Supply Chains Must Get Smarter, New Report Says

CSCO Insights Editorial Staff

What will the supply chain of the future look like? According to IBM, it will be a lot smarter.

IBM is the latest to present a vision for the future of supply chain, in a new report based on a survey of some 400 supply chain executives from across the globe. Last week, we summarized key survey findings from the report. (See Defining the Supply Chain Executive Agenda) This week, we look at the second phase of the report, the IBM vision for the supply chain of the future.

IBM identified five key themes it says represent the “Chief Supply Chain Officer Agenda”: cost containment, supply chain visibility, supply chain risk management, customer intimacy/requirements, and globalization.

In the report, IBM says there will be three main strategies that companies will use to build the future state supply chain: better “instrumentation,” improving integration or “interconnectedness,” and increased supply chain “intelligence.”

What does that really mean?

IBM outlines the characteristics of each as follows:

Instrumented:

• Sensor-based solutions to reduce inventory costs with increased visibility
• Production and distribution process detectors to monitor and control energy usage and waste
• Physical transportation, distribution and facility asset management, controlled and monitored with smart devices for efficiency and utilization

Interconnected:

• Agile, on demand network of suppliers, contract manufacturers, service providers and other (financial and regulatory) constituents
• Outsourcing non-differentiating functions to share risks across the global network
• Variable cost structures that fluctuate with market demand
• Shared decision making with partners at source (local, regional, global strategies)
• Integrated, networked asset utilization and management

Intelligent:

• Network and distribution strategy analysis and modeling with event simulations
• Scenario-based operational analysis
• Simulation models and analyzers to evaluate flexibility factors – service levels, costs, time, quality – with inventory synchronization
• Sustainability models to analyze and monitor usage impact (carbon, energy, water, waste)
• Integrated demand and supply management with advanced decision support

IBM says, for example, that when it comes to supply chain visibility, increasingly the “issues will not be about having too little information, but rather too much. Smarter supply chains, however, will use intelligent modeling, analytic and simulation capabilities to make sense of it all.”

Impact on Functional Areas

In the graphics below, IBM summarizes what the impact will be of moving to an instrumented, interconnected and intelligent supply chain of the future.

The report adds in conclusion: “Globalization and growing supply chain interdependence have introduced a heightened level of volatility and vulnerability that is unlikely to subside. Uncertainty has become the norm. This new environment demands a different kind of supply chain – a much smarter one.