TECHNOLOGY

The Death of Supply Chain

ALISTAIR BERG/GETTY IMAGES

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.

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 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

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 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.

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

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

Stefan Gstettner is an associate director at The Boston Consulting Group. He spent six years as the COO of a consumer
goods retailer and ran a supply chain expert network. His current area of focus is digital supply chain transformation.

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