Nearly half of supply chain leaders surveyed have dramatically accelerated spending on digital technologies to make their operations more responsive and forward-looking during the pandemic, according to an industry report released by MHI and Deloitte.
Cloud computing, robotics and inventory/network optimization tools saw the biggest jump in terms supply chain investment, with 49% of survey respondents increasing spending.
83% of respondents believe digital supply chains will be the predominant model within just five years – 22% believe they are now. The survey results also suggest that investments in supply chain innovation continues to be strong.
For many organizations, the pandemic has been a trigger for increased technology investment. Companies projecting to invest at least $5 million in the next two years will be focusing on each of the technologies covered by the survey. These proactive investments can help improve supply chain agility and resiliency in times of disruption.
- 57% plan to spend more than $10 million on robotics and automation
- 48% plan to spend more than $10 million on cloud computing
- 43% plan to spend more than $10 million on predictive and prescriptive analytics
- 26% plan to spend more than $10 million on artificial intelligence
Supply chain technologies are driving resiliency
According to this year’s respondents, nearly all the advanced digital technologies covered by the survey are expected to achieve widespread adoption within the next 1-2 years.
Cloud computing and storage has the highest current adoption rate at 57%. Adoption is expected to grow to 88% over the next 3-5 years.
Robotics and automation, currently at 38%, is expected to reach 76% in the next 3-5 years. Predictive Analytics, currently at 31%, is expected to grow to 79% in the next 3-5 years. Industrial Internet of Things, currently 27%, is expected to grow to 73% over the next 3-5 years. Artificial Intelligence, currently at 17%, is expected to grow to 62% in the next 3-5 years.
Top supply chain challenges: Talent shortage, customer demands, disruption
When it comes to supply chain challenges, respondents continue to report that their organization’s greatest challenge is hiring and retaining qualified workers at 52%.
Close behind is the category of customer requirements in which customers continually expect and demand faster response times and lower costs. Digital innovation is essential to solving this customer experience challenge, but the technologies cannot be implemented without a skilled workforce to run them. Supply chain disruption was also a major challenge at 39%.
“Supply chain resilience has never been more important. Companies that made investments in digital technologies prior to the pandemic were more prepared and able to adapt, survive and even thrive during this disruption. They will also be ready when the next crisis inevitably hits,” John Paxton, CEO of MHI.
Strategies to protect supply chains from global disruptions
Previous to the pandemic, companies had already begun making changes in response to the shift to a digital, always on supply chain. Companies recognize that the worldwide reach of supply chain means that they have to think outside of their company and look to partners to improve the organization.
COVID-19 accelerated this process and our survey respondents reported the following as top defensive strategies that organizations are currently utilizing or plan to implement: implementing flexible manufacturing or supply chain related services (45%), and building longer-term business relationships with a few suppliers (43%).
“When the pandemic hit, consumer preferences went out the window in favor of what they needed urgently, foreshadowing a critical new normal for supply chains. Flexibility to predictable patterns is no longer enough; resiliency to unforeseeable disruption is an existential, business-critical requirement,” Thomas Boykin, Supply Chain Specialist Leader, Deloitte Consulting.
Embracing digital innovation
The report defines a pyramid, introduced last year, of digital adoption that has four technology stages, starting with the collection of data through digital connectivity, and then moving up the pyramid to generate increasing supply chain value and insights from that base data through automation, advanced analytics, and ultimately artificial intelligence.
The Supply Chain Digital Consciousness Index (DCI) characterizes a supply chain on four levels of awareness — from dormant to elevated — and across five digital categories.
The categories span all dimensions of supply chains, from leadership, talent development and workplace culture, to technology and innovation adoption to customer experience.
“The pandemic has reset the bar for where companies need to be along their DCI journey – and accelerated the pace at which they must get there. Many organizations don’t yet have the foundation to support their evolution along the digital continuum,” Randy V. Bradley, Associate Professor of Information Systems and Supply Chain Management, Haslam College of Business, The University of Tennessee.