digital innovation in supply chain management: nice-to...

Digital Innovation in Supply Chain Management:

Nice-to-have or MUST?

Alessandro Perego Direttore Scientifico Osservatori Digital Innovation

Ordinario di Logistica e Supply Chain Management

Direttore Dipartimento Ingegneria Gestionale

Politecnico di Milano

Number1 – Genio, creatività e innovazione nella supply chain – 7/5/19

Alessandro Perego| Osservatori Digital Innovation 7 maggio 2019

What is the effect of the 4.0 digital revolution

on Supply Chain Management?


BLOCKCHAIN

ARTIFICIAL

INTELLIGENCE

DIGITAL OPERATIONAL

TECHNOLOGIES

CLOUD COMPUTING

INTERNET OF THINGS

BIG DATA ANALYTICS

The new «wave» of Digital Technologies

Guarantee of execution

Indisputability

Traceability

Language and Image Recognition

Machine learning

Data-driven optmisation

On demand + 3D printing

New Human-Machine Interfaces

Collaborative Robots

Accessibility

Computing power

Unstored storage

New models of control and management

Sensors Economy

Pervasive Automation

Data Management

Massive Analytics

Data Driven Approach

Paradigm 4.0 «wave»


Supply Chain Complexity (uncertainty)

Demand-side uncertainty

Product variety

Consumer demand volatility

% Sales induced by promotions/discounts

Price elasticity

Price fluctuations

Product life cycle (length and position in the curve)

Rate of Introduction of new products

Risks of Obsolescence

Number and characteristics of the market segments

Intensity of Competition in the market

Number of echelons in the downstream supply

chain

Importance of time-to-market

New markets/New channels

…


Supply-side uncertainty




Number, uniqueness, localization of suppliers

Stability of the supplier base

Duration of supply contracts

Level of dependency on the supplier base

Number of echelons in the upstream supply chain

Financial performance of suppliers

Country risk of suppliers

Maturity level of processes and technologies

Product complexity/Number of components

Quality level required

Technological evolution of materials

…


On the Demand-side …

… blurring the boundaries between industries



… increasing customer service expectations



… reducing information asymmetry between

‘manufactures’ and customers (transparency)



… pushing towards mass customisation



… reducing product life cycle (software-defined life)



… new direct (but actually ‘indirect’?) channels


On the Supply-side …

… pushing towards global supply (or very local non-

industrial supply)



… changing the way products are made


On the Supply-side … … new materials and different “relevance” of

components in the “bill of materials”



… increasing the competition from ‘everywhere’


What is the impact of new digital trends on Supply

Chain Complexity?

New digital trends are

increasing both Demand-

side and Supply-side

Uncertainty

Increasing

Supply Chain

uncertainty


U

Supply Chains & Supply Chain Strategies

Risk Hedging Supply Chain

The “Risk Hedging” Supply Chain

strategy aims to reduce risks in

supply disruption

AGILE Supply Chain

The “Agile” Supply Chain aims to

reduce risks on both the supply

and the demand side, combining

Risk Hedging and Responsive

Supply Chain strategies

Lean (efficient) Supply Chain

The “Lean” Supply Chain strategy

aims to maximize the “expected”

Return On Assets (ROA) creating

both cost and value competitive

advantages

Responsive Supply Chain

The “Responsive” Supply Chain

strategy aims to mitigate risks

(related to the changes and the

diverse needs of the customers)

on the demand-side


What is the impact of new digital trends on Supply

Chain strategies?

New digital trends are

powerful enablers of

«agile», responsive,

risk-hedging strategies


Social listening to «feel» the customers

Collection and analysis of «big data» about consumer preferences and

behaviours from social media and apps

Finding and tracking online conversations

Conversations around keywords, phrases,

events

Conversations about brand, business,

industry, competitors

Goals

Improving customer service

Identifying influencers

Improving hashtags and keywords

Managing online products and services

by listening to real-time feedback


Bio-marketing to intimately «feel» the customers

A new human-oriented idea of Marketing. Not only Big Data but heart beat,

breathing, eye-tracking to reveal consumer behaviours and preferences

In Labs with less-invasive technologies

(heart beating, brain activity,

breathing, electrodermal activity, …)

to design solutions

In natural environments with non-

invasive technologies (eye-tracking,

face-mapping, wearables, voice

recognition, ….) to test solutions


Artificial Intelligence for Demand Planning

A new set of tools based on Artificial Intelligence and Machine Learning to

understand the drivers of customer demand

Hidden

correlations

Massive Model

Testing

«Big» Data Bases

High granularity

Clusterization

User support and

RPA (automation)


Extreme one-to-one personalization

Combination of Artificial Intelligence and Business Analytics to provide a

unique personalised customer journey, on-line and in-store

Business Intelligence Platforms

Virtual assitants/chat-bots

Learning-powered visual shopping tools

Visual Search/Computer Vision

Facial Recognition

Body scanners

AI-based Product Recommendations

AI-based sales forecasting

Image processing

….


Control Towers for Supply Chain Visibility

Maturity Model for Control Towers:

from visibility to alerting to autonomous response and learning

End-to-end real time Visibility

Alerting and Exception

management

Predictive Analytics

Prescriptive Analytics

Collaboration

Machine learning

Risk management and what if

analysis

Root-cause analysis

Self-service Analytics


IoT-enabled Supply Chain Visibility

Massive application of item-level auto-identification to increase the control

and visibility of the flows all along the Supply Chain

Application at the production stage

of RFId tags on all products for all

channels and all volumes

Benefits: reduction of POS costs

(check-out, inventory control,

shrinkage), supply chain costs,

increase in sales (reduction of out-

of-stocks), trackability along the

chain


Blockchain to «track» the Supply Chain

A new classes of technologies to address a very old problem with complex

supply chains: the collection and availability of certified original data

For finished products but also (more

complex) for raw materials and components

Distributed ledgers + smart contracts +

programmable logic

Operations + Administration + Finance

Robust ID for goods and actors

Tracking unit: item, lot, field, …


Artificial Intelligence for Supply Chain Planning

A new set of tools based on Artificial Intelligence and Machine Learning to

manage the frequent (re)planning of complex Supply Chains

Optimization of the logistic system

is a large-scale mixed binary

optimization model

Algorithms for short computing

time and frequent re-run (e.g.

genetic algorithms)

Big Data Bases and automatic

collection/cleaning of data

Process Orchestration


Cloud-enabled Supply Chain Management

Redesign of Supply Chain systems to exploit all available

«resources» in the network

IT systems covering value chain planning and

execution are being disrupted

Online platforms are replacing traditional

“on premise” application,and expanding to

cover all major aspect of value chain

management, from demand forecasting to

transportation management, from sales

management to people management

Internal Visibility Integration Cloud

Company's Social Networks

Customers

Channel Partners

Sales

3PLs

Transportation

Carriers

Manufacturing

PartnersSuppliers

On-Premise: ERP, SCM, BW, GATP, Supply Planning, Strategic Procurement,

Etc.

Custom AppsIBP Response


On-Demand Manufacturing

Job Shop Virtualization

Customer sends an RFQ directly via web

Analysis of BOM and production cycle, real

time simulation

Immediate feedback 24x7 on prices and

expected delivery dates

Automatic order release and scheduling if

the customer accepts the proposal

Manufacturing as a service, i.e. decomposing the manufacturing process into

manufacturing/design services and a simulation engine


Design for Supply Chain

Fast time-to-market and Supply Chain risk mitigation

by aligning product design and supply chains


Supply Chain Finance for Risk mitigation

Digital-enabled combination of Supply Chain and Financial Data/Information in

order to assess and mitigate Supply Chain Risks

Visibility-enabled Supply Chain Finance

Models (Reverse Factoring, Inventory

Finance, Contract Farming, …)

Risk Assessment based on financial and

operational data

Integration based on EDI and

collaboration platforms

(in the near future) use of blockchains

and smart contracts


Blockchain for Global Trade

A new classes of technologies to address a second very old problem with

complex supply chains: the management of international exchanges

Global Logistics/Trade

Blockchain platform to ”provide end-to-end

supply chain visibility to securely and

seamlessly exchange information about

shipment events in real time”.

Smart contracts to reduce the time and cost

for clearance and cargo movement also

reducing errors and inaccuracies


What’s the resulting «moment» of the forces?

The result depends on:

The intensity of the force = the combinatorial effect of new digital-based solutions

The point of application of the force = the organizational scope

Digital Trends as

Complexity Increase (exogenous forces)

Digital Trends as

Solution Enablers (endogenous forces)

Digital Innovation in Supply Chain Management:

Nice-to-have or MUST?

Alessandro Perego Direttore Scientifico Osservatori Digital Innovation

Ordinario di Logistica e Supply Chain Management

Direttore Dipartimento Ingegneria Gestionale

Politecnico di Milano

Number 1 – Genio, creatività e innovazione nella supply chain – 7/5/19

digital innovation in supply chain management: nice-to...

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