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Emerging Trends Cause Distribution & Supply Chain Strategy Re-Think

Say the words “supply chain disruptions,” and things like natural disasters, delivery delays, or part shortages are first come to mind.

But, have you thought about how emerging technologies such as intelligent robotics, 3D printing, and open-source electronics will cause a different wave of disruptions?

In the long run, we could expect that there will be massive benefits from increased distribution center automation, products made from digital models, and robot-run assembly operations. However, the initial changeovers will require a parallel strategic supply chain and distribution rethink, and will surely influence the next-phase evolution of sourcing, procurement, inventory-holding, manufacturing, and delivery practices.

Rumblings of how these technology changes could shake-up the electronics industry and current supply chain thinking are trickling into mainstream media and reports.

GigaOm's recent article, for instance, leads with this headline and summary: “Today's complex global supply chains are poised to be dismantled. Thanks to the growth of 3D printing, intelligent robots, and open-source hardware, tomorrow's supply chains will be faster, smaller, cheaper, and local.”

GigaOm's article points back to an IBM report about the migration to software-run supply chains and the ongoing adaptability electronics companies will need to manage through these emerging trends, which promise to change the manufacturing game.

“By changing requirements for scale, location and volume, the software-defined supply chain won't just changes costs or manufacturing processes — it will effectively up-end the industry structure as we know it,” IBM predicts.

IBM found that these newer technologies “can produce an average 23 percent unit cost benefit and reduce barriers to enter manufacturing by an astounding 90 percent.” Despite that impressive potential, there is a big “But” — and it's this: Half of IBM's 55-member executive survey sample said they had no manufacturing strategy in place to manage the impact of digitization.

More broadly, IBM suggests that the move to this sort of software-defined supply chain requires electronic companies to understand far-reaching implications. On one front, for example, product design and retailing will be influenced greatly by end-customer interactions, it said. And, while competitive dynamics are expected to change radically, supply chains will become more simple, flexible, and localized, the company noted.

Similarly, Chris Caplice, executive director of MIT's Center for Transportation and Logistics writes, that there are four other trends that will redefine US distribution. They are:

  • Densification of product (reducing product size while maintaining or increasing its value);
  • Diversification of sales channels (omni-channel retailing is becoming more popular);
  • Decentralization of production (3D printing, additive manufacturing, and programmable robotics will shift production strategies and change economies of scale within manufacturing), and lastly,
  • Digitization of products (the shift away from physical to information-based products).

Caplice notes that as these trends play out, “there will likely be a period when many different logistics models emerge. The shape of the dominant model is unknown, but it will look very different from the one we follow today.”

As always, change is afoot — again. And, as always, the supply chain will sit right in the middle of it all.

17 comments on “Emerging Trends Cause Distribution & Supply Chain Strategy Re-Think

  1. Himanshugupta
    August 31, 2013

    Mostly disruption alone is a negative word. Even transformation does not always convey positive message but it suits better to the overall theme of the blog. With 3D printing, prototype phase is bound to change. With new material that can be incorporated in the 3D scheme will shape the daily routine jobs.

  2. Ashu001
    August 31, 2013

    Himanshu,

    One can't forget Geo-political Uncertainities in this equation.

    Look at how much Oil Prices have risen because of the Uncertainty in Syria recently.

    Will America bomb Syria?

    Will it ?Won't it?

    That's enough to swing Oil Prices 10 Dollars in every direction.

    And Rising Crude Oil Is one of the Biggest Overheads for all Manufacturing Companies today-Even if its all Robots you need Energy to power them;Don't You???

    Regards

    Ashish

  3. Ashu001
    August 31, 2013

    Jennifer,

    In your equation for more and more Automation,you(and IBM as well) have assumed that Financial trends will remain more or less as they are today for the next Decade or so.

    Which means Capital will continue to remain cheap thanks to overflowing Central Bank Liquidity Worldwide.

    What happens if the Liquidity Tap gets turned off(for whatever) reason?

    This is what I forsee happening as the Current Fiat Money Standard comes to a massive-massive Halt worldwide.

    When that happens and Capital becomes Priced Fairly;The Ongoing trend towards will see a major Slowdown going ahead.

    Regards

    Ashish.

  4. Eldredge
    August 31, 2013

    I hadn't thought about the potential that 3D printing may have to move production much closer to the point of sale, but it is a possible (perhaps likely) outcome. Parhaps a consumer could even 'edit' the design of his or her product on the spot.

  5. Daniel
    August 31, 2013

    “I hadn't thought about the potential that 3D printing may have to move production much closer to the point of sale, but it is a possible (perhaps likely) outcome. Parhaps a consumer could even 'edit' the design of his or her product on the spot.'

    Eldreg, i think it may take time for flurishing the technology nad for common man use. as of now organizations its using like NASA and other cutting end technology devlopers

  6. Daniel
    August 31, 2013

    “In your equation for more and more Automation,you(and IBM as well) have assumed that Financial trends will remain more or less as they are today for the next Decade or so.”

    Tech4people, automation will help for speedy process and to reduce the human interaction. Even though the initial expenses are more, it may become economical for long run.

  7. Daniel
    August 31, 2013

    “Even transformation does not always convey positive message but it suits better to the overall theme of the blog”

    himanshu, you are right. When it goes for actual implementation or replacing the well performing system by a new one, the system may not behavior as expected.

  8. Daniel
    August 31, 2013

    “have you thought about how emerging technologies such as intelligent robotics, 3D printing, and open-source electronics will cause a different wave of disruptions?'

    Jennifer, there is no doubt that the technological transformation from old or existing systems to the new can introduce some delays due to the time gap for replacing the existing system with a new one.

  9. Daniel
    August 31, 2013

    Tech4people, i think such international affairs has lots of impacts in technology devlopment and in supply chain

  10. Lavender
    September 2, 2013

    Hi, Jennifer. 

    I also have seen IBM's report about future supply chain change. But with the continuous globalization, what does local supply chain mean? How does localization come?

  11. Jennifer Baljko
    September 2, 2013

    @tech4people -I'm not convinced there's a built-in assumption here that the financial climate will remain exactly as it is today. But, as history has proved more than once, and beyond the recent Great Recession, there are boom and bust cycles, and companies need to build that into their supply chain planning models.

  12. Jennifer Baljko
    September 2, 2013

    @lily – As you know, most companies are running complex, global supply chains and designing, souring and manufacturing in multiple places globally. Much of that was driven by trying to drive costs down. But, now, as companies factor in higher labor and transportation costs, there is emphasis being placed on the total cost of ownership, not just the lowest cost. What some companies are finding today is that's more cost effective and often more efficient to place final assembly, for example, or some other supply chain activity closer to customers and their end market. Localization also implies regionalization or customization for different geographies. Lenovo, for instance, has a hybrid supply chain model that involves sophisticated supply chain segmentation and analytical capabilities that have resulted in inventory, delivery and cost improvements. This supply chain model has even earned them some recent accolades: http://www.gartner.com/newsroom/id/2580318

  13. Eldredge
    September 2, 2013

    @Jacob

      I'm sure it will take some time for #d printing to evolve. Perhaps there will come a day when we all have 3D printers in our homes, and we merely downlaod a program to 'replicate' the products that we need.

  14. Eldredge
    September 2, 2013

    Disruptive technologies, by definition, are always game-changers. It will be interesting to see how 3D printing impacts the supply chain – all the way from design to delivery.

  15. Daniel
    September 3, 2013

    ”  I'm sure it will take some time for #d printing to evolve. Perhaps there will come a day when we all have 3D printers in our homes, and we merely downlaod a program to 'replicate' the products that we need.”

    Eldrdge, I won't think 3D became common because before that either 4D or 5D will become popular. If there is no time gap between versions of technologies, then its difficult to get flourished in terms of popularity and usage.

  16. Hailey Lynne McKeefry
    September 3, 2013

    i just read this article: SpaceFab: 3D printing and robotic assembly in space.

    It talks about SpiderFab, a series of technologies under development by Tethers Unlimited, Inc. (TUI), which combines 3D printing and robotic assembly–an excellent example of your point of how technologies are being combined. They are building and creating spaceship components and structures in orbit.

  17. FLYINGSCOT
    September 4, 2013

    I wonder what is driving the return to local supply.  Is it cost, politics, automation, technical capbility etc?  I reckon we will need to see a major change in western attitudes to assembly type production before that comes back local.

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