Fourth Industrial Revolution

3 digital trends are changing supply chains

Susan Galer
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The Digital Economy

How Networks Ensure Products Intersect with Demand

Consumers are thrilled with all the flexible ways they can find and purchase goods, not to mention same-day shipping which has revolutionized the concept of getting exactly the product you want when you want it. A new definition of “having it your way” has emerged, fundamentally changing how companies do business and how supply chains operate. Hans Thalbauer, Senior Vice President of Extended Supply Chain Management at SAP, discussed three major trends that impact supply chains in the digital economy during in his recent keynote at SAPInsider SCM 2015 entitled,“Product and Demand Networks.”

Trend 1: Customer-centric fulfillment

According to Thalbauer, companies are now aligning their mission not only with the organization’s own product strategy, but also their customer’s strategy. This radically changes order fulfillment. He cited research from SCM Worldthat 45 percent of companies are building direct-to-customer fulfillment capabilities. Managing the digital supply chainrequires product and demand networks able to keep pace with speedy, multi-channel distribution models. As companies explore distribution and sales channels for a new kind of customer-centricity, a different supply chain model is emerging based on understanding demand at a granular level. Just like marketing and sales, supply chain professionals in the digital era need a deeper understanding of customers – who and where they are, and how they want to purchase goods and services.

“If you want to introduce speed into the supply chain then you need to understand very closely what customers really want for every city, not just for a region or at an aggregated level. It makes a difference in your ability to fulfill the order very, very fast,” said Thalbauer.

Responding quickly to customer demands also requires a company to connect with suppliers across a business network. Thalbauer mentioned Ariba, SAP’s cloud-based business network, as an example of how companies are connecting immediately with trusted suppliers.

Trend 2: Personalized solutions

Individualized products created on demand are fast becoming the norm. The same SCM World study found that 52 percent of manufacturing companies expect to be highly vertically integrated in the next five years, and the same percentage plan to bring manufacturing in-house. This shift away from outsourcing and towards integrated platformsreflects demands for fast, flexible personalized “solutions.”

“Companies in food production are already using 3D printers to produce items like chocolate and pasta because consumers would like more flexibility to have their specific flavors, colors and ingredients,” said Thalbauer. “Discrete manufacturing works the same way in places like the automotive industry to produce a car to your specific requirements. You see all the industries, like footwear and motorcycles getting more and more individualized products. In order to do this, companies need an integrated platform that connects the entire supply chain including manufacturing, asset management, marketing and consumer sales.”

Trend 3: Internet of Things improves people’s lives

In industries as disparate as automotive, pharmaceuticals and retail, companies are redefining missions to focus on improving people’s lives. In order to meet this challenge, many are beginning to produce goods on demand as efficiently as mass-produced ones using Internet of Things (IoT). Thalbauer said IoT will provide the extended supply chain with the real-time information required to make good on corporate promises of improving people’s lives. Greater visibility across the entire supply chain, from source materials through manufacturing and delivery, will also enable better compliance with external regulations and internal rules. It’s no wonder research shows 87 percent of supply chain officers consider Internet of Things to be important or interesting technology.

“Having more information about where everything is across the entire supply chain is one dream everyone in the extended supply chain world wants to fulfill. When products, assets and machines can talk we can have end-to-end visibility,” he said. “Internet of Things allows companies to gain real-time network insights so decision-makers can make more informed decisions for immediate results.”

It’s been said the future is impossible to predict. But product and demand networks, powered by IoT and other technologies, can simplify the most complex supply chain conundrums, creating opportunities based on informed strategic planning and real-time decision-making for companies. There’s no longer any reason why product and demand should be kept apart.

This article is published in collaboration with The SAP Community Network. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Susan Galer is a Communications Director at SAP.

Image: Crew members of a ship loaded with containers. REUTERS/Paulo Whitaker. 

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