7 Apexes of Supply Chain 2017

Imagine building a pyramid four or five thousand years ago. Originally, Supply Chain was looked upon as an overwhelming labor-intensive parade, life sacrificing at times as collateral damage for the powers that be. The perception is turned on its head in Globalization 3.0. Tom Friedman, a 3-timer Pulitzer prize winner and renowned NY Times columnist, categorizes globalization, or the nature by which nations or businesses develop influence across national boundaries to operate on an international scale; into 3 periods. Globalization 1.0, between late 1400s to early 1900s, nations went global through states, governments and bigger sticks up to around the second industrial revolution time frame. The same took place in 2.0, predominantly, through multinational corporations up to around late 20th century, and “the world got shrunk from size Large to a Medium”. And then, between late 20th century – early 21st, with the invention of PCs, Netscape, intermission protocols and Uploading capacities, came Globalization 3.0 and the world “got shrunk to a size Small”. The Internet of Things (IoT)l evolves with the optimization and fusion of communication, energy and logistics. Globalization will increasingly be carried out by household individuals who collaborate on IoT platforms and shape minimal-marginal costs communities in the process. Por-Piang has been the way of life in Thailand for over half a century, if not thousands with respect to the middle-path outlook. The digitized economy of sufficiency, for that matter, is coconut milk on mango-sticky rice, with lots of mango. With that, welcome to Supply Chain 3.0.

Businesses nowadays resort to Supply Chain as a capacity that must be calculated carefully: “is it a core competency to be carried out internally or is it a non-core aspect of the business better outsourced for scalable subject matter expertise?” Nonetheless, the organization’s ability to transition to digital while the era of change is still in lapse is vital to its prospects going forward when the economy picks up again. Never mind thriving from the get-go; first things first, prospects for long-run survivability is the current concern. The good news is, Supply Chain can be a great pivot point to streamline digital capacities across the organization matrix, vertically integrated partners and beyond. The SCM World survey results in 2014 found that 49% of supply chain directors predict that, in three years, digital supply chain will play a pivotal role to interrupt legacy systems. Supply Chain-driven business expansion today can create a host of opportunities tomorrow. The good old saying “you snooze, you lose” seems appropriate for the status quo.

1. Amazon One-hour Delivery

As impressive is same-day delivery in 2016, it’s not good enough by Amazon’s standards. Micro operators can make a couple calls and put same day delivery on the menu for customers in the same community. But to offer one-hour delivery to a different continent without outsourcing, forget about it. Amazon itself can’t do it. Not until recently, with the opening of 43 Amazon Prime Now hubs and Amazon Fresh Delivery stations, US-wide. The obvious objective is to carry out front-door deliveries within 60 minutes, or less. For conventional business hubs to follow suit with internal capacities, the entire organization structure would need to be restructured and reengineered while the opportunity cost could prove years if not decades to break even. While the opposite is not true, it’s one of those three macros where globalization 3.0 doesn’t favor the individual as the operator.

2. 3D Printing

3D printing technology has brought about new ways to produce and flexibility in production that reduces R&D time. But what kind of impact would it have on supply chain management? Hypothetically, when production requirements are reduced to simply digital files connected to the internet and the pumping machines themselves, strategic warehouses and inventories, logistics hubs and even manufacturing plants become liberated from raw material sources. And that, in and of itself, is a paradigm shift. The difference is push vs. pull marketing, or for digital nomads, consumers vs. prosumers. The conventional pushes feasible products to produce to shelves that consumers didn’t previously know exist, hope they like what they see and buy it. Where in the latter collaborative economy, the antithesis manufactures nothing without an order. Of course, this leaner profile of manufacturing is only possible if there is no raw material to waste. Thus, no sales target to meet and break even with. In its full fledging form, the “Zero Marginal Cost Society” sees economies scale with decreasing human resource requirements. Collaborative prosumers design, develop and produce the products and services they consume. Amazingly, the blurring area where the concept of democracy trespasses the business world originated in the “Cooperative Self-help movements” that formed during the great depression, early 20th century. In this world, product customization becomes a normal routine. Lead time, or the time from start to end of the production process, becomes minimal. The best thing out of all of this for environmentalists (such as Elon Musk), is that the entire process is extremely eco-friendly. And that, is undeniably becoming more and more important to consumers everyday.

3. Driveless cars

Automated car driving is an innovation with many positive promises for the economy. Originally invented for those that loath traffic, it also has profound effects on supply chains, on the up side. A McKinsey study last year found that the driverless cars combined with smart technologies will optimize supply chain and logistics operations in the future through reduced labor costs and enhanced production systems, warehouses and inventory facilities that will become extremely efficient.

4.Fashion becomes fashionable and obsolete overnight.

Do you remember The Dress video clip that went viral, where everyone were debating over the color the dress? The phenomenon of clips going viral can make product sales spike significantly higher than usual turns out to have disadvantages, as well as advantages. This unpredictability of never knowing which clip is going to go viral and when, and the impact on sales as a result thereof, favors companies with strong supply chain capacities required to respond to demand in a timely manner, be it production, shipping or other aspects that make it possible to satisfy consumers.

5.Social media is popular.

When the digital economy comes with demand for digital signals, customers will become more and more willing to place orders via social media platforms from mobile devices. The more data is available, the more there is to analyze, the more consumption patterns to learn and the more accurate predictions become.  Thus, the ability to fulfill customer needs in real-time will increase accordingly.

6. Long-term sustainability

When demand on resources that are critical components to Supply Chain exceed available supply, the price of raw materials like water, minerals, oil and gas soars and creates a shortage. Natural resources are becoming increasingly more difficult to acquire. Currently, key performance indicators for the Supply Chain workforce is also changing from the past to reflect new demands in the industry. This often causes a labor shortage and therefore its own sustainability. This shortage has become the important topic of discussion among economic and business leaders around the globe as it is expected to have a direct impact on long term profitability. 

7.Internet of Things (IoT) is here to stay

The inconspicuous, yet ubiquitous, third industrial revolution has availed a host of micro applications. Many companies are resorting to available technologies such as embedded systems and sensor applications for literally every operational aspect of the business including the products. Deliveries and logistics are now trackable with pinpoint accuracy. With such advantage comes a surge in demand for software engineers with the practical expertise to walk the slippery slope ahead. For example, the software engineers at John Deere, the manufacturer of “agricultural, construction, and forestry machinery, diesel engines, drivetrains used in heavy equipment, and lawn care equipment”. The software engineers came up with creative ways to add value for customers’ experience by embedding sensors that displays moisture, soil temperature and other related information on the monitor. The very business model is changing for Thailand 4.0 industrialists as well. More and more are expected to jump on the IoT bandwagon with committed investments.

The 7 apexes offers a glimpse into how the unpredictable world could look like just a few years out, the role of Supply Chain, how critical it will become in catering value for businesses in various ways and connect customers around the globe. Businesses can study persistent trends underlying Supply Chain to adapt and remain relevant in the game.

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References and pictures credits forbes.com, iritech.com, logistics.go.th, i.ytimg.com, thesource.com

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