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Could better technology have averted the supply chain crisis?
According to PwC’s 2022 Digital Trends in Supply Chain Survey, 80 percent of operations and information technology leaders surveyed say technology investments have failed to fully deliver expected results.
According to the survey of 244 operations and information technology leaders, top obstacles to full delivery of results are not getting the expected capabilities and needing more time to implement the technology, but other reasons, including internal shortcomings, were cited.
PwC wrote in the study, “Companies may not have committed to a strategy that’s linked to their investments. Without a clear business case and dedicated change management — including actions such as leadership communications and adequate training — full technology adoption and execution can suffer, and the anticipated value from the investment may not be achieved.”
Cloud was found leading planned investment, but technologies such as third-party analytics, scan and intelligent data capture, RFID and IoT were competitive at lower levels of investment.
Blue Yonder’s Supply Chain & Logistics Executive Survey found that most supply chain executives (42 percent) plan to focus on the implementation and enhancement of warehouse management systems in the next 12 months, followed by transportation management systems (36 percent) and order management (32 percent). Rounding out the top-five were logistics tech supporting supply chain visibility and transparency, 28 percent; and artificial intelligence, 27 percent.
According to the Blue Yonder survey of 150 U.S. executives with responsibility for logistics and manufacturing operations, the top priorities related to improving customer experience amid the ongoing supply chain disruptions were keeping high-demand items in stock, providing consistent on-time delivery, increasing inventory visibility and optimizing fulfillment options.
In announcing plans Wednesday to join freight forwarding and customs brokerage startup Flexport as its CEO, Dave Clark, Amazon’s soon-to-exit consumer chief, expressed his enthusiasm to help Flexport tackle global cross-border movement of goods, which he described as “the most complicated piece of the supply chain,” challenged by varied regulatory rules, geographical distances and siloed network of providers.
He wrote on LinkedIn, “The supply chain has entered everyday national discourse for all the wrong reasons. Put simply, the United States supply chain suffers from a significant fragmentation of technology and process.”
- PwC Digital Trends in Supply Chain Survey 2022 – PwC
- Blue Yonder Survey Finds Nearly 1 in 4 Businesses that Faced Supply Chain Disruptions Have Invested $10M or More to Fix – Blue Yonder/Business Wire
- Dave Clark to Join Flexport as Chief Executive Officer – Flexport
- Dave Clark On LinkedIn: #flexport – LinkedIn
- What will Dave Clark’s exit mean for Amazon’s retail business? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Which logistics technologies promise to help global supply chains run more efficiently and what’s causing the apparent shortcomings? Do you agree the U.S. supply chain “suffers from a significant fragmentation of technology and process”?
Poll
Loading …BrainTrust
Mohamed Amer, PhD
Independent Board Member, Investor and Startup Advisor
Natalie Walkley
Sr. Director, Marketing @ Optoro
There are certainly improvements that can be made to supply chains, not least within retailers themselves where systems need to have a more joined up view of things like stock. However the current crisis isn’t a matter of technology. It is mostly caused by exceptional circumstances like factory shutdowns, capacity constraints against a backdrop of massive demand, rampant fuel and energy inflation, labor shortages and so forth. Technology may alleviate some of these things, but would not solve all of the issues.
It seems to me that pre-pandemic most companies prioritized cost (and quality) over agility and diversification. That model is now turned on its head. Tech would not have averted the current crisis, although it may have mitigated its severity somewhat. And going forward tech solutions will absolutely be needed to weave together a much more complicated supply chain matrix.
As I learned a long time ago, in the end it doesn’t matter how much you complain to the railroad if the train can’t get through due to a snowstorm or congestion. A smarter way to track inventory or a more clever forecasting algorithm won’t help much when your ship can’t unload or your factory on another continent is locked down because of disease. And that means there will always be some degree of inefficiency – as planners we can embrace that uncertainty and overbuild our networks somewhat so that we can be resilient, or we can deny reality and insist all costs everywhere must be minimized – and lose everything with any ripple of interruption.
The supply chain is broken, but it was already mostly this way before COVID-19. Retailers have failed to implement the real-time infrastructure required to compete effectively. They need a real-time service bus connected to order management, POS, WMS, transportation management, and yard management. Only then will they understand where everything is in a sense-and-respond central nervous system that can make real-time decisions.
But don’t hold your breath on this. U.S. ports were already way slower and rustier than elsewhere. Even so, when the Build Back Better infrastructure bill allocated $17 billion to port upgrades, it specifically handcuffed technology upgrades that didn’t boost union activity. Retailers will need to gain visibility first by using good technology. Unfortunately, they’ll be watching their goods move in slow motion for a while.
Technology is wonderful and amazing. Relying solely on technology to solve knotty problems is a losing position. Supply chains are designed and come to life iteratively over years and decades. When macro conditions change they undermine the taken-for-granted assumptions and model that attracted billions, if not trillions, in collective global investments over decades. Technology can accelerate your ability to adapt and adjust to new realities, which requires more, not fewer, investments. That proposition is troublesome because of demand uncertainties, if not outright destruction, as countries worldwide fight inflation by tightening the money supply. The bottom line, technology helps make better and faster decisions but cannot change the business cycle, eliminate global trade disruptions, or address implications of global security threats.
Technology that can enable sophisticated analytics can certainly do more to improve the supply chain situation, especially, in the complex area of cross border regulations. Quantum computing is right around the corner and I’m very bullish that it will launch a vast array of innovation that none of us has ever seen before. But let’s not forget about how efficient and well run logistics and supply chains behaved during the run-up to COVID-19. Chains were pretty efficient, supply was ample, and rarely did anyone of us experience a significant out of stock situation for any product. Unfortunately, COVID-19 was the perfect storm that ravaged the entire world’s forecasts. No one had seen this coming and hopefully we won’t see something like it again for another 100 years. Getting ourselves out of this will take a couple of bumpy years, but at the intersection of new tech innovation and advanced analytics is a whole raft of significant progress.
Immediately after the 2008 financial meltdown spurred on by sub-prime loans, dozens if not hundreds of start-ups were launched to address both the base causes and the regulations enacted to prevent it from happening again. These technologies, along with others that pre-dated the crisis, are collectively called FinTech and have dramatically altered the course of the financial services industry. I’m not going to judge for the better or worse.
In the aftermath of the massive supply chain disruption (really a series of large interruptions), there will be a similar explosion of start-ups with the same goal of addressing both the base causes and any regulations enacted to prevent it from happening again. Flexport is just one of a few dozen already gaining traction in the world of logistics. There will be many more.
Short answer: NO!
In theory this is largely a technology issue, in reality it’s a political one. International and national politics, brinksmanship, and agendas are behind the supply chain problems. It’s a combination of poor leadership and feudalism across many, many leaders and countries that underlies this. It includes highly politicized and money grubbing responses to the pandemic, as well as the long arm of heavily funded verticals and their henchmen — ahem, I mean lobbyists.
There could be technology and capacity planning solutions, but as long as politicians and certain enterprise interests stand in the way, technology won’t work.
Plus add more than 15 food warehouse and production facility fires in the U.S. in recent months, that absolutely impact the food supply chain.
The long term solution to the supply chain is the ability to track each product item through the supply chain much like Lululemon has done. By giving the manufacturer and retailer employees the tracking information at the product level, the lowest cost manufacturing and best service level to the consumer can be provided. To collect and provide this information, every item must be bar-coded or RFID-tagged. Bar codes require manual scanning while RFID can be scanned electronically or automatically. This data can then be used for better production, warehouse and transportation management. AI will evolve to make the intelligence from these systems even better.
The U.S. supply chain systems have evolved from older manual counting methods. They now need to be better implemented with electronic digital systems to provide another level of productivity increase.
Reliable technology certainly gave brands an upper hand amidst the crisis in many ways. One tool worth noting is integration platform as a service (iPaaS) technologies that systematize how retailers integrate critical technologies such as OMS, WMS, TMS, and last-mile software. iPaaS can quickly enable a variety of additional fulfillment options such as vendor dropship, plug-and-play marketplace connections, and system-to-system integrations. However perhaps just as important as the technology itself is the architecture of said technologies. More brands are moving to cloud-native solutions with microservices architecture that give them the agility and extensibility they need to stay competitive during supply chain disruptions.
The villain is not the technology, but the use of the technology from a less-than-optimal implementation and the hubris that “my technology is better than yours.”
Ultimately, technology must address the supply chain and its products “from the cradle to the grave.” The future supply chain is not going to be simpler. While there was a hiccup during the pandemic, global commerce will only get more complex with more countries involved in the production end and the consumption end.
Universal visibility across all nodes is the most important capability, but is effective only when people and processes are aligned around it.
If anyone can make a dent in global supply chain issues, the one to watch is Dave Clark and his team at Flexport. They’ll use technology heavily and map out pinch points to gradually improve processes, at least where allowed by governments and related roadblocks. In fact, it was current Flexport CEO Ryan Petersen who toured Long Beach CA in the fall of 2021, quickly identifying a small but important issue in chassis shortages thanks to congestion from local zoning laws not allowing containers to be stacked higher. Communicating this to the local government alone helped free up some of the congestion. Hopefully Flexport’s tech and Dave Clark will peel away more of these issues.
I think we’re mixing together several issues here:
Could the crisis have been averted thru better technology?
> No: as Neil (and others) noted, there were a variety of causes, but…
Does this mean technology and process are unimportant?
> No, of course not; they’re always important and always evolving (and by implication then, they’re always capable of being improved).
>Whether/not they suffer from “significant” fragmentation is something I don’t really know enough to comment on; nothing is perfect, of course, but this can be either a truism, or an excuse.
AI may have helped, but AI as well as existing tech is heavily dependent on historical or situational data. With the pandemic, war, inflation, etc. we had unique, disruptive events that were not easily foreseen — black swan events that would make most technology incapable of response, because of dependence on data. In addition, the processes in place were crafted in conjunction with the tech as a symbiotic relationship. These were designed for longer term merchandising, not for short one-off conditions. It was like a tidal wave came in and washed away the tech and processes. Maybe that leaves a fragmentation of debris, but clearly the systems were not designed for it.
I don’t believe that technology utilization could have in any meaningful way prevented the Covid 19 Supply Chain Crisis that we are still working out from under. Common sense practices, however, might have helped.
Endless focus on cost reduction, inventory productivity, production optimization etc. are all well and good until something happens that fundamentally upsets our apple cart. Consider the crisis we faced in managing service and supply issues of simple PPE products like face masks. If there are lessons learned it is focus on technology by all means but take into account as a modicum of common sense and good judgment that major disruptions are by their very nature impossible to predict. Near shoring is not likely a reasonable solution but diversified production and assembly sites and strategic material stockpiles certainly do offer possible viable future solutions.