Imagine a utopia where minimum human intervention is needed to run an entire shop floor. In this world, manufacturers have total control and visibility of all products, machines predict equipment failures and correct them, shelves count inventory, and customers check themselves out. While such a supply chain model seems improbable and far into the future, the likes of Amazon, Walmart, and Toyota, are already on their way to achieving this vision. At the center of their supply chain initiatives making this possible is the Internet of Things (IoT.)
The supply chain is considered the backbone of a successful enterprise. However, firms find it increasingly challenging to establish a robust supply chain model. The disruptions caused by COVID-19 have further made matters worse as ‘disconnected enterprises’ struggle to gain complete supply chain visibility. The pandemic has established that supply chain disruptions and uncertainties will become more frequent going forward.
The current supply chain landscape faces numerous challenges that need to be addressed. These issues are illustrated below:
As enterprises strive to develop a resilient supply chain, IoT will occupy the center stage. An interconnected supply chain will bring together suppliers/vendors, logistic providers, manufacturers, wholesalers and retailers, and customers dispersed by geography. The technology ensures improved efficiency, better risk management, end-to-end visibility, and enhanced stakeholder experience.
A seamlessly connected supply chain provides advantages at every stage of the value chain for each of the stakeholders. The exhibit below showcases a connected supply chain ecosystem:
Let’s look at how some companies are capturing the benefits IoT:
Using real-time data (captured from GPS coordinates) tracking the movement of raw materials/finished goods, IoT technology aids firms in determining where and when products get delayed. This helps managers ensure route optimization and better plan the delivery schedule. IoT, in combination with blockchain, helps secure the products against fraud. For example, Novo Surgical leverages IoT for optimally tracking and tracing its ‘smart surgical instruments.’ This has reduced errors, decreased surgical instrument loss, increased visibility and efficiency, and improved forecasting of demand for the firm.
Sensors on machines constantly collect information around the functioning of the machine, enabling managers to monitor them in real time. By analyzing parameters such as machine temperature, vibration, etc., manufacturers can better predict machine downtime and take necessary actions to mitigate this. For instance, Toyota partnered with Hitachi to leverage the vendor’s IoT platform and use the data collected to reduce unexpected machine failures and improve the reliability and efficiency of equipment.
IoT sensors in the warehouse assist in tracking the movement of individual items, providing an efficient way to monitor inventory levels and prevent pilferage. Smart shelves contain weight sensors that monitor the product weight to determine when products are out of stock. Walmart has been leveraging smart shelves in its retail stores to manage its products more efficiently and improve the shopping experience.
IoT technology uses sensors that can monitor and adjust warehouse parameters such as humidity, temperature, pressure, and avoiding spoiling of items. Leading e-commerce players like Amazon and Alibaba have been pioneers in leveraging IoT to optimize warehouse management.
As enterprises aim to future-proof their supply chain, they will need a structured path following these five steps below:
Since IoT is an interplay of multiple devices and machines, a successful IoT implementation requires firms to invest in sensors, cloud/edge infrastructure, IoT connectivity networks, data management and analytics solutions, and application development and management. Enterprises can accelerate their IoT supply chain journeys by partnering with solution providers with strong expertise in IoT products and services capabilities in the supply chain arena.
Are you embarking on your connected supply chain journey? Please share your thoughts and experiences with us at [email protected] and [email protected].
Medical Device Industry
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Life Sciences Supply Chain
With cases topping one million globally, governments and health care agencies across the world are working to contain the spread of COVID-19 through several safety measures including the complete lockdown of high-risk countries. While this might prove effective in controlling the pandemic, enterprises across multiple industries are struggling to mitigate its growing impact on the supply chain.
Forced quarantine in manufacturing countries like China has significantly affected major industries including automotive, electronics, pharmaceuticals, and medical devices and supplies, highlighting the limitations in their existing supply chain models. The impact on the overarching life sciences industry is particularly acute, because it cuts across the entire ecosystem, and could potentially enable the spread of COVID-19 due to the diminishing supply of active pharmaceutical ingredients and medical supplies such as masks and hand sanitizers from the key supplier, China.
Despite acknowledging the risks of a single sourcing strategy, many organizations in the life sciences industry continue to work with a single supplier in low-cost regions like China and India to capitalize on their lower costs for labor and materials. This is risky in and of itself. And it also results in sub-contracting situations that lack transparency into the tier-2 and tier-3 suppliers, which further complicates risk management.
Here are our suggestions for how organizations in the life sciences industry can combat the global supply chain crisis:
Despite the extra costs associated with building a proactive supply chain and qualifying multiple suppliers, doing so allows organizations to rapidly respond in pandemic-like situations, thereby reducing reliance on inventory management. Building an adaptable supply chain model that remains operational under any critical situation is the key to managing sourcing risk and avoiding global supply chain disruptions.
Please share your views on the impact of COVID-19 on the global supply chain with us at [email protected], [email protected], and [email protected].
The supply chain function is an area crying out for a digital platform or utility. In fact, I believe it’s ripe for digital disruption. Digital technologies such as automation, advanced analytics, AI, cloud and the IoT can make a huge contribution to rationalizing and managing the supply chain for companies in the North American market and globally, so it’s a prime candidate for transformation. Companies such as Amazon and Walmart are building logistics and supply chain digital platforms for themselves, but they seek to shape the space and disadvantage other companies. So, several vendors are pushing to provide supply chain platforms. It’s clear that especially Accenture and Genpact, also believe in the coming disruption, as they are making very big plays to compete against Amazon in the supply chain space.
Enterprises must leverage analytics, cloud computing, control tower technology, IoT and MDM solutions to control cost, remove process inefficiencies, manage risk, and address uncertain customer demands.
Enterprises drove 15 percent growth of Supply Chain Management (SCM) Business Process Outsourcing (BPO) in 2017 as they sought to reduce high operating costs, address evolving customer demands, and manage risk and compliance. The solution to much of these problems, according to Everest Group, is digitalization.
“Enterprises can struggle with broken supply chains for many different reasons, not the least of which are siloed operations, inefficient processes and lack of visibility” said Vikas Gujral, practice director at Everest Group. “Enterprises that adopt digital solutions to combat these challenges are achieving better supply chain efficiency at lower cost. We have identified analytics, cloud computing, control tower, Internet of Things (IoT) and master data management (MDM) solutions as the emerging drivers for success in the SCM BPO market.”
These results and other findings are explored in a recently published Everest Group report: “Supply Chain Management (SCM) BPO—Annual Report 2018: Moving Toward a Digital Supply Chain Ecosystem.” In the report, Everest Group analyzes the global SCM BPO market in 2017, focusing on the state of the market, market size and adoption trends, and the service provider landscape.
Key Adoption Trends:
***Download a complimentary 10-page abstract of the report*** (Registration required.)
In 2015, Denver-based Chipotle Mexican Grill suffered a major crisis with an E. coli outbreak that left 55 customers ill. Sales plummeted, news stories and investigations shattered its reputation, and the restaurant chain’s share price dropped 42 percent, to a three-year low, where it has languished ever since. Why couldn’t Chipotle prevent or contain it? What triggered it?
The answer lies in an ever-present scenario companies face – dependence across multiple vendors and lack of transparency and accountability across complex supply chains. A radical solution, using blockchain technology, is rapidly emerging, and is being explored by a slew of startups and corporations.
Blockchain allows supply chain managers to attach digital tokens – a unique, negotiable form of digital asset – to intermediate goods as they progress along the production, shipping, and delivery phases among different supply chain players. This gives businesses far greater flexibility to find markets and price risks, by capturing the value invested in the process at any point along the chain.
One example of blockchain in action is Walmart working with IBM and Beijing’s Tsinghua University to follow the movement of pork in China. Another is BHP Billiton, a mining giant, using the technology to track mineral analysis conducted by outside vendors. Everledger, a dynamic startup, has already uploaded unique data on more than a million individual diamonds to a blockchain ledger system, thus developing quality assurances and helping jewelry market associations comply with regulations barring “blood diamond” products.
“Smart contracts,” an application based on blockchain technology – buoyed by advances in chip and sensor technology – is an especially powerful option providing traceability and automation benefits. These contracts can grant different vendors special, cryptographic, and encrypted permissions, can be automatically executed by an autonomous system, and provide visibility on each other’s activity to all members of a supply chain community.
This kind of provable, transparent credentialing will be especially important for additive manufacturing, which is central to the dynamic, on-demand production model of the burning Industry 4.0 movement. For instance, operations and maintenance crew in an aircraft carrier need to have absolute confidence that the software file they downloaded to 3D print a new part is safe and not hacked. One of the most compelling arguments for blockchain is that it can help eradicate the trust problem in supply chains, without which the sophisticated, decentralized, IoT–driven economy many are projecting might be impossible.
While the need for efficiency improvement and information aggregation suggest blockchain technology could deliver vast supply chain savings for companies everywhere, there are formidable obstacles to overcome first, such as:
Despite these challenges, positive steps are being taken. For example, Hong Kong recently formed a Belt and Road blockchain consortium that seeks to bring a structure and order along with ICANN (Internet Corporation for Assigned Names and Numbers), an international, private sector–led global administrator and adjudicator.
While it might be too early to say that blockchain entirely solves the global supply chains issues, we believe any system that promises to enhance transparency and control for businesses and their customers, while also countering inter-commercial trading frictions, is worth exploring.
An increasing number of investors, businesses, academics, and even governments are starting to view blockchain technology as a much-needed platform…are you with them?
Supply chain planning BPO is a relatively new entrant into the global services arena. Organizations are now turning to specialist providers that can deliver a range of services across delivery, master data management (MDM), aftersales, and reporting & analytics. A number of leading broad-based BPO providers have developed capabilities in this area to complement finance & accounting and procurement outsourcing offerings.
However, as is typical with a service that is not very tightly defined, supply chain planning BPO consist of completely different sets of underlying services, depending on the client context.
On one end of the spectrum, supply chain planning BPO services can cover relatively transactional activities such as:
On the other end, supply chain planning BPO services have been seen to cover quite complex activities such as:
Both sets of services have different skill set requirements, educational qualifications, staffing metrics, and talent management regimes. The transactional activities require basic numerical skills, some working knowledge of ERP systems, and good reporting capabilities. The complex manifestation of supply chain planning is much more judgement based, and requires operations planning skills, understanding of network planning/optimization tools, and excellent analytical abilities.
In a competitive or sole-sourced bid situation, any wrong assumptions could have significant implications on deal profitability for the service provider or pricing competitiveness for the buyer. Therefore, it is critical for both parties to understand and articulate where the specific service lies on the complexity continuum.
During the deal tenure, this poses additional challenges during a benchmarking or contract review/renegotiation exercise. We have often observed providers putting forth a “blended” rate covering the entire set of services, which limits the transparency and flexibility to objectively and accurately assess the pricing. Case in point: as part of a recent contract review, we had to go through the qualification and job description of each individual on the account to enable an apples to apples comparison. This led to the identification of significant value leakage due to a blended rate covering all kinds of supply chain planning activities that was higher than the fair market price for the complexity of the underlying services delivered.
It will be interesting to observe how the market evolves and service providers develop a tighter definition of these services to ensure there is no confusion during solutioning and pricing of contracts. If you were on the buy- or sell-side of a supply chain planning BPO deal, our readers would love to hear your experience!
Analytics has gained significant traction recently and service providers are increasingly leveraging it to transform their offerings
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