Leading-Edge Logistics: How Tech Can Strengthen The Supply Chain

OVERVIEW

Technological revolutions never happen in isolation, and they are only successful if they are adopted by consumers and spark innovation by other organizations.

Consider the Global Positioning System (GPS). Launched by the U.S. Department of Defense, GPS started as a military navigation technology, but, once it found its way into civilian use, the way we interacted with our world changed. Businesses leveraged the technology, using it in everything from the map app on your smartphone to what the driver of the cab you’ve just hailed uses to find your house. Estimates suggest the global GPS market is worth more than $30 billion – and it’s still growing rapidly.

First released in 2001, Apple’s iPod drove another cluster of innovation – despite many people thinking that carrying 1,000 songs in a shirt pocket was cool but hardly a necessity. The iPod then fathered the iPhone, allowing users to purchase goods, services and entertainment from their smartphones, forcing many businesses to reshape supply chains to respond to such consumer demand.

And then there’s smart home hubs, such as Amazon’s Alexa. Communicating with machines used to be the stuff of science fiction, but voice-enabled assistants are a rapidly growing market. Juniper Research estimates smart devices will be in 55 percent of U.S. homes by 2022. And the applications aren’t limited to household use. Voice-activated devices are already making their way into some companies’ supply chains, where they’re increasing warehouse efficiency.

Supply chains and logistics are also benefiting from these clusters of innovation. Blockchain, artificial intelligence, the Internet of Things and autonomous vehicles are poised to play a significant part in how companies supply and ship their products.

IN DEPTH

“Transformative technologies – the ones that have a real impact on what we do as a society and our economy – don’t happen in a silo. It’s never one technology that makes the difference on its own, instead, clusters of innovations occur that propel the larger change,” said Eric Boyum, U.S. Practice Leader, Technology and Communication, Aon.

As with GPS and the smartphone, when new technologies such as blockchain and AI make their way into supply chains, Boyum added, they do so as part of a larger “ecosystem” of technological innovation. “When you take these kinds of technology, they’re always more powerful in combination than they are alone,” he said.

Boyum, who works with some of the world’s largest technology firms, noted that start-ups that have grown to become the world-famous giants of Silicon Valley typically focus on transformative concepts. A key reason they’ve been able to transform so quickly is they can disrupt their own thinking. “You can’t disrupt an industry if you can’t disrupt your own team’s thinking,” Boyum explained.

Historically, businesses in other industries would find themselves forced to adapt to that disruptive technology, Boyum said. Now, however, many industries – including supply chain and logistics – have reached a point where they are capable of developing more mature digital strategies, allowing them to engage more proactively with the latest technology innovation clusters.

Technology Innovation Will Drive Supply Chain Transformation

Supply chains are also clusters for innovation. Among Gartner’s top supply chain technology trends for 2018 are AI, the Internet of Things and blockchain. The research and advisory firm also sees advanced analytics, “intelligent things” such as autonomous vehicles, conversational systems, robotic process automation and immersive technologies such as virtual reality all having a growing role in supply chains.

Some recent examples of how transformative technologies have disrupted the supply chain include the following:

• A new blockchain initiative at Alibaba is intended to protect product authenticity and improve the integrity of its supply chain.
• Amazon just announced a new program to deliver packages to the trunks of shoppers’ cars. The system relies on General Motors’ OnStar roadside assistance and navigation service or Volvo’s similar On Call service.
• Walmart and nine other major food companies have teamed up with IBM to explore applying blockchain to their food supply chains.
• The way goods are moved will change, as drones, autonomous vehicles and even robot ships make their way into the supply chain. Japan’s largest container shipping line, Nippon Yusen Kabushiki Kaisha, plans to test the possibility of sailing a container ship across the Pacific Ocean by remote control in 2019.

“If you look at some of the largest logistics and shipping companies, they’re already saying they’re planning to adopt blockchain technology,” said Lee Meyrick, Aon’s Chief Executive Officer of Global Marine. Looking at the experience of other industries transformed by technology, Meyrick said the ultimate impact of this new technology will be on efficiency – driving greater transparency and decreased cost throughout the entire supply chain.

As Supply Chain Data Increases, So Does The Need For Technology

Manufacturers and sellers have long relied on research to gain insights into consumer behavior. Now they are beginning to use data and analytics to make supply chains more precise, according to Boyum.

“Imagine the potential of having very granular data around what consumers in specific regions or cities are particularly interested in buying,” Boyum said. “You could understand that a product that might be ideal for buyers in New York might not sell to buyers in London. With the sheer amount of data that is generated, artificial intelligence could be deployed to help meet specific consumer demand at lightning speed.”
Blockchain, in combination with AI and other technologies, could allow businesses to capture, sort and make decisions from vast quantities of data that can help make the difference in increasing supply chain efficiency.

Simply put, Meyrick states, “technology and information move cargo.” With a deeper understanding of data, “efficiency improvements throughout the entire journey of a part or product going from place A to place B can be groundbreaking.”

Supply Chain Transformation: Innovation Has Its Price

While transformative technologies have changed our society and the way we act and interact with goods, such change is not without risk. Significant among those is implementation.

“A new technology is always tough to implement, and there are always going to be hiccups,” Boyum said.

Integrating new technology into an organization, especially for mission-critical functions, must be viewed as an enterprise-wide initiative, inclusive of opportunity and risk. The more complex those new systems are, the greater, potentially, the risks.

There are strategies for managing that risk, however. And for many businesses, the cost of not implementing the new technologies is one they can’t afford. “You can’t let the fear dictate strategy. Of course, there will be some failures, but those failures can translate into opportunity.” Boyum said.

Also, an organization adopting new technology should be careful not to move too quickly, Boyum said. It’s best to test the new technology first in limited areas of the organization or limited functions before rolling it out more widely.

Supply Chains As Part Of A Cluster Of Technology Innovation

The greatest effects of transformative technologies are the societal shifts that stem from them. New products and services are only successful if people adopt the technology and new way of doing something. And as Boyum underscores, “it’s usually done in a cluster.”

Supply chains and logistics are now becoming part of such a cluster, as emerging technologies and the ability to better capture and use data promise previously inconceivable efficiency.

While there are always risks associated with embracing new technologies, those companies that embrace the potential of technological developments like AI, blockchain, robotics and the Internet of Things are likely to be the winners as supply chains are reshaped by the latest transformative technologies.

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