IS TECHNOLOGY THE SAVIOR OF SUPPLY CHAIN?

Supply chain has been disrupted on a global scale and the latest survey of the Institute of Supply Management confirms this. 95% of the respondents reported that their supply chain was impacted by the pandemic. In the same period an increase of digital transformation and technology spend has been reported.

This raises the question: will technology enable supply chain to overcome this crisis? We asked Andreas Anyuru, Chief Technology Officer at Consafe Logistics to shed light on this.

Andreas Anyuru

Supply chain resilience technology

As the virus is still among us and lockdowns are being used to battle this threat, the economy as well as the buying behavior have accelerated the digitalization. McKinsey has reported extensively on the increase of the online shopping intent and change in shopping behavior. This is not going unnoticed and companies are adapting quickly to these insights. According to the Gartner Board of Directors Survey 69% of boards of directors accelerated their digital business initiatives due to the pandemic and 67% expect a budgetary increase in technology.

As economies reshape, the demand and supply of goods will require a more safe and intelligent approach. There are several approaches for supply chain to become more intelligent and resilient with the use of technology.

1 | Digital Twin

A digital twin is basically exactly what it sounds like. It is a virtual copy of a process, product or service, bridging the physical and digital worlds. One of the first users of digital twin technology was NASA, being forced to develop ways to test, operate, and maintain systems at a (very long) distance. This is precisely one of the main advantages, shifting the execution to remote working.

In a supply chain setting, a digital twin can be used for visualization, simulation and emulation throughout the entire life-cycle. An example of use is for the design of the warehouse and simulation of the warehouse operation. The digital twin let you test new flows as well as the warehouse automation remotely and without altering the existing sites.

In their report Innovation Insight for Digital Twins in Warehousing Gartner predicts that by 2022, 25% of leading supply chain organizations will have launched explicit digital twin initiatives for improving warehouse efficiency.

2 | Artificial intelligence

McKinsey has recently estimated the future economic value created by AI and machine learning to 1.3 trillion USD per year, in supply chain operations alone. Their 2020 survey results have shown that the revenue increase from AI adoption in supply chain management was 72% in 2019, which has increased compared to 63% in 2018. A lot of potential, but where to start?

One way is by using a so called genetic algorithm, inspired by Charles Darwin’s theory of evolution, to evaluate different packaging solutions against each other and thereby optimize the packaging for each order. This is a great way to improve sustainability in supply chains by shipping less air and at the same time be more cost efficient. The Swedish postal service PostNord recently stated that according to their calculations standard truck loads today contain up to 30 % air.

3 | Sophisticated automation

With the increased focus on ecommerce due to the pandemic and the increasing risk of unavailable warehouse employees, sophisticated automation in warehouses are being embraced. These can range from complex decision-making logic to managing material flows.

In highly automated warehouses it is mostly a mixture of equipment that is used to optimize the order fulfillment. These could be AS/RS (Automated Storage & Retrieval System), conveyors, automatic sorters, AGVs (Automated Guided Vehicles), robotic picking system and automatic palletizers. However, a financial investment will be required to implement this which should be aligned to the long term business strategy.

A quicker win could be to implement complex decision-making logic, which is more meant as the ‘brain’ of the warehouse operation. This could for example increase picking speed by optimizing the actual route the pickers take through the warehouse. Finding the optimal route through a warehouse is an example of the “travelling salesman problem” where an AI-algorithm is used to calculate the shortest possible route for each pick round, instead of using a traditional aisle pick route.

To return to the initial question: will technology enable supply chain to overcome this crisis? Yes, I think it will and I’m convinced that it will be an even more important part of the new supply chain when we after the pandemic return to the new normal.

Source: 
ISM COVID White Paper 2 (weareism.org)
https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/a-global-view-of-how-consumer-behavior-is-changing-amid-covid-19
Digital strategy investments accelerate with the support of IT amid COVID-19 (gartner.com)
Global survey: The state of AI in 2020 | McKinsey