This is a guest post by Sandeep Kumar, Vice President at ITC Infotech and Head of the Business Consulting Group.
The increasing automation of the supply chain has become a major talking point in recent years as technology continues to play a pivotal role in the way operations are run.
The buzz is easy to understand – automation enables businesses to address the need to scale their operations without having to add to their workforce, with a more streamlined, flexible and efficient operation that drastically reduces errors.
Although it continues to dominate headlines today, the supply chain technology revolution actually started in the early 1980s with the advent of powerful computing models in MRP and MRP II. This later evolved into the next generation supply chain software that helped bring in advanced planning and optimisation capabilities as well as strong functional automation of warehouses and factories. The equation has been shifting ever since then, with newer technology becoming more affordable, the cost benefits of tool driven automation became extremely attractive and application of smart tools came to be realised as a critical competitive advantage.
Many geo-political events and technology breakthroughs have contributed to this trend. The oil crisis of the 70’s triggered multiple innovations in cost reduction and efficiency, and the opening up of China and the Far East in the 80s made the making and selling of products across different continents not only possible, but cost effective. The end of the Cold-War and increase in globalisation led to rampant consumerism in the 90s – driving product proliferation, miniaturisation and reduction of life cycles, digitisation of information exchange , and increasingly stringent statutory requirements for safety and ethical practices.
The forces of globalisation have continued to drive newer themes which dominate the agenda today, such as the globalised supply chain, cost and profitability improvement, value chain integration, integrated planning and optimisation, global supply chain analytics and more. Technology has helped shape business evolution at each step.
In essence, what we see today is the supply chain being more and more digitalised and therefore more intelligent. By setting up a centralised supply chain analytics centre, for instance, businesses can benefit from processes like demand forecasting, replenishment planning, inventory analytics and sales and operations planning support in a shared services model. In this way, they can extend the benefits of standardised processes and analytics across multiple business divisions without having to increase human resources.
The impact of growing automation in supply chains has been widespread across industries. Among those most affected by transformation in supply chains are high tech OEMs and consumer electronics OEMs. These are largely sectors where cost efficiencies are paramount and technology adaptation is helping to lower the cost of product operations, and this demand has made them the pioneers in adopting new advanced capabilities that disrupt the supply chain models.
In these sectors, functions such as designing, sourcing and distribution have gone through transformational change. Companies like Cisco, for example, operate a business model that uses technology as a powerful integrator of supply chains. The automotive, aerospace and industrial manufacturing industries have also undergone similar transformation.
This evolution does not come without challenges.
In addition, the CPG, fashion apparel and retail industries are good examples of how global supply chain models bring together raw materials and ingredients from across the world, before products are manufactured and then distributed to global markets. Wal-Mart’s Retail Link, for instance is a great case of how a retailer manages its huge supplier base through a supply chain Information portal.
This evolution does not come without challenges. In this case, the challenge lies primarily in staying ahead of the curve. Early adopters of supply chain risk management like Cisco and Ericsson, for example, have been pushed into investing in such capabilities based on environmental factors putting their supply chains at risk. Wal-Mart and Lego are other examples where supply chain sustainability and codes of conduct are being put in place as a consequence of management not being live to bad supplier practices.
Another concern has been the decreasing relevance of human labour in the face of growing automation. Although, it is clear that this transformation does impact manual work content by changing the way certain tasks are performed, arguing that it subsequently leads to the removal of people from supply chains would be quite an overstatement.
What however needs to be reinstated is that despite the rapid technological developments, humans have always and will continue to be the drivers of these processes. Even though specific roles will keep changing, supply chains will continue to depend on technology-savvy people. Supply chain technology is moving human tasks from more repetitive data entry and crunching tasks to more intelligent supply chain decision making, enabled by smart data and technology support.
This is an interesting time for supply chains as a series of innovations and technological shifts such as mobility and the rise of digital commerce will drive further change in the coming years. Supply chain risk management, sustainability, global integrated planning capabilities, and the use of instrumented intelligence are becoming key areas of interest that will help increase in-process visibility and enable the quicker business turn around on key operations. Fast-paced change in this area means there is plenty of space for players to claim the “pioneer status”. Businesses that want to succeed and reap the benefits of supply chain automation need to be forward-looking and brave enough to take the extra step ahead of their competitors.