Transforming supply chains at scale through tech

We’re on the cusp of a transformation in the way global supply chains operate. Historically supply chains have been governed by five forces: social changes, the environment, economics, politics and technology. Those forces are now in flux both individually and collectively as world geopolitics enters a new era: a post Brexit fallout, the Ukraine-Russia war, a UK cost of living and energy crisis, and a wider global economic downturn. 

While the first four forces are standalone and hard to control,  the last one has a unifying effect as the connective tissue encompassing them all: technology. For supply chain and logistics businesses, technology is an enabler which increases speed, boosts resilience, and creates scale, all of which are key to thriving in today’s volatile climate. 

There are several areas of technology that have drawn much attention in terms of their prospects and scalability as enablers of newer supply chains. Let’s take a closer look at them. 

AI, ML and supply chain management - the perfect trifecta

AI and machine learning are leading the charge. Their usage not only helps to anticipate peaks and troughs in both demand for and availability of resources, but also by autonomously responding to situations on the ground. This results in greater flexibility as well as better service levels, while keeping costs down.

A machine learning-powered supply chain allows organisations to automatically improve their predictions of product demand over time. This not only boosts stock and inventory forecast accuracy to prevent the ‘bullwhip effect’, but opens opportunities such as dynamic pricing for retailers. Plus, data models can highlight anomalies in product flux and automatically set control mechanisms, such as customer purchase limits and additional stock ordering. 

Take the current global commodity shortages, such as the one in fruit and vegetables recently experienced in the UK. The farming industry has been utilising tech like moisture sensors and GPS to improve crop nutrient availability, leading to better yields, but it might be missing an AI inspired trick. As suggested by CI&T’s Chief Growth Officer for EMEA, Rebecca Crook, leveraging AI could be the solution to enabling detailed forecasting and data-driven decision-making in what farmers grow and when, and how this connects with consumer demand. 

On a similar note it could improve the end-user experience too, empowering supermarkets with the functionality to make more advanced, personalised customer recommendations for alternative products and recipe ideas when there’s a widespread shortage or a surplus that nobody wants to put to waste.

Meanwhile, with AI, menial backend tasks such as document procession, order picking or error correcting can be further automated, allowing employees to take on more impactful, fulfilling work. AI can also help managers to assess the performance of suppliers, from pricing to reliability, to further minimise disruptions and strengthen the supply chain.

These aren’t simply speculative breakthroughs, either. Research from McKinsey shows that early adopters of AI and ML have already enjoyed significant success, with an average improvement in ‘logistics costs by 15 percent, inventory levels by 35 percent, and service levels by 65 percent’. 

What’s more, generative AI tools like ChatGPT and its successors have the power to take wider responsibilities in supply chain management. With its natural language processing capabilities, ChatGPT can expedite the exchange of clear information about what’s going on in the whole supply chain so suppliers enhance their delivery times, quality, and pricing by analysing data from unstructured sources like customer feedback, invoices, and emails. This level of almost instant visibility is unparalleled.

5G and IoT will transform visibility but the roadmap is slower

COVID-19 stalled the progress of some technologies, and accelerated others. After all, it was far more important to focus on mRNA vaccine investment than the installation of more 5G towers. But the benefits of 5G technology are clear. It’s 1,000 times faster than 4G and can handle 10,000 times more traffic. It also reduces latency from 10ms to less than 1ms and grows device connectivity from 100,000 devices per sq. km to 1 million whilst allowing devices to exchange information independently amongst themselves, enabling distributed computer processing and autonomous decision-making. 

In short, this is the most revolutionary aspect of 5G that connects with IoT, AI and ML - facilitating an explosion in the number of devices and applications that can simultaneously interconnect.

For supply chains, this enables unprecedented levels of speed and responsiveness when tracking the movement of goods worldwide. Low-price 5G chips can collect and analyse supply chain data in real time. Then, 5G-enabled IoT sensors can be placed at different points of a supply chain where they can make autonomous decisions or be connected by a single overseeing AI. From monitoring product location and tagging to status updates, this means instant computing workarounds in the event of a delay or disruption.

5G will also help organisations to optimise their operations and minimise inefficiencies, such as using geolocation technologies to avoid traffic congestion, even by forecasting it. By combining 5G with IoT, organisations can ensure products hit warehouses and shelves at the right time, and with the perfect amount.

The challenge hindering the scaling of this technology for supply chains is ironically around supply and demand, as the global recession and the pandemic have reduced investment in areas like out-of-home connectivity which drives on 5G and IoT technology.

Although the worst of the pandemic is over, trends in semiconductor and chip production continue to impact 5G and IoT development. Their mutually beneficial relationship is key here as the former significantly enhances performance and increases data transfer speed of the latter. 

Next-gen technologies will future-proof the industry

While supply chains need to become faster, safer, and more resilient, a truly future-proofed supply chain must also be a sustainable one. 

As we creep towards a net-zero society, greener supply chains will be incredibly sought after - especially as they can avoid fluctuations in fossil fuel prices and availability, and attract eco-conscious customers, investors, and employees.

Once again AI, IoT and 5G have an important role to play: Measuring real-time emissions and tracking resource usage from extraction of raw material and ploughing seeds until the final deliveries. Add to that, certifying goods origins helping to fight deforestation and environmentally abusive practices, while using AI to employ the best models available to minimise the carbon footprint. Changing how our supply chains are built, how they are run and how they consume energy are challenges in which companies will have to invest heavily to win.

Fortunately, governments are beginning to take note and provide sizable incentives for planet-friendly procurement and distribution. The US recently passed a comprehensive energy bill to invest around US$370 billion in a variety of low-carbon energy technologies over the coming decade. Research already indicates that the legislation could help to significantly reduce US emissions and reach net-zero aims.

Meanwhile, the Russia-Ukraine war, and its impact on the delivery of oil and gas to Europe, continues to make countries within the continent follow the US and invest huge sums into sustainable energy.

Studies show that quadrupling renewable energy generation and building out electrical infrastructure could save the EU over $1 trillion by 2035, with additional benefits to climate, health, and energy security. Similarly, Britain’s Energy Security Strategy sets out how the country will use renewables to ensure as much as 95% of electricity is low carbon by 2030.

Right now, the cost per watt of power obtained by solar and wind is on par with fossil fuels. But if green energy investment is successful, we might see independence from fossil fuels that transforms procurement, operations, and excess waste within supply chains for good.

In the meantime, other existing and emerging technologies offer a glimpse into an incredible future. For example, process mining, which captures business process data and uses advanced analytics to monitor and improve processes isn’t new but is yet to be fully adopted. For supply chain management, it can leverage digital fingerprints to analyse detailed procurement journeys both in terms of their structure and their KPIs. The process data powers smart algorithms for root-cause mining that make it possible to reveal the reasons behind delivery issues and process deficiencies, and to trigger improvements.

Now is the time to take action

With supply chains it’s becoming a case of “Scale eats technology for breakfast”, to paraphrase a famous quote from Peter Drucker. In essence, it’s not the technology per se but the scope it has to be applied at scale and speed to solve global problems, that will make the biggest difference. 

To harness this new technology, business leaders need to invest big and invest now. As this kind of investment drives efficiency up and costs down permanently, securing an edge over the competition as economic downturns transition into booms. So it's advised to future-proof your supply chain now, while your competitors might not be thinking about doing it themselves.  

CI&T are experts at driving digital efficiencies and ensuring value from our clients’ investment in digital transformation. Get in touch to see how we can help scale your business.

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