Investment In Supply Chain Innovation Is at a Critical Inflection Point
Annual MHI Report and Other Sources Confirm Major Interest in Robotics
As external forces continue to ramp up the pressure on the distribution and logistics sector, companies that don’t embrace a digital mindset are likely lose both revenue and customers. And while the digitalization of the supply chain remains a work-in-progress, there is a consensus that simply being aware of evolving technology is no longer enough.
According to the 2019 MHI Annual Industry Report, the age of the digital supply chain is already here. Digital technologies and innovations within the manufacturing and retail sectors have continued to push the boundaries of what is possible, while increased customer expectations have prompted companies to elevate their own digital consciousness.
At the same time, there is an industry-wide realization that the supply chain can benefit from the latest digital technologies, with automation, robotics, advanced analytics and the industrial internet of things all expected to make a significant impact in the next decade. Factor into the mix a shortage of qualified workers – a constantly company-cited challenge in the supply chain – and it becomes clear that a digital mindset needs to be adopted.
Taking that into account, companies that leverage the technology tools that already exist will be able to open the door towards greater performance and success sooner rather than later.
“By focusing on talent development and leveraging tools such as automation, robotics, cloud computing, Internet of Things (IoT), analytics, machine learning and augmented reality, an end-to-end supply chain solution can be created that is adaptable, transparent and more intelligent than ever before,” said MHI’s CEO George Prest. “Leading companies are not only recognizing and accepting this new digital reality, they are elevating their mindset from a state of simple “awareness” to a state of keen “consciousness” — a mindset that helps them identify and implement the fundamental changes necessary to harness digital-driven opportunities for reducing costs, anticipating and managing risk, and creating a more customer-focused experience.”
Embrace existing technology
As you might expect, the annual survey of over 1,000 company decision makers put the usual tech innovation suspects under the supply chain spotlight. Sensors, inventory optimization, predictive analytics, cloud computing/storage, robotics and automation, the IIOT, artificial intelligence or machine learning and mixed reality have all been part of the manufacturing hype cycle for the last few years, but the current versus predicted adoption trends make for interesting reading.
Cloud computing, for instance, is already being used by 56 percent of companies, while predictive analytics and connected assets (aka the IIOT) have shown an increased adoption rate in the last four years, the report said. All of these evolving technologies would see both increased investment and adoption rates before 2024, with predictive analytics expected to be used by just under 90 percent of companies within five years
‘Robotics and automation’ currently has an adoption rate of 32 percent, although 87 percent of survey respondents said that this technology would have a significant impact on the distribution and logistics sector within 10 years. The report noted that robotic solutions have already made their mark in the manufacturing sector, and there is an expectation that total investment into this technology will increase exponentially by 2021.
Much of this investment will be down to the competitive advantage that robotics and automation is expected to generate. Around 40 percent of people said that the technology had the potential to create an advantage for adopters, while 24 percent saw it as disrupting the supply chain industry itself. In fact, robotics and automation is seen as the technology that will shape the future of supply chain over the next decade, exerting more overall influence than predictive analytics and AI.
“Manufacturing and supply chain operations continue to invest heavily in innovation. 57 percent of respondents are planning new technology investments totaling more than $1 million over the next two years — that is a 10 percent increase over the 2018 report,” MHI said. “Thirty-four percent plan to spend more than $5 million and 22 percent plan to spend more than $10 million. According to the survey, the highest funding will be for Robotics and Automation, an area where companies plan to spend an average of $20 million over the next two years.
The bullish attitude towards robotics and automation is also driven by its place in what MHI defines as the four stages of digital adoption.
According to the authors of the report, digital adoption is “an evolutionary process of implementing digital technologies and capabilities from the ground up” – which starts with digital connectivity and ends with artificial intelligence. Robotics and automation, for example, sits on the second level of the digital adoption pyramid, with 53 percent of companies integrating automation innovations into their working practices – this category also includes autonomous vehicles and drones, wearable and mobile technology and 3D printing.
On the flip side, the oft-touted benefits of AI have – to date – not made the expected impact in terms of current use, although there is a consensus that AI will become a core business competency within three years, with a predicted five-year adoption rate of just under 70 percent within that time frame.
Understanding supply chain innovation
Now in its sixth year, the MHI report – produced in collaboration with Deloitte Consulting – is a guide for the themes and trends that are at the forefront of supply chain innovation. And while the report might not get the same level of press coverage as Mary Meeker’s annual internet-focused slideshow (a mere 333 pages long this year), the insights it provides are a useful barometer of what company decision makers are focused on.
This year, for example, MHI introduced the concept of “Supply Chain Digital Consciousness” – a framework that will encourage companies to not only assess where they are in their personal digital journey, but also how best to fix any defined pain points. Falling behind on digital innovation, the authors of the report said, can have “disastrous consequences” in both the digital and physical world, with even the most successful companies still figuring out how and when to adopt evolving technology.
“Using digital innovation to improve supply chain efficiency, transparency and sustainability has become a necessity for continuing to grow the customer base and maintain a competitive standing,” MHI said. “Digital technology is now an integral part of every step in the supply chain, and it is virtually impossible to find a company not in the midst of modifying its technical architecture to be more digital.”
The challenge for most companies is understanding where innovative or evolving technologies fit into their working practices both now and in the future. And there is little doubt that the workforce will become more automated, especially as the rapid pace and demands of the connected society show no signs of slowing down any time soon.
For example, Amazon (no surprises here) is not only deploying more robots in its workforce but is also the company putting the most pressure on the distribution and logistics industry. The retail behemoth has invested heavily in automated solutions in recent years, but the plan was, according to a recent BBC report, to both reframe worker relationship with machines and extend the capabilities of those machines within the workforce.
With that in mind, MHI’s report suggests that investment in supply chain innovation is at a critical inflection point. The trend of declining investment from 2015 to 2018 is, the report said, being countered by a 95 percent increase in projected spending by the end of the year, investment that is likely driven by a tsunami of challenges that includes, but is not limited to, a defined talent gap, customer demands for faster shipping and response times, increased competition and, importantly, the aforementioned pressure on the logistics sector itself.
“Digital innovation presents both challenges and solutions. On one side, it is driving change at a neck-snapping pace and disrupting entire industries, with competitors emerging from nowhere to challenge long-established market leaders and business models. On the other side, digital solutions are enabling new capabilities, new market opportunities, new ways of working and new levels of performance,” the report concluded. “Businesses that make smart use of supply chain innovation can give themselves a competitive advantage in the marketplace and position themselves to be the disrupters, rather than the disrupted. They can also reach new customers and achieve levels of efficiency and effectiveness that were previously unimaginable.”
Berkshire Grey takes a holistic view to how supply chains can benefit from the integration of intelligent robotics solutions. Distribution and logistics is a labor intensive industry, and the human element can often be the fly in the ointment. Investment in automated solutions that do the heavy lifting provides companies with a tireless workforce that is fast, accurate, scalable and flexible. To find out more about how our approach to robots in the retail distribution space can increase your own digital consciousness, contact us today.
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