Innovation Now: How Technology Drives Supply Chain Evolution

Time-sensitive deliveries, lean inventories, and shorter product lifecycles consistently place greater demands on the supply chain. With supply chain technology advancements, shippers have increased expectations of what logistics providers can accomplish, and the proper alignment of those expectations is the key to guaranteeing success between both parties.

Shippers and third-party logistics providers (3PLs) are becoming more integrated thanks to solutions that make data more accessible, improving the ability to make real-time decisions that benefit both parties and creating more meaningful partnerships. Most prominently, automation and blockchain technologies are gaining mindshare among shippers and 3PL providers to drive revenue and advance digitization initiatives, according to the 2018 Third-Party Logistics Study by Infosys Consulting, Penske Logistics, Korn Ferry and Penn State University. 

In today’s marketplace, customers of all types are better informed and expectations are increasingly set higher. The growth of e-commerce, increased consumer demands and the speed at which new technologies enter the market makes the supply chain more relevant. This comes as demand patterns are shifting and new competitors are entering the marketplace, challenging established business models. 

The functioning of today’s supply chains relies significantly on the abilities of all involved parties to have access to vast amounts of data in near real-time or, increasingly, real-time. As a result, shippers and 3PLs are moving away from transactional relationships and toward meaningful partnerships. There are many risks when products are moved along any supply chain, and with an increased desire for greater visibility, blockchain, automation and digitization technologies are becoming more desirable.

“Supply chain used to be a function. Now it is a value-add, and it is fundamental to your customer’s experience,” said Kim Breland, director of finance, supply chain operations for Sprouts Farmers Market, a supermarket chain based in Phoenix. “It has gone from a box hitting a location to delivering an outcome.” Breland was among several logistics executives who took part in the study’s workshop held at Google headquarters in Mountain View, California.

 

Blockchain moving into the supply chain

Blockchain guarantees security to wary customers by validating and recording every transaction by an independent third party. Within each movement or block, blockchain identifies the parties involved, price, date, location, quality, state of the product, and any other information relevant to managing shipments and the products on the shipments. No one party can modify, delete or append any record without validation of the edit from others in the network. The goal is to create one version of the truth, link information and create transparency.

Data generated through blockchain technology could provide more opportunity to analyze information, which is becoming more important in today’s data-driven supply chain. Although the technology is being deployed in other industries, such as finance, both shippers and 3PLs are taking a more cautious approach.

The study found 67% of shippers and 62% of 3PL providers reported they did not know enough about blockchain to rate it at this time. The study found that both 3PLs and shippers are in the initial stages of examining or implementing blockchain technology—3PLs were slightly more optimistic about the technology compared to shippers, with 15% of 3PLs saying they see a benefit but can’t yet quantify the impact it will have compared to 9% of shippers. Because of its nascent stage, the blockchain ecosystem needs further development. However, interest is increasing, particularly for logistics providers and its use could create a competitive advantage.

 

Advancing with digitization, automation

Additionally, automation and digitization technologies are driving changes in the ways in which data is collected and utilized. Automation technologies already available include adaptive cruise control with braking, lane departure warnings, collision-mitigation systems, right-side object detection sensors, electronic stability control and telematics devices. In addition, transportation management systems and warehouse management systems allow shippers and their 3PL providers to collect and analyze data, and their use is becoming more common in the supply chain. Shippers and 3PLs are leveraging these advanced technologies to enable faster and more efficient services, provide visibility and improve safety.

Still, rapidly changing technology has both benefits and challenges. While the large number of companies competing in the space may drive costs down, it could also threaten the continuity of service as players drop out. It could lead to a potential struggle to build a comprehensive adoption strategy as technology changes over time.

The report found 71% of 3PLs and 65% of shippers reported that they are investing less than 5% of capital expenditures in digitization and automation. When asked what is standing in the way of future automation and digitization capabilities, 25% of 3PLs and 17% of shippers cited their uncertainty in the return on investment. Although it may seem that increased automation will decrease the need for companies to invest in employees, the opposite is true. Technology will help employees recognize greater potential and address certain tasks so that talent can push further, but it is human talent that is the key factor in defining and applying innovation.

Finally, big data shows the most potential within the supply chain as 67% of 3PLs and 69% of shippers said they plan to invest in big data analytics in the future. Proactive information can help shape advance planning and strategic decision making to minimize disruptions.

 

Resilience rises with improved data integrity

In addition to adapting to emerging technologies, the study’s results show that 64% of shippers and 79% of 3PLs report that they have been involved in projects where the ability to execute quickly was directly impacted by lack of complete, accurate, and consistent information.

Both shippers and 3PLs need to take individual and joint ownership of strategies and capabilities that will help to reduce, mitigate and eliminate certain types of risk in their relationships, and develop the resilience to deal with uncertainties and adverse circumstances that may occur. Successful relationships of any type typically require significant time, effort and commitment by the involved parties.

In today’s landscape of seemingly limitless and often virtual networks of suppliers, manufacturers and customers, success hinges on an effective supply chain. As a result, the role of supply chain leaders and logistics executives are taking on greater importance as companies work to build more efficient and technologically advanced supply chains. Some organizations struggle to infuse the required traits of tomorrow’s supply chain executive, but shippers and 3PLs that understand the current and future state of the supply chain industry can deploy strategic workforce planning. That process and approach is a critical path to leveraging the right workforce, today and tomorrow, at the right cost.

Overall, there are a number of perspectives and issues that are central to creating and improving the effectiveness of essential interfaces between shippers and 3PLs. These may be in the context of the processes relating to planning, forecasting, and execution. Given the rapid advancement of technology and changing consumer and business expectations, companies that can convert disruptions into engines for growth and transformation will be the most successful.