Why Supply Chain Management Requires A Digital Mindset

David Bolton
By David Bolton on October 14, 2019

Whisper it quietly, but the future of quality is not just here but also making its presence felt. And thanks to a combination of the connected society, evolving customer expectations and the elevation of a digital mindset as a business optimization tool, companies are waking up to the fact that they need to adapt their working practices and quality management to fit the technology requirements of Industry 4.0.

The news that quality is under pressure from innovative tech and end-user demands should not come as a surprise. Digital transformation is already a well-trodden path for most companies, one that decision makers are aware of and, in theory, integrating into ongoing business strategies. In fact, there is a consensus that being aware of evolving or emerging technology is no longer enough, even more so when you factor in the requirements of supply chain management.

According to the 2019 MHI Annual Industry Report – sub-titled “Elevating Supply Chain Digital Consciousness” – the digital supply chain already exists. Ongoing innovation within the manufacturing and retail sectors has pushed the boundaries of what is possible, a state of continuous improvement that has been driven (in part) by increased customer expectations.

Automation and data exchange, for example, will play a significant role in the product lifecycle and the ongoing argument that these tools should be a priority has highlighted the need for companies to embrace a so-called digital consciousness sooner rather than later. Factor in specific Industry 4.0 elements – the Internet of Things, cloud and cognitive computing, cyber-physical systems (robots, basically), augmented reality, and advanced analytics – and it becomes clear that the future of quality is knocking on the door.

Taking that into account, companies must integrate technology into both their internal and external quality ecosystems. Industry 4.0 has already had an impact on the business landscape, but what is important to note is that the supply chain – and, by association, quality – is likely to benefit from next generation technology sooner rather than later.

Leveraging the tech tools

The MHI report said that companies that leverage the available tech tools will be able to transform their supply chains and, ultimately, take advantage of the digital environment. Emerging technologies would likely see increased adoption rates over the next five years, although elevating the mindset from simple awareness to actual consciousness will lean heavily on both investment and a commitment from executive teams.

For the purposes of this annual report, MHI surveyed over 1,000 company decision makers about not only their attitude to a digital mindset but also where they believed the company was in terms of tech integration. In addition, the report asked respondents about the challenges and pain points that they were experiencing in their supply chain management processes. Finally, respondents were asked to identify the technologies that would dominate in the next 10 years.

The criteria for inclusion in the digital supply chain was quite simple. Tech needed to be digital, on-demand and, crucially, always on. With that in mind, respondents cited the following eleven technologies as the ones with the most potential to disrupt or improve the supply chain status quo:

  • Blockchain
  • Robotics and automation
  • Predictive analytics
  • Internet of Things
  • Artificial Intelligence
  • Driverless vehicles and drones
  • Wearable and mobile technology
  • Inventory and network optimization
  • Sensors and automatic identification
  • Cloud computing and storage
  • 3D printing

All of these technologies could be filed under the heading “the usual suspects” in relationship to the concept of Industry 4.0, but it is worth noting that 80 percent of respondents said that the digital supply chain would be the predominant model within five years as opposed to the 10 set by the survey questions and predicted timeline. In addition, there was an acceptance that some of these tools were already being used, albeit with varying degrees of integration and success.

Cloud computing, for example, had a 56 percent adoption rate in 2018 – an increase of 15 percent from 2015. Around 43 percent of respondents said that they had integrated sensors and automatic identification, while inventory and network optimization was also at 43 percent. Predictive analytics – often seen as the secret sauce in any successful digital transformation – had a current adoption rate of 30 percent, although the report said that just under 90 percent of companies would be using analytics as a business insight tool by 2024.

The key factor, naturally, will be the level of investment that companies are prepared to make. According to the authors of the report, investment in supply chain innovation is at a ”critical inflection point,” with the recent trend of declining investment being countered by a year-on-year increase of 95 percent in overall projected spending in 2019.

“Manufacturing and supply chain operations continue to invest heavily in innovation. 57 percent of respondents are planning new technology investments totaling more than $1 million over the next two years — that is a 10 percent increase over the 2018 report,” MHI said. “Thirty-four percent plan to spend more than $5 million and 22 percent plan to spend more than $10 million. According to the survey, the highest funding will be for Robotics and Automation, an area where companies plan to spend an average of $20 million over the next two years.”

Supply chain management needs digital mindset

The bullish attitude to investment in emerging tech in the supply chain is driven by MHI’s belief that a digital mindset in terms of supply chain management is the only way forward.

Relentless pressure from customer expectations means that supply chains have to perform flawlessly, efficiently and transparently. These three elements are the platform on which a digital consciousness is built, and the supply chain must be agile, fully automated and self-learning to succeed and be competitive.

MHI’s report said that four stages of digital adoption must be integrated – digital connectivity, automation, advanced analytics, artificial intelligence – and companies have to appreciate that each of these stages are another step on the overall journey towards increased awareness. Falling behind on digital innovation is not really an option, and companies need to make certain that the digital mindset squares with established goals and processes.

Recognizing that digital innovation can improve all aspects of the supply chain is an integral part of the process, with the price of digital inaction – the cost of doing nothing, essentially – no longer sustainable. As a result, respondents had already identified robotics and automation, predictive analytics, AI, IoT, and driverless vehicles as the top technologies that would both disrupt the supply chain and create a competitive advantage.

“Using digital innovation to improve supply chain efficiency, transparency and sustainability has become a necessity for continuing to grow the customer base and maintain a competitive standing,” the authors of the MHI report said. “Digital technology is now an integral part of every step in the supply chain, and it is virtually impossible to find a company not in the midst of modifying its technical architecture to be more digital.”

Improving the quality journey

To be fair, the need to be more digitally aware is not really breaking news, and the identified tech in the MHI report has been on the industrial and manufacturing radar for some time. What is more interesting is how this state of digital consciousness will dovetail with quality management and the path towards Quality 4.0. The supply chain is a vital part of Industry 4.0’s “factory of the future,” and simplifying its complexity with technology is likely to play a major role in terms of quality.

BCG’s recent “Quality 4.0 Takes More Than Technology” report, for instance, asked whether technology was the “silver bullet for improving quality management,” and noted that digital tools are going to be the catalyst for the adoption of next generation QMS solutions. The caveat is that recognizing that tech will have an impact is different to actually investing or integrating solutions – almost two-thirds of respondents to BCQ’s survey said that Quality 4.0 would have an impact, but only 16 percent had implemented any sort of adoption policy.

Much of that comes down to the fact that companies are still struggling to come to terms with what technology can actually bring to table. BCG’s report cited long-standing challenges with integration – fragmentation of quality data, shortage of digital skills, lack of a quality culture, an absence of internal support, for instance – and these roadblocks are becoming more apparent as companies look to relieve the pressure that has been created by the expectations of modern society.

These oft-cited pain points aside, the challenge for most companies is understanding where business optimization tools can fit into their long-established work practices. At the same time, there is little doubt that the workforce of the future is likely to rely on more automated solutions, especially as the rapid pace and demands of the connected society are not going to slow down.

Finding the right balance is always going to be a challenge in itself, but the key aspect is that digital solutions do exactly what they say on the tin … they solve identified problems. And if investment in technology drives change within the company and allows them to become a quality leader, then that will be money well spent.

ETQ helps organizations realize the business opportunities that quality creates. Our industry-leading Reliance 2019 SaaS solution features built-in best practices and best-in-class flexibility, with the software enabled to optimize the critical processes that drive excellence through quality.

To learn more about how ETQ can help you become a quality leader, contact us today. Alternatively, reach out for a demo, and find out how to move through your quality journey.