Six Digital Supply Chain Trends That Are Happening Now
Focused on increasing productivity, improving organizational resiliency and fostering innovation, supply chain professionals are also being asked to “do more with less” in the midst of economic uncertainty and constant change.
As they also navigate rising costs, inflation, labor pressures, and other challenges, these professionals are using more technologies that help them engage their employees, make better use of their assets and resources, and develop intelligent, responsive logistics operations.
Those technologies come together to create digital supply chains that can be used to leverage new opportunities, tackle current challenges, and plan for the future. “Advancements in technology provide supply chain technology leaders and other executives an opportunity to support new business models, enhance decision making, and improve integration with trading partners,” Gartner reports in Top Trends in Strategic Supply Chain Technology 2023. “This is causing supply chain organizations to fund new initiatives focused on digitizing asset tracking and management, supporting digital supply chain transformation, improving user experience through technology, and reskilling and upskilling their workforces.”
The proof is in the numbers. According to Gartner, 73% of supply chain organizations are currently allocating their supply chain IT budgets to “driving business growth and enhancing performance.” A movement that has been underway for several years now, digital supply chain transformation helps shippers work smarter, faster, and more efficiently amidst the current market uncertainty. It also helps them plan for a future that’s sure to include a blend of opportunities and disruptions.
Here are six digital supply chain trends that shippers should be paying attention to along with some top analyst advice on how.
1 – What’s old is new again.
Greg Aimi, VP, team manager of supply chain research at Gartner, remembers the day when Walmart set a January 2005 target for its top 100 suppliers to be placing RFID tags on cases and pallets destined for its stores in the Dallas/Fort Worth metroplex area. The announcement sent a chill down the spine of all suppliers that worked with Walmart, which promised to extend the mandate to all of its suppliers by a certain date.
In the end, the initiative wound up being what Aimi calls “the epitome of the hype cycle.” Fast-forward to 2023, however, and the retailer—which has mostly been using RFID tags for apparel—is now revisiting the idea of using the tags for general merchandise.
The RFID technology itself has advanced since 2005, and more retailers are using automation, robotics, and RFID in their fulfillment centers and stores. If the technology becomes ubiquitous in the retail environment, Aimi says it will increase inventory visibility levels, support the use of more robotics in stores, and migrate into additional use cases.
2 – Servitization comes to the forefront.
Robots as a Service (RaaS), Software as a Service (SaaS) and Retail as a Service (Raas) are all gaining in popularity as more companies obtain their equipment and software on a service basis versus buying it outright. A lower upfront investment means companies of all sizes can get a ticket to the digital supply chain game. It also puts less stress on internal IT departments because the vendors themselves usually maintain and upgrade the hardware or software that they’re selling as a service.
Vamshi Rachakonda, VP and sales/GTM lead for U.S. manufacturing, auto and life sciences at Capgemini, sees this trend continuing as more companies hone their individual digital supply chain strategies. “We’re definitely seeing increased demand for services, both from shippers and from their customers,” he says. “This is likely to continue for at least the next few years.”
3 – The digital supply chain isn’t a nice-to-have; it’s a must-have.
Any company that’s still using spreadsheets to track shipments, walkie-talkies to manage yard activity, and clipboards to track inventory is slowly making itself obsolete. That’s because the digital supply chain is no longer a luxury; it’s a necessity. “Companies are making progress in this area because they really don’t have a choice,” says Rachakonda.
Among the key drivers is logistics’ transition from being a “back-end” function to one that can substantially affect revenues (both positively and negatively). In response, Rachakonda says smart manufacturers are leveraging the latest technologies—IoT, big data, AI, blockchain, etc.—to their advantage. “This is an area where manufacturers are making progress, but there’s still more work to be done,” he adds.
4 – Vendors are stepping up their games.
Never ones to sit on the sidelines while their customers struggle with increasing supply chain complexity, hardware and software makers are stepping up to the plate and helping shippers tackle the rigors of global supply chain and logistics management.
Many of them are adding digital enhancements based on customer input and feedback, says Aimi, and others are starting up entirely new companies based on specific needs. He points to organizations like project44, FourKites and MacroPoint as some of the newer entrants born out of shippers’ need for improved transportation visibility and tracking.
“That whole market of companies came about on a serious level just within the last five years or so,” says Aimi. Their platforms incorporate handheld and in-cab computers, IoT sensors, and real-time location systems (RTLS) versus satellite. Rather than using EDI to transfer messages out to the drivers (and vice versa), everyone knows where the truck is at any given time. “That’s all being handled by ubiquitous, federated networks that are cloud-based,” he adds.
5 – People play an important role in the digital supply chain.
As they struggle with a persistent labor shortage, shippers recognize the importance of finding and keeping good talent—and even as they continue to invest in automation. According to Gartner, 95% of supply chain professionals are considering cyberphysical automation solutions and 59% say that “ongoing labor availability issues” are their primary reason for doing so. Asked which factors motivate their organizations to invest in supply chain technology, 17% of survey respondents cited the need to address labor constraints or shortages.
As operational labor management and its supporting technologies continue to evolve, Gartner says those solutions will be largely focused on improving workforce retention and deployment—and all while maintaining and/or improving productivity.
These are important wins in a labor environment where Deloitte expects U.S. manufacturers to have 2.1 million unfilled jobs by 2030, and where the Bureau of Labor Statistics is projecting that logistics employment will grow by 7% annually through 2026.
6 – All eyes are on sustainability.
Logistics, fulfillment, and transportation operations are all being called upon to institute environmentally-friendly processes and procedures, and for good reason. According to the EPA, the transportation sector is one of the largest contributors to U.S. greenhouse gas (GHG) emissions and accounted for 27% of all U.S. GHGs in 2020.
As consumers, business partners, governments, and regulators strengthen their push for more sustainability, shippers are placing similar expectations on their own suppliers. “Two years or three years ago, suppliers weren’t really being measured on sustainability the way they are now, and the way they will be going forward,” says Rachakonda, who recently worked with the head of sourcing for one of world’s largest aerospace manufacturers. That professional’s biggest concern was how to effectively measure suppliers based on their sustainability impacts.
This is just one example of the critical nature of sustainability in today’s manufacturing and distribution environments, where software vendors are being asked to meet similar expectations. For example, Rachakonda says software vendors develop solutions with help of partners/suppliers, all of which should also have their own sustainability programs in place.
As Rachakonda makes predictions about the future the digital supply chain, he sees more autonomous vehicles, delivery drones, and fully-automated warehouses coming into view. These technologies are all being developed, piloted, and deployed at various stages of the logistics process, but he expects the pace of adoption to accelerate over the next few years.
“We’re definitely seeing more companies interested in how to use drones for deliveries, automate their warehouses, and use more autonomous vehicles in their fulfillment centers,” says Rachakonda, who points to consumer packaged goods (CPG) and food and beverage as two sectors that have been leading the pack in this area.
“This is something we’re seeing more companies think about and spend dollars on,” Rachakonda adds. “One thing we all learned from the pandemic is that there are situations where you may not have a workforce in the warehouse. That event made more companies take everything from drones to autonomous vehicles to AI a lot more seriously in manufacturing and distribution. This isn’t just a theory anymore; it’s a reality.”