The digital evolution of supply chain operations
Jun 1, 2020
Georgia Wilson

The digital evolution of supply chain operations

Frank Himpel
Jaap Bruining
Digitalisation
Coyote logistics
Dr. Frank Himpel, Faculty Member, CSE Hamad Bin Khalifa University & Jaap Bruining, Head of Coyote Europe, Coyote Logistics, on supply chain digitisatio...

In today’s supply chains, fast paced innovation and complex operations built on legacy systems are commonplace challenges within the industry. To combat this, supply chains are digitally transforming in order to create more efficiency. With digitalisation, supply chains are experiencing cost reductions, as well as increased agility, end to end visibility and flexibility, resulting in a competitive advantage against others in the industry.

Speaking with Dr. Frank Himpel, Faculty Member at CSE Hamad Bin Khalifa University, and Jaap Bruining, Head of Coyote Europe at Coyote Logistics we discuss current supply chain digitisation trends, the benefits, the challenges and the future of supply chain technology.

1. How can the supply chain industry benefit from digitisation? 

Supply chains link customers on buyers’ markets with production capacity and resources needed from resource markets. This occurs on a global scale, making the world a smaller place. Global ordering and deliveries are a reality in many industries already. In order to facilitate accuracy, forecasting, operational efficiency, and strategic flexibility of the entire chain, digitalisation has played a crucial role. In the past, logistics and supply chain management was considered a purely operational play that could be optimised by lowering costs as well as lead times, while trying to increase overall quality for the customers. Transportation tasks and logistical coordination were often outsourced to achieve greater cost control through scaling. However, through the advent of digitalisation, this view has been disrupted. Nowadays, logistics and supply chain management is a strategic asset of a company trying to satisfy the needs of its ever-more demanding customers. Digitalisation can help to reap the benefits of a more agile supply chain portfolio network for the benefit of all parties involved – customers, companies, suppliers, and logistical service providers. To that end, digitalisation is a great opportunity in many industries worldwide.

Dr. Frank Himpel, Faculty Member, Engineering Management and Decision Sciences division, College of Science and Engineering at Hamad Bin Khalifa University, Qatar

2. What are the benefits of digitalisation?

The digitalisation of a supply chain network has several benefits. Depending on the specific industry, products can be delivered to customers much faster than before. This reduces lead times and delivery times, in particular of so-called high runners. Here, predictive analytics tools are employed to simultaneously and continuously assess internal and external data with regards to improving forecasting of demand volumes and demand patterns, as well as provision times. Another benefit largely associated with digitalisation is to increase the flexibility of the production infrastructures (i.e. factories), no matter where they are located geographically. The more interlinked coordination with logistics and transportation capacity ensures the timely delivery to end users and customers, even if the production points are on the other side of the globe. Thirdly, the production concept of Mass Customisation will be more fully and broader implemented. While this concept has been introduced to the management discipline already some time ago, it has not been able to show its potential on a global scale in many industries. Through the disruptive advent of digitalisation, the benefits of Mass Customisation (i.e. highly individualised production at comparably lower factor costs) will become available for many industries worldwide. Also, operations can be managed in a more granular manner. This implies the availability of learning systems to continuously calibrate performances (and measure deviations accordingly). Therefore, management of operations and production capacity becomes more accurate and also more realistic in a way. To learn about unrealistic KPI targets does not take whole planning cycles anymore, so that strategic adjustments can be implemented much sooner. Last but not least, another benefit of digitalisation is the integration of more fully automated and autonomous production and logistics capabilities. This spans autonomous mobility of trucks outside the warehouses and factories with more fully automated sorting and picking functionality in warehouses, to factories that can be steered and adjusted from large distances away. All in all, the benefits of digitalisation in logistics and supply chain management are very promising, however, only few companies and industries have started the journey towards achieving more digitised production potential.

Dr. Frank Himpel, Faculty Member, Engineering Management and Decision Sciences division, College of Science and Engineering at Hamad Bin Khalifa University, Qatar

3. What are the challenges of digitalisation? 

Digitalisation is not without its challenges. Several technologies need to be integrated in a technology network that supports a data network (e.g. the so-called cloud), and both networks need to be linked to production capacities and forecasting methodologies. If one element of the entire setup is missing, or not fully operational, then the benefits might not be achieved. In other words, implementing digitalisation as a step-by-step approach, which is often cautious in nature, might not lead to success. Digitalisation is pretty much a binary system – either a system is being digitalised (and if so, then all-encompassing), or a system is not being digitalised more profoundly. Island-like solutions, such as those we have witnessed in past decades, where ERP systems co-existed with more traditional legacy systems, are not the way forward when it comes to the digitalisation of supply chain networks. Of particular relevance is the holistic, integrative, systemic implementation along all partners and stakeholders of a supply chain network. And to refer to a classical metaphor – the chain is only as strong as its weakest link.

Dr. Frank Himpel, Faculty Member, Engineering Management and Decision Sciences division, College of Science and Engineering at Hamad Bin Khalifa University, Qatar

Another challenge in the digital supply chain is measuring the impact of supply chain technology, to determine improvements in efficiency and costs reduction. The importance of this came through loud and clear in research from Coyote Logistics last year. Supply chain professionals reported that, while measurement is essential, many shippers still struggle with it. In fact, a majority ranked identifying return on investment as a top supply chain technology challenge. Integrating with systems, managing tools and analysing data completed the top four.

Jaap Bruining, Head of Coyote Europe, Coyote Logistics

4. What are the current trends within supply chains in relation to digitalisation?

One major trend through the eyes of logistics and transportation is the advent of so-called supply chain management-as-a-service. Supply chain management capability can be bought on the basis of need, as provided by specialised external vendors, rather than having such functionality in-house. The whole concept of outsourcing business functions, which began more than half a century ago with outsourcing of IT departments, might be adopted to the outsourcing of supply chain management functionality. Here, completely new business models can emerge that will specialise as per lead-time constraint, mode-of-delivery-constraint, and/or factor allocation constraint. Another trend is the ‘uberisation’ of transportation capacities. Here, flexible transportation networks will ensure the delivery of resources to factories, and/or products to customers.

Dr. Frank Himpel, Faculty Member, Engineering Management and Decision Sciences division, College of Science and Engineering at Hamad Bin Khalifa University, Qatar

5. What innovative technology have you seen implemented as a result of digitalisation within supply chains?

As companies around the globe aim to capitalise on the benefits of digitalisation, artificial intelligence (AI), Big Data, machine learning (ML), and blockchain have become highly prominent. In particular, blockchain technology is having inroads into innovative supply chain concepts in the food and healthcare sectors. In general, AI aims to support a company’s desire for greater supply chain automation. Advanced analytics and the internet of things (IoT) sources help better forecasting of demand patterns and supply potentials, for example. IoT in particular is considered suitable for supply chains where higher uptime and higher asset utilisation are key.

Dr. Frank Himpel, Faculty Member, Engineering Management and Decision Sciences division, College of Science and Engineering at Hamad Bin Khalifa University, Qatar

6. What is the best strategy for adopting digital technology within supply chains?

Hybrid supply chain strategies, where paper-based and IT-based approaches are mixed, rarely achieve the level of efficiency required for successfully spanning global supply chains in the long run. Therefore, those technologies would need to be adapted swiftly. Here, it requires bold decisions, rather than cautious tactics. However, acting alone through one’s own ecosystem also might not be suitable – therefore, allocating partners and orchestrating them in a concerted effort is key.

Dr. Frank Himpel, Faculty Member, Engineering Management and Decision Sciences division, College of Science and Engineering at Hamad Bin Khalifa University, Qatar

It’s also important to know what the aims are, how technology will help meet them and how you will measure the impact it has. Start a steering committee and align priorities with those of the business and executive leadership. Secure IT’s input to the strategy. It’s also essential to involve human resources as you may need to build on existing skills sets and/or recruit to plug any skills gaps. 

Keep in mind that out of 13 supply chain tasks, shippers did not think a single one should be 100% human or 100% technology — both were consistently the most frequent choices. Even those predominantly human or technology tasks should have some blend of both. Once strategy creation and execution is underway, remember to stay informed on industry trends and new technology.

Jaap Bruining, Head of Coyote Europe, Coyote Logistics

7. Looking to the future, what would you like to see developed in relation to digitalisation?

Talking about technology and advancements in digitalisation falls short of mentioning that logistics and supply chain management is a people-intensive business. Even more so, people in logistics and transportation have a wide variety of educational backgrounds, with regards to specialisation and maturity. Logistics is a people’s business, and even the advent of Supply Chain 4.0 will not completely get rid of human resources in our supply chain networks. However, as facets of efficiency of increased digitalisation capability are likely to (partially) diminish the role of human beings in these networks, alternate jobs need to be allocated for these individuals. So, rather than wishing for even more roboterised production and logistics systems, I would suggest to not forget the human dimension.

Dr. Frank Himpel, Faculty Member, Engineering Management and Decision Sciences division, College of Science and Engineering at Hamad Bin Khalifa University, Qatar

Innovations in technology continue to advance capabilities in business planning, measurement, operations and more. Advanced AI solutions, better freight market forecasting tools, technology to streamline supply chain and blockchain as a viable operating system were at the top of the supply chain wish list for shippers, Coyote Logistics’ research revealed last year.

Jaap Bruining, Head of Coyote Europe, Coyote Logistics

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