How technology will transform the future of supply chains

By Erlon Faria Rachi, Senior Manager of Data Science and Advanced Analytics at CI&T.

  • 1 year ago Posted in

Technology has always disrupted and improved how we manage supply chains—from the newly wheeled carts strapped to camels on the ancient Silk Road, to today’s AI-powered demand forecasts for ultra-accurate retail restocking. But while these developments consistently push society forward, they haven’t always been initially well received. Take barcodes, for instance. When barcodes were first introduced commercially, sceptical manufacturers had to be persuaded to print them on products, and hesitant supermarkets convinced to buy scanners. But within a handful of years, barcodes were widely acknowledged to have transformed the efficiency and accuracy of the entire retail lifecycle. As business leaders, we must always push through initial reluctances and harness transformative new technologies. Supply chains that can adapt to outside change, from geopolitics to the environment, are a major competitive advantage in today’s volatile economic climate. So, which new technologies are set to increase speed, support reliability, and boost resiliency for businesses like yours? Let’s take a look.

IoT and 5G will transform visibility

The COVID-19 pandemic caused a slowdown in the development of some technologies, and a speeding up of others. After all, it was far more important to focus on mRNA vaccine investment than the installation of more 5G towers. But now that the worst of COVID-19 is likely over, IoT and 5G can advance to where they would’ve been had the pandemic not taken precedence. The benefits of 5G technology are clear. It’s 1,000 times faster than 4G and can handle 10,000 times more traffic. It also reduces latency from 10ms to less than 1ms and grows device connectivity from 100,000 devices per sq. km to 1 million. In short, it facilitates an explosion in the number of devices and applications that can simultaneously interconnect. For supply chains, this enables unprecedented levels of speed and responsiveness when tracking the movement of goods worldwide. Low-price 5G chips can collect and analyse supply chain data in real time. Then, 5G-enabled IoT sensors can be placed at different points of a supply chain to allow managers to remotely monitor product location, tagging, and status, and instantly begin planning workarounds in the event of a delay or disruption. 5G will also help organisations to optimise their operations and minimise inefficiencies, such as using geolocation technologies to avoid traffic congestion. By combining 5G with IoT organisations can ensure products hit warehouses and shelves at the right time, and in the perfect amount.

AI and ML will optimise performance

Another area of technology which promises to revolutionise the management of supply chains is artificial intelligence (AI), and its machine learning (ML) subset. Remember, it’s important to note the slight difference between AI and ML: AI enables a computer system to use maths and logic ‘think’ for itself and perform tasks autonomously. Meanwhile, ML allows the system to ‘learn’ and improve on its output, based on its experiences. A machine learning-powered supply chain allows organisations to automatically improve their predictions of product demand over time. This not only boosts stock and inventory forecast accuracy to prevent the ‘bullwhip effect’, but opens new retail opportunities such as dynamic pricing. Plus, data models can highlight anomalies in product demand and automatically set control mechanisms, such as customer purchase limits and additional stock ordering. Meanwhile, with AI, menial backend tasks such as document procession and order picking can be automated, allowing employees to take on more impactful, fulfilling work. AI can also help managers to assess the performance of suppliers, from pricing to reliability, to further minimise disruptions and strengthen the supply chain. These aren’t simply speculative breakthroughs, either. Research from McKinsey has shown that early adopters of AI and ML have already enjoyed significant success, with an average improvement in ‘logistics costs by 15 percent, inventory levels by 35 percent, and service levels by 65 percent’. With costs rising and disruptions escalating, business leaders should strive to harness the benefits of AI-driven supply chains—before faster-moving competitors race too far ahead.

Next-gen technologies will future-proof the industry

While supply chains need to become faster, safer, and more resilient, a truly future-proofed supply chain must also be a sustainable one. As we creep towards a net-zero society, greener supply chains will be incredibly sought after - especially as they can avoid fluctuations in fossil fuel prices and availability, and attract eco-conscious customers, investors, and employees. Fortunately, governments are beginning to take note and provide sizable incentives for planet-friendly procurement and distribution. The US recently passed a comprehensive energy bill to invest around US$370 billion in a variety of low-carbon energy technologies over the coming decade. Research already indicates that the legislation could help to significantly reduce US emissions and reach net-zero aims. Meanwhile, the Russo-Ukrainian war, and its impact on the delivery of oil and gas to Europe, will likely make countries within the continent follow the US and invest huge sums into sustainable energy. Studies show that quadrupling renewable energy generation and building out electrical infrastructure could save the EU over $1 trillion by 2035, with additional benefits to climate, health, and energy security. Similarly, Britain’s Energy Security Strategy sets out how the

country will use renewables to ensure as much as 95% of electricity is low carbon by 2030. Right now, the cost per watt of power obtained by solar and wind is on par with fossil fuels. But if green energy investment is successful, we might see independence from fossil fuels that transforms procurement, operations, and excess waste within supply chains for good. In the meantime, other emerging technologies offer a glimpse into an incredible future. In ten years, could AI even be designing living organisms? A research team of roboticists and scientists have shown it’s certainly possible. With innovation always just around the corner, it’s up to us to be ready for whatever technology may throw at our supply chains, businesses, and lives next.

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