Yes… It’s that time of year again. The festivities are ramping up and in the blink of an eye we’ll be ushering in the 19th year of the 21st century. It’s that time when idle chatter at the office Christmas lunch turns to debating what next year will bring, especially among logistics and supply chain professionals, for whom it seems every New Year brings new challenges, trends, and disruptive innovations.
It’s also the time when I start to think about sharing my thoughts on trends for the coming year, but of course, stop short of trying to make predictions.
My post on key trends to watch in 2017 received a lot more attention than I anticipated, so I figured it can’t hurt to gather my thoughts and pull together another collection for 2018. If nothing else, it’s always interesting to track them through the year and see how they develop
The 7 Trends for Supply Chain Pros to Watch in 2018
2018 Trend #1: Increased Focus on Cost-to-serve
OK… so this is almost a prediction, but it’s a topic on which I feel qualified to speculate, and I do so with good reason. The burgeoning growth in omnichannel supply is great news for consumers and even enterprise buyers, but it also continues to add considerable complexity for supply chain organisations.
In many cases, supplying companies have taken an “Implement first. Ask questions later” approach to multi-channel and omnichannel strategies in their haste to avoid losing sales to ecommerce giants like Amazon. One of the key risks involved in such an approach is that certain sales will undoubtedly be unprofitable, and that’s an untenable situation for supply companies to remain in.
As enterprises start to count the cost of omnichannel initiatives, it will be important to look closely at ways to streamline operations and improve profitability.
Hence it will be more important than ever to perform detailed cost-to-serve analyses, not just to understand customer and product profitability, but also to determine the economics of the various order-to-cash pathways that make up the omnichannel supply chain.
Of course this also means that cost-to-serve (CTS) analysis becomes more complex in an omnichannel environment, but that won’t stop companies from homing in on CTS and other detailed cost evaluations. This in turn will ensure another current trend will strengthen through 2018—the use of advanced supply chain analytics technology.
2018 Trend #2: Big Data and Advanced Analytics in the Cloud
Fear of the cloud is diminishing as concerns over data security give way to the desire for fast, flexible, high-powered computing. As legacy systems are retired, companies are replacing them with on-demand, cloud-based data solutions and services. This trend is driven by the need for supply chains to become more responsive and for management teams to better understand cost drivers in logistics activity.
These objectives are getting tougher to achieve without digital assistance, and cloud technology is gaining favour as a fast and relatively inexpensive route to analytic capabilities, not only for large multi-national corporations, but also for small and medium sized businesses, which are beginning to find these capabilities within reach.
The appeal of big data analytics is only enhanced by IoT developments, which continue to enable more supply chain assets and devices to be connected to the cloud.
Data-visualisation is improving, to a point where specialist technical competency is not essential to make sense of the mass of unstructured and structured data generated in a supply chain operation.
With this in mind, we should expect to see continued adoption and therefore, development of advanced analytics solutions and services in supply chain and logistics. These capabilities may in turn stimulate a higher degree of data-driven decision-making.
2018 Trend #3: Enterprise Mobility Penetration into the Supply Chain
Enterprise mobility has come a long way in just a few short years. It’s been less than a decade since big-budget, rugged mobile devices began to penetrate the warehouse and transport operations of large enterprises. It’s taken less than five years for them to become largely irrelevant, as consumer-grade tablets and smartphones soon came to offer the same capabilities—with a far lower price tag.
The consumerisation of digital technology has impacted enterprise software too. Mobile apps unchain supply chain pros from their desks by making back-end systems accessible on personal devices.
The bring-your-own-device (BYOD) movement is pervasive and while it has been slower to take hold in logistics than some other business areas (perhaps because of the investments committed to industrial hardware), the popularity of apps for supply chain management activities is well and truly on the rise.
I believe we’ll see mobile app adoption intensify in supply chain organisations through 2018, for a number of reasons, which include:
- The growth in availability and variety of off-the-shelf enterprise apps.
- The rising popularity of BYOD programs, through which companies allow employees to download and use enterprise software on their personal devices.
- Pressure from employees who desire mobile access to business information systems.
- The emergence of cross-platform development tools, which eliminate the need for engineers to develop discrete applications for each mobile operating system (Android, iOS, Windows Phone and others).
- Increased awareness of the benefits of enterprise mobility (efficiency and productivity to name but a couple).
- The greater availability of app-development tools for popular enterprise platforms such as SAP. Examples include SAP Fiori apps and SAP Mobile Platform.
2018 Trend #4: Elastic is the New Lean
Omnichannel supply and the new “I want it now” consumer culture will be strong drivers of supply chain trends in 2018, including those already mentioned in this article. Furthermore, they may signal the end of “lean” as a dominant force in supply chain design and strategy.
In place of lean, we might have to get used to a new conceptual buzzword in supply chain management – elastic logistics.
After years of “leaning” the supply chain, many companies are likely to review their approach to the determination of inventory levels and operational capacity. Instead of reducing inventory to the furthest possible degree, enterprises will respond to growing demand-unpredictability with “elastic” strategies, designed to…
- Accommodate both established seasonal demand fluctuations, and the much more volatile ebbs and flows of demand through multiple sales channels.
- Maintain customer service levels and minimise unforeseen or hidden logistics costs.
- Support a highly scalable logistics operation, able to flex assets and resources in response to external market forces and customer-behaviour trends.
Technology will play a huge role for companies wishing to develop elasticity in the supply chain. In time, advanced analytics, artificial intelligence, machine learning, automation, and IoT connectivity will enable supply chains to function within parameters impossible a few years ago.
To use an analogy, performance will be enhanced beyond what is humanly possible, in the same way as the latest military aircraft, which can only stay in the air because of countless calculations and inputs made by onboard flight-augmentation computers.
While such artificially augmented heights of supply chain elasticity are unlikely to be achieved by any company in the next 12 months, 2018 will probably be the year in which early breakthroughs are made and “elastic” best practices begin to emerge.
2018 Trend #5: Everything as a Service
The world of business is shifting from one where service supports the product, to a new paradigm in which service is the product. This is a trend which will continue to strengthen and impact supply chain organisations—both in terms of how they serve and how they are served.
Consumers and business customers alike will increasingly expect to buy products bundled with services. At the same time, supply companies will gain access to more services that help them meet the challenges of the new paradigm.
One example of this can be seen in the emergence of robotics as a Service (RaaS), a business model that aims to make industrial robots more accessible, while also helping robotics suppliers overcome challenges that might otherwise impede market growth (like high platform costs and reticence over new-technology investment).
Imagine if your company could rent a fleet of warehouse robots, complete with real-time monitoring, support services, and back-end data management in the cloud, all on a pay-as-you-go basis.
Suddenly you’ve solved one of the scalability problems hinted at in the previous section of this article. When seasonal peaks approach, you draft in a few more robotic pickers, then send them back to the vendor as volume recedes to normal levels. You only pay for what you use, when you use it, and you bear little of the risk from working with the latest (and perhaps as yet unproven) technology.
That’s the appeal of the “as-a-service” delivery model, and in 2018, there’s every reason to believe more companies will make use of such services, and that more assets and solutions will become available via that model. Another year, another step toward the concept of “everything as a service”
2018 Trend #6: Perfect Order Will be a Big Deal
If you’re a regular follower of our blog, you’ll probably wonder why I’m including perfect order in an article about supply chain trends. After all, it’s nothing new. Indeed, you’ll find many articles here and elsewhere about perfect order measurement, some of them dating back quite a few years.
But trends don’t always have to arise out of newness. Sometimes older concepts and practice can see a resurgence in popularity due to changes in the business environment or market.
I believe that to be the case with perfect order, which is suddenly garnering renewed attention from industry journalists and thought leaders. Not that this is a bad thing, given recent research which apparently indicates that only 84% of all orders are “perfect.”
Again, omnichannel growth is an important factor, since by making the supply process more complex and difficult to track, it’s sure to challenge perfect order performance. This is unfortunate at a time when customer-service expectations are higher than they have ever been.
Thankfully for companies with the means to invest though, new technologies (some of which have been discussed here) are able to enhance performance evaluation even in complex supply chain environments.
In the omnichannel supply chain, perfect order is central to customer perception, cost control, and profitability. The higher the ratio of perfect orders, the lower the cost of returns processing, rework, and delivery expedition. Hence we should expect many companies which for one reason or another, have paid little attention to perfect order, to intensify the focus on this critical performance KPI in 2018.
2018 Trend #7: More Things Will Connect to the IoT
If your company will invest in any assets in 2018, you can expect them to be sensor equipped and ready to connect to the Internet of Things—and I do mean any assets.
Sensor technology is really taking off and while RFID-equipped inventory is still slow in making its way to the mainstream, machinery, equipment, and even structural assets (like warehouses and offices) are likely to be fitted with sensors and accompanied by smartphone apps for monitoring and control.
As the increase in sensor-equipped assets continues, the challenge will be in capturing and making use of the flood of granular data channeled through the Internet of Things.
As a result, we can also expect some growth in the adoption of supply chain control tower technology, especially among larger companies with the financial capacity to integrate and centralise automated and manual activities.
That’s not to say that smaller businesses can’t benefit from embedded-sensor technology too. At the very least, increased volumes of real-time information can only be advantageous in the quest for agility and responsiveness.
Since many assets will be equipped with sensors by default, it’s unimaginable that supply chain organisations won’t make use of them to some degree, if only on an experimental basis. Perhaps more than any other 2018 trend, the penetration of IoT connectivity is likely to generate plenty of excitement for observers in the year to come.
What Trends Are on Your Radar for 2018?
Other trends worth watching include autonomous trucks, drones, and the exploration of blockchain applications in the supply chain. It’s unlikely that these technologies will mature enough to seriously disrupt industry in 2018, but they are sure to invite continued interest and even experimentation among pioneering enterprises.
Of course as always, the trends described in this article are simply the ones which, in my opinion, will make the biggest waves among supply chain organisations in 2018.
Perhaps you have other ideas or even inside information about trends which I may have overlooked or underestimated. In any case we’d love to hear what trends you think will rock the supply chain and logistics world in the next 12 months, so please don’t be shy about adding your comments below.