Supply Change episode 6: technology’s role in the modern supply chain

July 12, 2019 Matt Vermeulen

So what is the role of technology in the modern supply chain? Is it all a bunch of hype, or do the big buzzword techs actually have real-world use-cases?  We’ll explore blockchain, artificial intelligence, digitization, and the Internet of Things and how they solve for supply chain problems. 

The history lesson

 

Let's do a quick supply chain technology history lesson. The first digital solution was electronic data interchange in the 1980s. Though very rigid and limited, it allowed a mainframe computer to be able to go through a translator and send forms and data streams off to suppliers. It was like a request for proposal, but for very simplistic one-line requirements for things like part numbers. You could also send out purchase orders in that format, and suppliers could send back invoices and advanced shipping notices. But it was rigid and difficult to add additional information, and certainly had no option for discrepancies. 

 

Then companies moved to something called material resources planning (MRP) to gain more accurate inventory management so they could tie inventory to the production line. That gave them a more accurate production line inventory level ordering process on the direct material. 

In the mid-90s procure-to-pay came along. These were the e-procurement tools and invoicing tools that allowed for a more robust sourcing engine that allowed for data flows outside the limits of a bill of material. So there were significant impacts on how work was done and how accurate the data was. 

Impact of artificial intelligence on the supply chain

Over the last two years, more data has been created in the world than in all of history. Our supply chain organizations were never built to accommodate that level of data. AI, by automating things like repetitive tasks, allows us to use that data, draw insights from it, and then run a better business and a better supply chain. 

AI is what we've been waiting for for some time now because many organizations are data rich and insight poor. AI allows you to operate an insight and outcome-driven supply chain, which is much more valuable to the enterprise, and better for your end consumers.

How the “Internet of Things” will shape the supply chain

The Internet of Things allows an enterprise to get an even better grasp on demand. Laundry detergent companies, for example, are able to measure detergent usage within a particular consumer’s washing machine and feed that data back up the supply chain. Instead of managing based on when a truck leaves a warehouse to when it arrives at a store, they’re managing production scheduling based on when a consumer uses up laundry detergent. 

It’s changing the way we manage all kinds of manufacturing by letting companies create and manufacture products far closer to the specifications of what their end consumers want. The data point becomes not just a way for you to manage a supply chain better, but by using the Internet of Things it allows you to know more about what consumers want as an end product.

Blockchain and the supply chain

One of the challenges of managing a supply chain is that you've got multiple players—it’s not just a linear supply chain. But the challenge of managing and synchronizing supply chains is not necessarily the technology, but the level of trust that exists within that supply chain. And that’s the potential of blockchain, the level of trust that blockchain brings to those relationships is potentially far greater than what we have now. 

Blockchain could make hiding data on one side or the other of that relationship impossible. Potentially, the shared data will be entirely transparent and everyone will be able to look at the same blocks of it. That's going to change supply chain management forever. Right now companies actually hire third-party consultants to be in the middle, cleansing data to make sure that the data is transparent. Blockchain eliminates the need for that person in the middle because transparency is built-in.

Transparency in the supply chain

Supply chain transparency is the dream that every supply chain organization has. For instance, it's never been more critical than it's become over the last few years to make sure that the products that you buy don’t involve slave labor, and all of these technologies bring us closer to that dream. 

Blockchain brings the trust, AI brings the power, and IoT brings the voice of the user to the customer. 

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About the Author

Matt Vermeulen

Matt Vermeulen writes about B2B commerce for Tradeshift. Whether he's writing about Accounts Payable best practices or debunking AI myths, Matt enjoys making complex topics easy to understand and fun to read.

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