Patterns of Digital Supply Chain Disruption

Patterns of Digital Supply Chain Disruption

Advances in smart automation is increasingly disrupting both B2B and B2C supply chains. The patterns of digital supply chain disruption will likely manifest in two waves.

Wave 1: Localized Disruption

In the next 3-7 years, supply chain functions such as planning or warehousing or delivery will be transformed by innovative applications of smart automation. For example, DHL recently announced testing augmented reality wearables in its warehouses to improve picking productivity and accuracy. 

Startups such as Dispatch and Starship Technologies are rolling out self-driving vehicles to compete head to head with Amazon and Google drones to enable Same Day last mile delivery. Beauty companies are piloting automated chat-bots to bring enhanced experience in its after sales customer service.

The above examples all highlight the imminent trend of smart automation enabling supply chain functions to break free of the traditional cost vs. quality vs. service trade-off conundrum. Instead of picking between offering a lower cost or faster delivery or better service, companies can offer both. Consequently, supply chains will become simultaneously lower cost and more agile and break free from the traditional “trade-off” constraints (see figure below)

Digital Supply Chain Future Value

However, this is just the beginning. Near term digital supply chain automation will likely be local in nature. That is to say, a specific set of smart automation technologies impacting a specific supply chain function or activity. These patterns of disruption are largely predictable. Progressive companies will likely anticipate and leverage against these emerging disruptions.

Wave 2: Large Scale Platform Disruptions 

Over the longer horizon, we will experience a second wave of less predictable and more transformative patterns of digital supply chain disruption. This will fundamentally redefine today’s supply chain structures. There are two drivers for this.

First, as underlying advances in artificial intelligence, sensors, 3D printing and miniaturization accelerates, they will combine and converge in unexpected ways to unlock more smart automation. For example an A.I. powered beauty advisor app on a consumer’s phone could trigger an order to a Beauty manufacturer’s 3D printing/forming facility to produce a batch of cosmetics tailored to their skin chemistry profile.

Second, as supply chain functions become more digital, they will increasingly exhibit and benefit from digital platform characteristics. Platforms will re-organize supply chain functions to become horizontal “plug and play” stacks that cut across organizations. Companies will then build and coordinate their supply chain functions on top of these shared supply chain stacks.

Future retailers and CPG companies can unlock massive transportation synergies by adopting an “Uber-sharing” of line haul trucks. The platform owner offers a flexible fleet of autonomous driving trucks coordinated for maximum efficiency. This is achieved via connected sensors and a cloud based A.I. engine for route optimization, cross-firm scheduling, preventative maintenance sensing.

The rise of supply chain platforms will create significant challenges and opportunities for companies of the 2020s. (see figure below).

digital supply chain - 2 waves

The above commentary was featured in “Welcome to the Robotic Supply Chain” from Procurement Leaders network.

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