The bionic supply chain is already a reality
By: Pwc Canada
Tags: Technology, Consulting, Business, Supply Chain, Pwc

The bionic supply chain is already a reality

Supply chains have long been linear models linking production, distribution, and consumption. Initially supported by fixed processes and configurations, these supply chains were often essentially internal activities. For 20 years, evolving technologies have opened up supply chains and have made them more dynamic because they have made the integration of internal and external actors possible. Nevertheless, the planning, ordering, and delivery cycle has still remained sequential, and errors made upstream have still been subsequently reflected in issues of breaks, overstocks, and delays. These traditional, standard models are now completely out of date because of the volatile, hyperdynamic, and totally personalized nature of consumer demand.

Anywhere, at any time

New buying behaviour that looks for products and servives “anywhere, at any time” is adding a new dimension to this disruption of the supply chain, especially in the retail and consumer goods sector. The originality and uniqueness of a customer demand has given way to a demand that has diversified and multiplied along with the diversification and multiplication of marketing channels.

The issues facing most players in the supply chain, whatever their industry, are essentially the following:

- the permanent increase in e-commerce-based-distribution models;

- an acceleration of demand due this increase in e-commerce; and

- a demand that is still driven by the principle of “same-day delivery”.

The bionic supply chain

The agility needed by a company to adapt to these new issues and their associated challenges — namely, the need for total flexibility — requires the use of all forms of resources available to it: financial capital, human capital, and natural resources, but it also requires new forms of resources — which is what organizations such as Amazon, Alibaba, and Apple are telling us.

These new resources consist of behavioural data on clients (behavioural capital), proprietary knowledge and algorithms (cognitive capital), a network consisting of partners, extended clients, and a social media presence (network capital). The challenge is to digitize the supply chain and make it “bionic” for all of its stakeholders: suppliers, operators, distributors, and customers.

Under the impulse of new purchasing behaviours, some companies, such as those involved in producing films, music, books, and magazines, have largely been able to completely transform their operations and their supply chains. They managed to make these transformations by integrating new distribution channels, dematerializing products, completely changing their catalogue structures, and transitioning from a sales model to a service model by rental and then to a subscription model. Finally, they have a distribution model that is boosted multiple times by their social media (i.e. social network) presence.

Redesigned adaptability

As the supply chain has diversified and been adapted to customers, so too consumption data has multiplied and been refined. Such data can now be obtained faster. These companies were able to first adapt their distribution model to a more refined consumer profile, and then develop with their suppliers dynamic product catalogues that meet the most recent expectations of their customers.

Due to their particular socio-economic contexts, these industries were able, before others, to find solutions to the problem that is the demise of the traditional, standard supply chain. But other distribution, transportation, and consumer product industries are also facing new customer expectations. The convergence of many new technologies (Internet of Things, blockchain, artificial intelligence, etc.) makes these necessary transformations possible today. The challenge is not to add a digital layer to a traditional model, but to rethink the whole model itself by integrating the digital into it.

New types of capital

With these challenges to supply chains come new forms of capital available to businesses that can provide innovative solutions and that can result in successful or future transformations:

● In anticipation of a changing demand that generates overstocks and ruptures, behavioural capital provides companies with customer data collected through CRM, loyalty programs, discussion groups, and so on. As it is modelled, this data can predict future variations (peaks, falls, changes in demand), inform about changes that need to be made (reallocation of inventory, reduction of production), and give the supply chain a greater deal of responsiveness.

● Under the pressures generated by multichannel and accelerated deliveries, distribution networks have become increasingly complex, increasing the number of warehouses and transport flows, the management of which is now becoming quite difficult. Cognitive capital accompanies this diversification by digitizing operations and thereby creating digital twins (compilation of data models, algorithms, and knowledge of operations). The digital representation of assets and processes can help businesses better understand their operations, predict their effectiveness, and optimize their performance.

● The problem of growth that is limited by the finite circulation of a product catalogue among existing or known customers can be solved by network capital, which can project the company beyond its traditional borders (geographical, cultural, product function). New markets, new populations, new customers, new uses of the same product — all of these boost growth. Blockchain technology now becomes crucial to allowing the company’s information to circulate freely.

The challenge of the “bionic” supply chain can then be simplified into two main questions: How do you operate these new forms of digital capital with the more traditional human forms of capital? and How do you integrate people and machines and thus benefit from greater agility, improved responsiveness, better transparency, and simplified decision-making in order to boost growth and attract new talent?

Building a new ecosystem

The “bionic” supply chain is not the digitization of existing functions, but the creation of a new ecosystem. This new ecosystem requires new talents and a desire on the part of the company for transformation. It is based on the principles of integration, visibility, and reaction time:

● Integration of supplies, suppliers, upstream and downstream logistics, production, warehousing, and the customer all controlled from a central point, which can possibly be virtual. By integrating and sharing data, planning can become hyper-responsive: raw material lead times are updated in real time by vendors and are integrated into production planning. The expected arrival time is announced and respected, which allows for a reduction of stock, a faster production cycle, and a reduction in the size of the lots. The customer’s order is ready faster. It can be supported in advance for a next day delivery.

● Visibility of the information collected by integration and sharing between all actors, which allows for collaboration between the strategic, tactical, and operational horizons. The very concept of the silo, which stiffens supply chains by making each link independent, disappears. The information that is visible and shared at each stage of the macro-process raises awareness of client-supplier concepts.

● Integration and visibility allow for an acceleration in the reaction time of each actor in the chain. It is the agility of the entire supply chain that is eventually multiplied. This reaction rate is further accelerated by the following functional transformations:

1. Purchasing and Procurement 4.0 automates transactions between applicants and vendors through shared platforms and catalogues;

2. Robotic warehouses offer unmatched service rates, minimizing inventories; and

3. Maintenance strategies, aligned with the principles of RCM (Reliability-Centered Maintenance) through the generalization of sensors, make full use of 3D printing and allow for machine service rates of nearly 99%.

The availability, sharing, and fast processing of data does not simply describe or even predict the supply chain, it also determines how it is managed.