Connecting Supply Chains With Digital Technology

More than 200 of the world’s biggest 500 companies have a presence in Wuhan, the Chinese province where the Covid-19 outbreak is thought to have originated. Many businesses rely on China for manufacturing, so their supply chains were severely disrupted when China locked down.

As the virus spread across the world, more supply-chain chaos followed. People were asked to stay at home and were unsure for how long. Hence, they stockpiled essentials like toilet paper and pasta, upsetting the delicate balance of ‘just in time’ deliveries that keep supermarket shelves stocked. Auto manufacturers saw demand collapse, while laptop makers could not produce computers fast enough for the millions of people who became home-workers overnight.

Manufacturers in every sector have learned critical lessons during the pandemic. The most important is the need to make global supply chains more resilient. Technology will play a vital role in readying supply chains for the coming economic upturn. The key components will be sensors, connectivity, Internet of Things (IoT), and Advanced Analytics using Artificial Intelligence (AI) and Machine Learning (ML).

The key risks

When the pandemic struck, most companies thought they had robust continuity plans, but few were prepared for the sheer scale of disruption. “When you have entire continents shutting down, your back-up plans are not feasible,” says Sylvie Thompson, Vice President, Transformation, at NTT DATA.

The modern supply chain is incredibly complex. From smartphones to cutting-edge drug therapies, many products rely on components found only in certain parts of the world. Or there is manufacturing expertise concentrated in a particular region. Third parties handle packaging, shipping, assembly, and all kinds of other processes. Each company will have a combination of partners, and disruption to one can affect all the others.

“The challenge is figuring out how to do security at speed of business”

Even after the pandemic, supply chains are still at risk from global instability, trade wars, tariffs, and potential regulatory changes in Europe and the U.K. following Brexit. Businesses must be ready for future shocks.

“You’re only as strong as your weakest link,” says Graham Conlon, Vice President and Head of Digital Supply Chain for SAP Asia, Pacific and Japan. However, he adds that the recovery is an opportunity for organizations to innovate in their supply chains and gain an advantage over their rivals.

The connected site

Technology will be vital to this. NTT and SAP have recently entered a strategic partnership to help companies create more resilient supply chains. “Resilience comes from real-time or near real-time connectivity,” says Vadim Zimberg, Vice President and Head of Global SAP Automotive Offering for NTT DATA.

One area NTT and SAP are working on together is the ‘connected site.’ For example, a connected factory could increase its processes’ visibility by installing sensors on everything from machinery to incoming and outgoing stock. Using 5G connectivity, these could share data on all aspects of the factory: this machine has been working at full speed for a while; a new batch of components has arrived; that delivery truck is now full and ready to leave, and so on.

Such data can be analyzed in real-time by AI, providing actionable insights. If that machine has been running at full speed for a long time, will it need a maintenance check soon? What does that batch of components mean for how many products the plant can finish this week? And if that truck leaves now, can customer delivery dates be revised?

Of course, not all supply chains are physical. Many sectors, such as education, entertainment, and healthcare, deliver their products and services through entirely digital supply chains. Where physical supply chains are built to last for years and can take a long time to change, digital versions can be much more agile and rapidly adjusted based on performance data.

Ensuring sustainability

Having this data is vital to supply-chain resilience, says Baskar Radhakrishnan, Strategic Advisor, Manufacturing Industry Solutions at NTT DATA: “You can’t fix something unless you know something.” Once you have that visibility, he adds, organizations are better prepared for disruption and better able to optimize for the challenges of the 2020s.

The global rollout of the Covid-19 vaccine has been a test for the supply chain—and one that it has generally passed. One vital part of the process, says Mr. Conlon, uses technology to track each vaccine batch to ensure it is genuine. Companies could apply this technology to any product where counterfeiting is a problem, such as fashion items.

Organizations could also use it to demonstrate that a product was made using sustainable sources and processes. This sustainability commitment is especially important as environmental concerns become a bigger priority for companies and their customers. This part of the process will be increasingly handled using the blockchain—the distributed ledger technology that is virtually tamper-proof.

At the same time, greater use of AI simulations will not only help companies to cut costs and streamline processes in the supply chain but will also improve sustainability. Planning routes for delivery trucks to minimize greenhouse-gas emissions, for example, is a time-consuming and challenging task for humans, but one where AI can excel.

One can never rule out unforeseen circumstances, but to be best-positioned, organizations need to embrace technology and real-time connectivity to survive them and thrive.