(Photo credit: Christopher R. Wilder)
The digital economy is changing the game for supply chain customers. Value chains are shifting rapidly, while technology advancements are disrupting old-style operations. Additionally, traditional value chains are also on the move. Hardware Original Equipment Manufacturers (OEMs) are moving to capitalize on software and services models. Original Design Manufacturers (ODMs) are moving into the OEM space. And there is considerable pressure on manufacturing services companies like Jabil Circuit Inc., Flextronics International Ltd. (now just Flex), and Foxconn Technology Co. Ltd. to deliver much greater value and full-service manufacturing solutions than ever before.
Today’s Customer Needs
Innovation, rapid response, and the increased need for actionable data have put immense pressure on the supply chain. Ever-increasing competition is putting pressure on margins, and advances in technology are forcing supply chain executives to focus their efforts on agility, reducing costs, and improving efficiencies. To accommodate each goal, companies invest significant man-hours and capital only to achieve marginal improvements.
Further, advances in the digital economy, Big Data, and The Internet of Things (IoT) have expedited the need for companies to detect supply chain changes, disruptions, and opportunities in real-time. Bringing end-to-end visibility into every aspect of the supply chain has become paramount, but evaluating and analyzing the massive amounts of structured and unstructured data can be a daunting task. Especially if the supply chain, including customers, business partners, suppliers, and employees are on disparate systems. When organizations interact with each other on a common network, they can enjoy the same increases in revenue-generating opportunities and decreases in cost structures across the supply chain.
Information Over Inventory
Advances in technology, especially IoT, are creating dramatic changes in supply, distribution, and logistics. Spurred by improvements in sensing, computing, and communications technologies, inventory-to-sales ratios for global business have fallen dramatically for several years. Customers want to invest in expertise, intelligence, and solutions that move at market speed, reduce inventories, mitigate risk, and manage and/or orchestrate third-party logistics and service providers more efficiently. Businesses are relying more and more on timely, contextually relevant data to achieve return on their investments. With the increase in diverse datapoints, systems are being developed to move beyond business intelligence to single sources of truth—or single instances of ERP—which provide a single console for all aspects of operational and enterprise systems. SAP SE (Business All-in-One), IFS AB (Applications), Microsoft Corporation (Dynamics), and Oracle Corporation (JD Edwards EnterpriseOne and E-Business Suite) are showing leadership in this space.
Improved Intelligence Brings Significant Customer Benefits
The Internet of Things (IoT) promises to fundamentally reshape supply chain management. Some estimates say in 2020 there will be over 200B connected devices collecting a myriad of both structured and unstructured data, while the amount of data collected doubles every two years. Where companies once suffered from ignorance about their customers, capabilities, and company, they can now have real-time intelligence. Where there was once opacity about supply and demand chains, there is now intelligence and transparency. IoT is allowing companies to gain visibility into all aspects of their businesses from customers, suppliers, distributors, manufacturers, employees, partners, etc. IoT is having a major impact, and the implications expand beyond the supply chain.
Former Chairman of the US Federal Reserve, Alan Greenspan, once said,
The remarkable surge in availability of more timely information…has enabled business management to remove large swaths of inventory safety stocks and worker redundancies. Information access in real-time…has fostered marked reduction in delivery lead times and the related work hours required for the production and delivery of all sorts of goods. Information technologies, by improving our real-time understanding of production processes and of the vagaries of consumer demand, are reducing the degree of uncertainty and, hence risk.
Sound decision-making and the accompanying risk reduction enable companies to invest more in their financial and operational capabilities to improve efficiencies.
Smart leaders have realized that Big Data and analytics have become table stakes for high performance supply chains. While companies collect more and more information from digital technologies, they need a way to make sense of the information and, more importantly, have the ability to make informed decisions.
Over the next few years, most companies will face transformational changes in all aspects of their business. As market changes are driving the need for businesses to be more agile and responsive to real-time consumer demands and customization, customers are clearly weighing their options for streamlining their supply chain. The rigid and inflexible strategies of the past have been played out and have little additional life left. It is important for customers to consider new information strategies and approaches that can help align and manage manufacturing resources with the new technologies of today. In the face of rapid changes and innovation in the marketplace, instant response, and immediate availability requirements, companies like Jabil Circuit are responding in kind to these trends and driving real value today.