The Tech Trends Driving the Evolution of the Supply Chain

How will logistics leaders respond to the need for innovation and evolve their businesses in 2019 and beyond?

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Kristi Montgomery, Vice President of Innovation at KencoKristi Montgomery, Vice President of Innovation at Kenco

Emerging technologies, shifting consumer expectations and rising pressures from major players and new entrants to the market have brought immense change in supply chain management. The industry has been greatly impacted by innovations like e-commerce technologies that have transformed the delivery of products, leading customers to expect fast, inexpensive and high-quality delivery with the click of a button. Leaders like Amazon have revolutionized the logistics space, forcing all companies to prioritize their supply chains to compete. With these transformative changes and even more on the horizon, one question remains: How will logistics leaders respond to the need for innovation and evolve their businesses in 2019 and beyond?

With cost savings focused on logistics management, the adoption of new technology ultimately has the bottom line in mind. Innovation is synonymous with process improvements as leaders seek out solutions that expedite and improve processes to increase profitability. Given the price tag of deploying new technologies, executives are taking a measured approach to innovating the supply chain.

In a Kenco 2018 State of Supply Chain Innovation survey of supply chain leaders from a range of industries and organizations of all sizes provides a deeper understanding of how they define innovation, which technologies are expected to have the greatest impact on the industry and what is in store for the future of innovation. While process improvement is not solely dependent on technological evolution, the study reveals 22 percent of respondents define innovation as adopting emerging technologies, up from 17 percent in 2017. Though 54 percent still define innovation as process improvements, more leaders linking technology and innovation suggests a change in the way tech’s potential is viewed. As supply chain technology continues to grow in prominence, where are supply chain leaders directing their attention and implementing solutions?

The Focus of Innovation

To keep pace with current market needs and anticipate future demands, supply chain leaders are looking to technology solutions to provide increased visibility and support the growth of e-commerce transactions. While the industry is progressively embracing the power of technology, certain innovations are more attractive and realistic than others.

Once a behind-the-scenes function, the efficiency of supply chains have become more customer facing, as consumers demand to know where their orders come from, where products are in transit and when packages will arrive. To meet the market’s expectations, 85 percent of supply chain leaders are hoping to invest in technologies that influence visibility. Robotics and automation, IoT and sensors and blockchain have emerged as hot options for improving processes. IoT technology is specifically being heralded for its ability to minimize expenses, heighten security and enhance regulatory compliance.

However, businesses must be cautious in selecting technologies, as the implementation of these massive solutions could do more harm than good if not properly piloted and proven. New technology will impact the structure and organization of a business, and current employees may not be equipped to handle complex systems. Primarily, the decision to implement a new technology must be aligned with the mission and vision of the company.

Companies are justifiably making e-commerce a major part of their businesses, and with the “Amazon Effect” creating unprecedented standards for how quickly customers expect any and all goods to arrive at their door, flexibility will be crucial to meet the growing pressures of e-commerce logistics. Understanding the urgency to meet shipping demands, e-commerce will be a major catalyst driving technological advancement in the supply chain. Though 73 percent of leaders say e-commerce is a priority in their organization, with 43 percent noting it as extremely or very important, supply chain professionals are still taking time to develop and integrate tech solutions into the business. Rather than mimic Amazon, industry leaders are devising alternative plans to revolutionize their unique supply chain challenges. Progress may be relatively slow, however, as over half of supply chain budgets allocate less than 10 percent of spending towards e-commerce.

Supply chain leaders are increasingly looking to technology to improve operations, but they also understand technology might not be the true solution for every challenge. While driverless cars and drones have been trending topics, supply chain leaders are actually deprioritizing both technologies, despite a projected shortfall of 174,000 truck drivers by 2026. In fact, 62 percent of leaders say driverless cars and drones are not a priority, an increase from 2017. Despite the buzz, the industry is not seeking innovation based on headlines alone.

Steps Towards Adoption

As logistics leaders look to identify emerging technologies that can successfully transform their business, there is a push to pilot and experiment with new solutions, particularly in areas where the application is evident. The tech that may be low on today’s to-do list will continue to advance, and companies must position themselves for future mainstream adoption by testing and proving tech’s role in the supply chain in the present.

Almost a quarter of companies are planning to invest in AR/VR, up from eight percent in 2017, and 35 percent are planning to invest in 3D printing, a 13 percent increase. Technologies with a clear and current use case like vision picking, where smart glasses with embedded cameras are used to help workers capture barcodes, have seen success in warehouses and distribution centers, piquing interest for other applications.

To achieve tangible process improvements in the near future, technology must have specific use cases, and benchmarking should be leveraged to measure change. While experimentation is well within reach, full-scale adoption remains more elusive given the complexities of implementation. Whether it is choosing a vendor, evaluating available data/metrics, understanding the infrastructural impact or creating a centralized communication system, integrating innovative technology requires extensive planning and preparation.

The Need for Collaboration

Increased excitement around larger-scale concepts like blockchain and success from pilots like AR glasses has catalyzed logistics innovation. Still, a complete overhaul of supply chain technology is not instantaneous. As the industry ventures into complex territories like IoT and blockchain, leaders must ensure that efforts are collaborative to make technology a positive move rather than a negative distraction. Stakeholders throughout the market from warehouse workers to executives and big box stores to independent organizations must communicate to bring about innovative change that will move faster and more safely. By sharing needs, successes and plans, the supply chain industry can build new technologies into the landscape and bring significant progress.

Kristi Montgomery is Vice President of Innovation at Kenco Logistics.

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