The Death of Supply Chain Management

by Allan Lyall , Pierre Mercier and Stefan Gstettner @ HarvardBusiness Review

The supply chain is the heart of acompany’s operations. To make the best decisions, managers need access toreal-time data about their supply chain, but the limitations of legacytechnologies can thwart the goal of end-to-end transparency. However, thosedays may soon be behind us. New digital technologies that have the potential totake over supply chain management entirely are disrupting traditional ways ofworking. Within 5-10 years, the supply chain function may be obsolete, replacedby a smoothly running, self-regulating utility that optimally managesend-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 highquality, real-time data — data that fuels process automation, predictiveanalytics, artificial intelligence, and robotics, the technologies that willsoon take over supply chain management.

Leading companies are already exploring thepossibilities. Many have used robotics or artificial intelligence to digitizeand automate labor-intensive, repetitive tasks and processes such aspurchasing, invoicing, accounts payable, and parts of customer service.Predictive analytics are helping companies improve demand forecasting, so theycan reduce or better manage volatility, increase asset utilization, and providecustomer convenience at optimized cost.

Sensor data on machine use and maintenanceare helping some manufacturers to better estimate when machines will breakdown, so downtime is minimized. Blockchains arebeginning to revolutionize how parties collaborate in flexible supply networks. Robotsare improving productivity and margins in retail warehouses and fulfillmentcenters. Delivery drones and self-driving vehicles aren’t far off. Rio Tinto,the global mining-and-metals company, is exploring how digitaltechnologies can automate mine-to-port operations. Using driverlesstrains, robotic operators, cameras, lasers, and tracking sensors, the companywill be able to manage the whole supply chain remotely — while improving safetyand reducing the need for workers in remote locations.

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

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

Reskilling implications

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

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

Looking further out, a handful of specialists will beneeded to design a technology-driven supply chain engine that seamlesslysupports the ever-changing strategy, requirements, and priorities of thebusiness. To keep that engine running, a small number of people must berecruited or trained in new skills at the intersection of operations andtechnology. Since the skills needed for these new roles are not readilyavailable today, the biggest challenge for companies will be to create a supplychain vision for the future  — and a strategy for filling those criticalroles.

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

Allan Lyall is a supply chain and retail expert. He wasAmazon’s VP of European operations for over 12 years, and has held otherexecutive roles at Apple and Tesco.

Pierre Mercier is a senior partner and managing directorat The Boston Consulting Group (BCG). He specializes in supply chain managementand the retail industry. Prior to joining BCG he worked at Mitchell MadisonGroup and Deloitte Consulting.

Stefan Gstettner is an associate director at The BostonConsulting Group. He spent six years as the COO of a consumer goods retailerand ran a supply chain expert network. His current area of focus is digitalsupply chain transformation.

Source: https://hbr.org/2018/06/the-death-of-supply-chain-management