The year 2020 no longer resides in a mythical Orwellian-like future where we will be living a science fiction inspired lifestyle. Although it’s less than three months away, it will arrive with significant changes. Are we ready?
The changing 2020 manufacturing and supply chain market
Manufacturing companies today are operating in a new world where constant changes in geopolitics, the exponential speed of innovation and the digitization of everything has made designing and managing a supply chain more complicated, yet more important than ever before. We are now more connected, we are always-on and we are mobile. We are more environmentally sustainable and socially responsible. However, the markets are more demanding and less committed. Supply chains are no longer chains but a network of opportunistic demand, supply and capacity entities. How does a company make its supply chain ready for 2020?
To get a perspective on the true magnitude of recent change, you do not have to think too far back to when supply chains were linear with firmly established links. Relationships between trading partners were long-standing. There was more brand loyalty and many consumer products lived long static lives. Longer life cycles and less variety meant that higher inventories could be maintained without concern for cost or obsolescence. Life was simpler. However, modern supply chains appear more like a fragmented network of known and speculative supply, demand and capacity. Consumer expectations are now very different regarding delivery times and product customization.
The 2020 quest for product differentiation
For example, the concept of product complexity with a confectionery manufacturer in the UK. The company makes 57 different formulations of one particular product. It is not a complex or exotic product, but a fairly large number of different combinations of salt and vinegar chips that are being manufactured on this site.
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The company manufactures different-branded products as well as own-label products for different retailers. Some retailers have exclusive pack sizes. A similar story resonates across global consumer goods supply chains.
The perpetual quest for product differentiation leads to larger product variety and increased product customization. This consequently leads to shorter product lifecycles, which negatively impacts production efficiency as lower volumes are manufactured with more frequent changeovers and overall higher inventories. Ultimately, it has made the business more complex; however, this complexity is accepted by companies as a necessary evil that helps them to be competitive.
The 2020 “smart” technology disruption
Supply chain media constantly reminds us of the revolution of Industry 4.0. When we think, hear or read about digital transformation, it is usually in a buzz-word context such as artificial intelligence, blockchain, advanced analytics, big data and the internet of Things (IoT) involved with the disruptive increase in adoption of “smart” technologies. There is no doubt that the combination of technology advancements in processing power, data storage and communication bandwidth has led to the exponential growth of cloud platforms connecting supply chains to almost infinite data and cloud services.
2020 supply chains will be more connected and more responsive to real-time events. They will feature more potential competitors as technology and connectivity reduce the barriers for new entrants, each with a unique niche value proposition.
The 2020 demographic shift in the workforce
A further twist to digital disruption is the change in demographics and talent. By 2020, a sizeable percentage of the workforce will be millennials and they will be fulfilling management roles. This is a generation where touch screens, swiping and always connected mobility is the norm. This generation has an unprecedented comfort level with trusting AI-generated decisions, deploying on shared platforms and outsourcing business functions to cloud services.
The importance of adopting an agile supply chain in manufacturing
The ideal strategy to survive and thrive in this dynamic environment is to embrace the change by adopting an agile supply chain that adapts quickly to change. An agile supply chain requires the ability to rapidly identify, evaluate and execute alternative supply chain scenarios in response to external signals.
However, being agile contradicts what many practitioners have been taught over the past decades. Supply chain experts have traditionally focused on efficiency -- and consequently pursued the lowest unit cost dream. We have sought to minimize procurement costs absorbing larger order quantities and longer lead-times; we plan for longer manufacturing runs to drive a higher return on assets and plan full-container loads to reduce transportation costs.
Agile supply chains exist almost as the antithesis of efficient supply chains. Agility requires the ability to detect, analyze and execute the best possible business decision regardless of traditional sources of supply and demand. There are three pillars to adopting an agile supply chain.
Agility requires supply chain visibility to identify external threats and opportunities. In 2020, supply chain visibility goes further than the traditional view of demand and supply. 2020 supply chains require vertically integrated visibility. Demand signals from the customer’s customer and supply capacity and capabilities from the supplier’s supplier. Visibility is not just about the numbers; it needs to include qualitative data to identify risks and opportunities in a timeframe that provides room to react. Visibility doesn’t just mean access to raw data; it means presenting the results of the raw data analysis in a decision-supporting manner.
Agility requires the means to rapidly calculate different supply chain scenarios. However, if the planning process is manually intensive, this is not always possible. Adopting automated techniques where possible elevates the responsiveness of the planning process. Of course, not every decision can be, nor should be, automated. In these cases, it is crucial to maximize decision support capabilities so manual intervention is augmented with intelligent decision support.
Having strong visibility and rapid decision support has lesser value if the opportunity to make decisions is limited. 2020 supply chains will continually have the most current data available, presenting the optimal plan based on real-time opportunities and constraints. Relying on monthly or even weekly planning cycles creates a decision lag that reduces agility. Many of the reasons for longer planning cycles are based on arbitrary constraints introduced in the past. In 2020, supply chain decision-making will be continuous.
It is evident that a supply chain 2020 strategy is something that occurs in close partnership with a manufacturer’s technology provider. Technology providers must provide a supply chain capability that enables the connectivity, the responsiveness, and the visibility required to thrive in 2020. This needs to include a best in class analytics capability to provide decision supporting visibility. It requires intelligent exception detection and management. In 2020, technology must provide collaboration techniques to harness qualitative intelligence across the supply chain. It also requires machine learning techniques to automate and augment planning decisions.
A 2019 assessment of supply chain technology is the first step to a 2020 supply chain.