Improving Supply Chain Management With New Technology
THERE IS NO IDEAL SUPPLY CHAIN
Supply chain management is a broad term, because it includes many different processes. In simple words, it is the steps to get a product from raw materials to production, and ultimately to an end customer. It consists of stages that are directly or indirectly involved in satisfying customer needs, and typically see three or more entities with functions such as product development, marketing, distribution and more. Sometimes Supply Chain is synonymously called “logistics” by mistake, because logistics is merely a part of the supply chain management process that deals specifically with the movement of goods from the point of origin to their final destination.
Effective supply chain management means all links in the chain must work perfectly together. It means you have reliable suppliers, all goods are quality, no delays in delivery at any point, and more. It means that everything must work as a coordinated system. As a result, customers receive goods or services in time and in a good condition. There is a positive side effect to developing a well organized supply chain system: it creates customer loyalty. Effective supply chain management may lower a company’s costs and increase profits as well.
However shiny the dream, supply chain management never works perfectly. Even the best supply chains fail and losses are caused. Just imagine, what a big journey it is for just one piece of product moving from the state of raw material to the end-customer’s location! And there may be billions or trillions of these tiny moving parts for just one company alone. No wonder, challenges are inevitable.
Some of the most common supply chain management challenges include:
- Lack of actionable data and insights
- Lack of data traceability
- Counterfeit goods and materials
All of these challenges are permanent. Even the most effective chains are affected by the lack of data transparency, traceability, bureaucracy, and worst of all…fakes. Fortunately, new technologies are constantly evolving, presenting new tools to fight these problems. And many of these new tools are actually getting traction.
CLOSER LOOK AT SUPPLY CHAIN STRUGGLES
Business leadership frequently finds it difficult to make informed decisions because they lack sufficient information at hand. Despite the argument that lots of data might be technically available, it’s not accessible nor beneficial for real-time decision-making because of the way data is typically captured, handled and stored. In other words, enterprise data is typically difficult to use, and thus creates the lack of actionable data and insights. So what data exists is often no to little help.
Supply chains themselves are vast, interconnected repositories of large amounts of data. In addition, a lot of paperwork and documentation duplicates make the data management process even harder. Data is disorganized and difficult to share. Each process needs to be agreed upon between various players at various points within the broader supply chain. Signatures, seals, faxes, emails, calls, copies, and tons of paper is seen at each and every process or stage. And it becomes quite easy to become entirely lost in physical or digital document stacks, not knowing exactly where the original document is, what document version you’re on, or who was the first to sign it.
In situations requiring a decision-making hierarchy of approvals, without considering new technologies such as smart contracts, each of the responsible stakeholders must be manually notified after the previous person has signed the document. Reminders must be sent manually. And something as simple as gathering approvals and signatures becomes a time-consuming process plagued with delays, inefficiencies, and ultimately with errors.
A simple inability to track needed documents, products, parts of products, or people, often results in delays, fraud and financial losses for even the largest and most sophisticated of supply chains (perhaps especially for the largest and most sophisticated supply chains…).
As for counterfeit goods, it brings a serious issue which almost all supply chains contend with to one extent or another. Both companies and citizens collectively lose billions of dollars each year because of fraud. For example, Europe’s wine industry alone lost 2.7 Billion Euros between 2013 and 2018 specifically to counterfeit wine and spirits [1]. The problem is that even those bottles deemed counterfeit frequently end up back in the supply chain 95% of the time as vendors attempt to take them back and resell them [2]. And this situation can and does happen across many global industries. From wine, to clothing and shoes, to healthcare medication, it’s everywhere, and it’s trillions, not billions. Poor-quality counterfeit products too often result in even sickness or death[3], where everyday somebody risks their lives by mistakenly buying falsified medicine.
What should be done when a fake or poor-quality batch of products slip into your supply chain? How do you efficiently learn a) when it got there, b) how it got there, and c) who supplied it? The search often takes weeks or months, meaning further risks, inefficiencies, financial burdens and reputation losses.
NEW TECHNOLOGY STRENGTHENING SUPPLY CHAINS
The first technology to lead the way here is Blockchain or “distributed ledger technology.” Of all the use-cases for enterprise products becoming “blockchain-driven,” supply chain management stands out for its potential to add value, and in its adoption so far. Blockchain technology allows for the processing of thousands of transactions per second, and for the tracking of these transactional goods the entire way through the supply chain. Blockchain has been noted as a viable solution for putting an end to fraud & counterfeit goods altogether by tracking each individual product unit with a unique ID through the chain, from raw material manufacturers through to consumers. Each step is recorded in an immutable blockchain ledger, meaning the information in the database cannot be tampered with and can be well trusted. Smart contracts delay payment processing until sufficient confirmation of authenticity occurs, making each supply chain stakeholder responsible for verification. If you have a food company and somebody sold unqualified meat, you could easily trace the meat purchase transaction back to the original supplier. Supply chain data transparency such as with this example is only visible to those stakeholders who are authorized and accepted to view it, where visibility permissions may even differ between various stakeholders. For example, blockchain technology could permit end-consumers of premium meats to know the precise farmer, farm name, and farm location where the meat was originally sourced from.
Distributed Ledger Technology (DLT) also can accelerate business processes by automating or excluding “paperwork.” You won’t need manual notifications for approvals anymore. Smart contracts – a feature of blockchain technology – will do it in a better way: once the first stakeholder digitally signs the document, the next stakeholder is notified immediately and automatically, until approvals are complete. Consider blockchain’s smart contracts as a form of “if this, then that” logic to automate actions, sequences and events in an enterprise business process. Reminders can be automatically scheduled every 24 hours until review & sign-off…and if 7 days transpires and still no signature…a higher-authority manager would be automatically notified also. All records of views, edits, signatures and approvals becomes both guaranteed & irrefutable using blockchain technology.
Despite blockchain being the leading new-tool in supply chain management, chains can further be strengthened by such technologies as IoT and AI.
Pairing technologies such as IoT and Blockchain together makes it possible to see each piece of the product flow through a warehouse assembly line, have it be time-stamped, photographed & digitally recorded from an IoT device, written to a refutable, immutable blockchain ledger that’s shared up and down the supply chain vertical to provide transparency, authenticity, and decision-making support to all stakeholders involved. A unique cryptographic identifier would be put on each item or batch to track and confirm a product or product component’s most pertinent details.
AI technology in robust supply chains could analyse characteristics of products and identify counterfeits or fakes that do not meet requirements, or have clear deviations, based on computer-learning patterns. For example, although a fake piece of clothing may be time-consuming or outright-impossible for humans to manually identify, artificial intelligence matched with modern imaging solutions could identify fakes and sub-standard products both more reliably and faster than humans ever could.
CONCLUSION
Technologies have the potential to make supply chain management easier, more transparent and paperless. Digital transformation is not a word; it’s a necessity. Data has to flow seamlessly within the system for all stakeholders to win.
By leveraging blockchain’s real-time tracking, authenticity and quality confirmations, this new technology can take many industries to new heights – both in terms of consumer acceptance and profitability – without fraudulence and cheap substitutes – with satisfied and loyal customers. While blockchain may be the most obvious place for enterprise companies to begin with proof-of-concept planning, MVP-building and pilot project executing, technologies like IoT and AI also have their place firmly in enterprise technology products and near-future roadmaps. By using new technologies, enterprises can address most of supply chain management’s greatest challenges, and see a better future tomorrow because of it. As the saying goes, “the art is in the start.”
If you are interested in how to apply new technology like blockchain, IoT and AI in your enterprise company, please feel free to reach out.
—
References
- European Union Intellectual Property Office Report (2018, https://op.europa.eu/en/publication-detail/-/publication/d496528c-6eb4-11e8-9483-01aa75ed71a1/language-en)
- Social Vignerons (2018 http://socialvignerons.com/2018/09/11/how-will-blockchain-technology-change-wine-interview-with-maureen-downey/)
- Is Counterfeit Alcohol Behind the Dominican Republic Deaths? (2019, https://www.rollingstone.com/culture/culture-features/counterfeit-alcohol-dominican-republic-death-851016/)
