, and that feels like a typical path for Gartner to go down…what firm could possibly focus on all of these? Answer: none. Rereading the list, none of these “trends” strike me as something one could install “out of the box”-they all need some consulting thrown in. I am going to force myself to make a choice here and go with Actionable AI as number one, not because it is necessarily better in terms of measurement, but because AI is trendy, and I can imagine board level discussions around “what is our actionable AI strategy”….
At the top of my list is the potential that AI holds for supply chain decision making, transparency, and insight. I believe there is tremendous potential for carefully-placed application of this technology. Cyber Security is my second choice on the list. There are mounting threats and vulnerabilities that must be addressed.
Near-term I foresee more tactical and iterative improvements deployed. Among them: Sustainability (supply chains are focusing on going green); Circular Supply Chains (replacing linear flows with more fluid – and flexible – models); Workforce Reskilling (the labor shortage makes this a high priority).
Is RFID implicitly included in one of these? I feel that’s missing and would be crucial to real-time inventory management. AI and composability are the two out of that list I feel would be most impactful. Both of those efforts will inherently lead to increased workforce satisfaction.
This is a classic situation where Gartner cannot see the forest through the trees. OOS throughout the supply chain is the key issue here. To solve this Gartner needs to recognize the key components that are driving this issue first. This is not a technology issue but instead personnel (we don’t have enough employees since there are chronic short-staffing concerns since the start of the pandemic), chronic OOS at the warehouse and retail levels (this is both employee and systemic caused), and blocked transportation off-loading of ships and railroad cars. Fix these first, so that retailers can create increased revenues/profits from shoppers who can purchase more, and then see which technologies can be applied to the Retail Supply Chain (which might be in a very different place by then).
Well said, Kai. There are short-, mid-, and long-term strategies that will help transform outdated retail supply chain operations.
I saw Simon deliver this presentation at the Supply Chain Symposium last week. The answer to this question cannot be applied in a blanket way across the retail industry. H said what is most important will vary based on questions every retailer or manfuctuer must answer for itself. Those 8 options were grouped into 3 categories, essentially investments to place bets on (pioneer), existing investments to scale, and investments to improve or optimize. Picking one from each most applicable for retail, I’d say Actionable AI (Pioneer), Industry Cloud Platforms (Optimize), and Supply Chain Integration Services (Scale). The unification of these three needs to be done with precision given the state of the world today.
Looking through the supply chain trends, I am struck by the one pressing need across all the initiatives — supply chain resiliency. We have learned over the past 4 years that our supply chain was far too rigid, far too structured, and far too complex to adapt to a swiftly changing business environment. While large-volume suppliers will always exist, two factors need to be in place in the new world — backup suppliers/cutover plans and multiple methods of bringing those products to market. As I look at the trends, “Smart Operations” probably fits those needs the best, although all the initiatives apply more or less.
AI is the shiny object, the issue is the accountability of decision making. We have had analytics and decision engines for a long time, but how many companies use it to automate decisions versus use it to vet their decisions in merchandising and supply chain? Almost like the self driving car scenario, active cruise control with driver on the wheel is one thing, a driverless car is a completely different beast especially when an accident is involved.
Actionable AI, Smart Operations and Composable applications combined seem to be a winning trifecta ticket. That said, these are tools and they still require human managers/leaders to set priorities, starting with investment decisions, that will result in maximizing the probability (there is no absolute certainty that is economically viable) that the right goods will be available at the right time and place for customers.
This means not just actionable AI but actionable insights so that retailers can “know to serve” (as Nike calls it) customers. This isn’t just a machine application but obviously requires humanity to truly understand and refine what the machines tell us.
Smart operations implies an overall optimization of the operations, ostensibly interns of both supply and demand chains.
Finally, composability is increasingly important given the legacy systems and the opportunity to make incremental investments that don’t upend an entire “stack”.
The entire wheel already has pieces & parts that are infused with actionable AI. Visibility across the supply chain is still the #1 request I hear from most retail, supply chain, CPG Companies. Its basic, but still a big pain point.
In a recently concluded supply chain report by HFS Research that included participation from 30+ enterprises and 18+ service providers, we identified the following supply chain areas:
1. Dynamic Control Tower solutions for enhanced visibility
2. Higher automation in planning, warehousing and fulfillment
3. Unified channel experience and consistent customer experience
4. Sustainability initiatives (conscious sourcing, decarbonization, tracking and compliance)
5. An elastic and scalable cloud infrastructure with most workloads moving to the cloud.