The Death of Supply Chain Management

The supply chain is the heart of a company’s operations. To make the best decisions, managers need access to real-time data about their supply chain, but the limitations of legacy technologies can thwart the goal of end-to-end transparency. However, those days may soon be behind us. New digital technologies that have the potential to take over supply chain management entirely are disrupting traditional ways of working. Within 5-10 years, the supply chain function may be obsolete, replaced by a smoothly running, self-regulating utility that optimally manages end-to-end work flows and requires very little human intervention.

With a digital foundation in place, companies can capture, analyze, integrate, easily access, and interpret high quality, real-time data — data that fuels process automation, predictive analytics, artificial intelligence, and robotics, the technologies that will soon take over supply chain management.

Leading companies are already exploring the possibilities. Many have used robotics or artificial intelligence to digitize and automate labor-intensive, repetitive tasks and processes such as purchasing, invoicing, accounts payable, and parts of customer service. Predictive analytics are helping companies improve demand forecasting, so they can reduce or better manage volatility, increase asset utilization, and provide customer convenience at optimized cost.

Sensor data on machine use and maintenance are helping some manufacturers to better estimate when machines will break down, so downtime is minimized. Blockchains are beginning to revolutionize how parties collaborate in flexible supply networks. Robots are improving productivity and margins in retail warehouses and fulfillment centers. Delivery drones and self-driving vehicles aren’t far off. Rio Tinto, the global mining-and-metals company, is exploring how digital technologies can automate mine-to-port operations. Using driverless trains, robotic operators, cameras, lasers, and tracking sensors, the company will be able to manage the whole supply chain remotely — while improving safety and reducing the need for workers in remote locations.

A key concept that many of these companies are exploring is the “digital control tower” — a virtual decision center that provides real-time, end-to-end visibility into global supply chains. For a small number of leading retail companies’ control towers have become the nerve center of their operations. A typical “tower” is actually a physical room staffed with a team of data analysts that works full-time, 24/7, monitoring a wall of high definition screens. The screens provide real-time information and 3D graphics on every step of the supply chain, from order to delivery. Visual alerts warn of inventory shortfalls or process bottlenecks before they happen, so that teams on the front line can course correct quickly before potential problems become actual ones. Real-time data, unquestioned accuracy, relentless customer focus, process excellence, and analytical leadership underlie the control tower operations of these retail operations.

Industrial companies are also embracing the concept. One manufacturer’s complex network moves more than a million parts and components per day. The control tower flags potential supply issues as they arise, calculates the effects of the problem, and either automatically corrects the issue using pre-determined actions or flags it for the escalation team. Similarly, a steel company built a customized scenario-planning tool into its control tower platform that increases supply chain responsiveness and resilience. The tool simulates how major, unexpected equipment breakdowns — so called “big hits” — will affect the business and points to the best risk mitigation actions.

Reskilling implications

The trend is clear: Technology is replacing people in supply chain management — and doing a better job. It’s not hard to imagine a future in which automated processes, data governance, advanced analytics, sensors, robotics, artificial intelligence, and a continual learning loop will minimize the need for humans. But when planning, purchasing, manufacturing, order fulfillment, and logistics are largely automated, what’s left for supply chain professionals?

In the short term, supply chain executives will need to shift their focus from managing people doing mostly repetitive and transactional tasks, to designing and managing information and material flows with a limited set of highly specialized workers. In the near term, supply chain analysts who can analyze data, structure and validate data sets, use digital tools and algorithms, and forecast effectively will be in high demand.

Looking further out, a handful of specialists will be needed to design a technology-driven supply chain engine that seamlessly supports the ever-changing strategy, requirements, and priorities of the business. To keep that engine running, a small number of people must be recruited or trained in new skills at the intersection of operations and technology. Since the skills needed for these new roles are not readily available today, the biggest challenge for companies will be to create a supply chain vision for the future  — and a strategy for filling those critical roles.

Clearly, the death of supply chain management as we know it is on the horizon. The managers and companies working to update their skills and processes today are the ones who will come out on top.