Technology And Analytics

The Death
Management of Supply Chain
by Allan Lyall, Pierre Mercier, and Stefan Gstettner
June 15, 2018

Alistair Berg/Getty Images

Summary. As more and more supply chain functions become automated,

traditional supply chain management is rapidly growing obsolete. To stay ahead of
the curve, companies must invest in digital tools that provide visibility into real-
time supply chain data, automating... more
The supply chain is the heart of a company’s operations. To make
the best decisions, managers need access to real-time data about
their supply chain, but the limitations of legacy technologies can
thwart the goal of end-to-end transparency. However, those days
may soon be behind us. New digital technologies that have the
potential to take over supply chain management entirely are
disrupting traditional ways of working. Within 5-10 years, the
supply chain function may be obsolete, replaced by a smoothly
running, self-regulating utility that optimally manages end-to-
end work flows and requires very little human intervention.

With a digital foundation in place, companies can capture,

analyze, integrate, easily access, and interpret high quality, real-
time data — data that fuels process automation, predictive
analytics, artificial intelligence, and robotics, the technologies
that will soon take over supply chain management.

Leading companies are already exploring the possibilities. Many

have used robotics or artificial intelligence to digitize and
automate labor-intensive, repetitive tasks and processes such as
purchasing, invoicing, accounts payable, and parts of customer
service. Predictive analytics are helping companies improve
demand forecasting, so they can reduce or better manage
volatility, increase asset utilization, and provide customer
convenience at optimized cost.

Sensor data on machine use and

INSIGHT CENTER
maintenance are helping some
Competing in the Future manufacturers to better estimate
How to make your company more when machines will break down,
nimble and responsive. so downtime is minimized.
Blockchains are beginning to
revolutionize how parties
collaborate in flexible supply networks. Robots are improving
productivity and margins in retail warehouses and fulfillment
centers. Delivery drones and self-driving vehicles aren’t far off.
Rio Tinto, the global mining-and-metals company, is exploring
how digital technologies can automate mine-to-port operations.
Using driverless trains, robotic operators, cameras, lasers, and
tracking sensors, the company will be able to manage the whole
supply chain remotely — while improving safety and reducing the
need for workers in remote locations.

A key concept that many of these companies are exploring is the

“digital control tower” — a virtual decision center that provides
real-time, end-to-end visibility into global supply chains. For a
small number of leading retail companies’ control towers have
become the nerve center of their operations. A typical “tower” is
actually a physical room staffed with a team of data analysts that
works full-time, 24/7, monitoring a wall of high definition screens.
The screens provide real-time information and 3D graphics on
every step of the supply chain, from order to delivery. Visual
alerts warn of inventory shortfalls or process bottlenecks before
they happen, so that teams on the front line can course correct
quickly before potential problems become actual ones. Real-time
data, unquestioned accuracy, relentless customer focus, process
excellence, and analytical leadership underlie the control tower
operations of these retail operations.

Industrial companies are also embracing the concept. One

manufacturer’s complex network moves more than a million
parts and components per day. The control tower flags potential
supply issues as they arise, calculates the effects of the problem,
and either automatically corrects the issue using pre-determined
actions or flags it for the escalation team. Similarly, a steel
company built a customized scenario-planning tool into its
control tower platform that increases supply chain
responsiveness and resilience. The tool simulates how major,
unexpected equipment breakdowns — so called “big hits” — will
affect the business and points to the best risk mitigation actions.

Reskilling implications

The trend is clear: Technology is replacing people in supply chain

management — and doing a better job. It’s not hard to imagine a
future in which automated processes, data governance, advanced
analytics, sensors, robotics, artificial intelligence, and a continual
learning loop will minimize the need for humans. But when
planning, purchasing, manufacturing, order fulfillment, and
logistics are largely automated, what’s left for supply chain
professionals?

In the short term, supply chain executives will need to shift their
focus from managing people doing mostly repetitive and
transactional tasks, to designing and managing information and
material flows with a limited set of highly specialized workers. In
the near term, supply chain analysts who can analyze data,
structure and validate data sets, use digital tools and algorithms,
and forecast effectively will be in high demand.

Looking further out, a handful of specialists will be needed to

design a technology-driven supply chain engine that seamlessly
supports the ever-changing strategy, requirements, and priorities
of the business. To keep that engine running, a small number of
people must be recruited or trained in new skills at the
intersection of operations and technology. Since the skills needed
for these new roles are not readily available today, the biggest
challenge for companies will be to create a supply chain vision for
the future — and a strategy for filling those critical roles.

Clearly, the death of supply chain management as we know it is

on the horizon. The managers and companies working to update
their skills and processes today are the ones who will come out on
top.

AL
Allan Lyall is a supply chain and retail expert. He
was Amazon’s VP of European operations for over
12 years, and has held other executive roles at
Apple and Tesco.

PM
Pierre Mercier is a senior partner and managing
director at The Boston Consulting Group (BCG).
He specializes in supply chain management and
the retail industry. Prior to joining BCG he
worked at Mitchell Madison Group and Deloitte
Consulting.

SG
Stefan Gstettner is an associate director at The
Boston Consulting Group. He spent six years as
the COO of a consumer goods retailer and ran a
supply chain expert network. His current area of
focus is digital supply chain transformation.