Traditional supply chains to undergo radical transformation by 2025: study

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2015-03-30

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New technologies, competition and customer demands will work together to radically change traditional supply chains over the next five to 10 years, notes a new report issued last week by international trade association MHI andDeloitte.

Firms polled report that they expect to invest heavily in new supply chain technologies over the next two years

“The speed at which supply chain innovation is being adopted – coupled with rising consumer expectations for anytime, anywhere service – is stressing traditional supply chains to near-breaking points,” George Prest, CEO of MHI, which represents the material handling, logistics and supply chain industry, says in a statement from Deloitte. “Companies that continue to use traditional supply chain models will struggle to remain competitive and deliver orders that are accurate and on-time,” Prest advises.

“As many supply chain organizations have spent years cutting costs and elmininating waste, incremental improvements are leading to diminishing returns,” notes the report. “This is driving the need for supply chain executives to seek more innovative solutions.”

To remain competitive in the supply chain space, “companies that are early-adopters of the innovations and technologies identified in this report can improve both their cost and service creating a strategic advantage,” he suggests.

The 2015 MHI Annual Industry Report, Supply Chain Innovation – Making the impossible possible, recommends that firms embrace the transformation now unfolding and focus on investing in new technologies that will allow them to compete and thrive as their supply chains continue to face pressure to do more with less.

The survey found companies appear to be doing just that. On average, firms polled report that they expect to invest heavily in new supply chain technologies over the next two years, with the top 17% spending more than US$10 million.

A chart in the report shows that 51% of polled companies are spending less than US$1 million on new supply chain technologies; 23% are spending US$1 million to US$5 million; 9% are spending US$5 million to US$10 million; 9% are spending US$10 million to US$50 million; 4% are spending US$50 million to US$100 million; and 4% are spending greater than US $100 million.

Suggesting this dawn of an innovation wave will soon hit the MHI, Scott Sopher, principal for Deloitte Consulting LLP, points out that “the convergence of big data, faster and cheaper computer power, and the increasing demands of customers will likely accelerate the adoption of innovative products and services in the material handling industry.”

There are, however, some overall challenges. In all, 51% of respondents cited customer demand for lower delivered costs as a challenge, 50% cited customer demand for faster response times, and 49% cited rising customer service expectations.