It has been months since the container ship Ever Given became trapped in the Suez Canal, blocking around 12% of global shipping for almost a week. While vessels now travel freely along the canal once more, it illustrated the fragility of global supply chains.
Since then, this year has seen more and more crises, big and small – the ongoing semiconductor shortage, which is impacting companies across hundreds of industries; petrol shortages, in the US due to a cyberattack, and in the UK due to a Brexit-related lack of HGV drivers.
And this is all on top of empty shelves in British supermarkets, with warnings that the worst may still be on its way.
When confronted with the semiconductor shortage, a manager on Bosch’s management board, Harald Kroeger, in comments to CNBC warned that the automobile industry’s supply chains are no longer fit for purpose.
This paints a dire picture for the global supply network. At a time when digitisation is becoming more prevalent, it begs the question of the role that data and digital technology can play in alleviating the crises.
Will the efficiencies promised by the technology help solve the problems facing supply chains, or are these challenges beyond its power to solve?
To better understand the opportunities and challenges for digital technology, DIGIT spoke with Neil Carden, Chief Operating Officer at data science consultancy Forth Point.
The move in recent years has been away from simple, linear supply chains. Advances in digital and connected technology have enabled more flexible networks – more reactive, and more complicated.
The new supply chains leverage the basic ideas of industry 4.0 – sensors gather data, networks pool the data, the data instructs automated machines, and the whole chain is analysed to make it more efficient.
To do this, organisations deploy technologies such as artificial intelligence, machine learning, cloud computing, IoT, blockchain, predictive analytics, wearable sensors, predictive maintenance.
Through these, supply chains are seen as moving towards their optimal state, where redundancies and bottlenecks are completely removed.
For the most part, companies are still in the process of digitising their supply chains. Gartner research warned that less than half of organisations have defined or plan to implement a supply chain digital transformation roadmap.
While there has been progress in digitising supply chains, it is still uneven.
“There’s been a considerable investment in individual points,” Carden noted. “But it’s mostly being built on top of this legacy patchwork quilt.”
This can be a major issue for supply chains, as they are only as strong as their weakest link. While companies, industries, or even whole countries, might have embraced digitisation, one backwards area, still relying on inefficient manual processes, presents a bottleneck risk.
Furthermore, while many of these organisations may be using some digital technology, they still rely on human decision-making, human data entry, etc.
These digital-assisted supply chains may be data-driven, but they are not smart, failing to take advantage of the opportunities presented by digital technology.
“Digitising things doesn’t make them smart,” Carden notes. “It is enabling technology, which allows you to be smart, but then you actually have to use it.
“To be smart, you need that diagnostic information so you can understand why things are happening and what is causing them to happen.
“And then you want to be predicative, forecasting what is likely to happen in the future, and then ideally, the supply chain becomes totally smart, moving towards the optimal arrangement.”
As data-driven processes start to take over and move human decision making towards a supervisory position, digital supply chains will become truly intelligent.
By embracing smart technology, supply chains can become more adaptive and flexible by predicting issues before they manifest.
“The first thing is being able to predict changes in demand side or supply side,” Carden says. “That way, you have a chance to do something about them and, ideally, move from reacting to being proactive.
“And secondly, when unforeseeable things do happen, you can be nimbler in the way you respond to those changes.”
In part, the more data we gather, the more of these crises can be spotted and avoided.
While the Ever Given was an anomaly, many of the problems related to current supply shortages can be linked to issues around the pandemic and Brexit, many of which have been years in the making.
However, the future doesn’t always resemble the past. This means that using past data to predict the future is not always possible. And, thanks to growing political instability and climate change, these once-in-a-lifetime crises appear to be coming a lot faster.
A lack of slack
As supply chains become smarter, it removes the need for redundancy.
This efficiency saves money – resources aren’t wasted producing excess product, which in turn need to be stored, and unneeded supply isn’t ordered, then shipped, then ultimately scrapped.
However, digitisation has come at the cost of slack and redundancy.
On the one hand, when things are functioning well, this is fine – data means that companies can predict how much of a product they will need and when. It allows producers to ensure they make the exact amount of product they need to meet spikes.
Any spikes in demand or supply, either up or down, can quickly be filled or re-routed.
However, when a crisis does occur, the system struggles. Without redundancy and slack, when one piece suffers a major failure, it creates a bottleneck that the system struggles to cope with.
“It’s easy to blame digitisation,” Carden says. “Digitisation is a means to achieve an end and the end is to reduce stock in the system because that’s inefficient and increases costs.
“There’s an argument there that you could have smart redundancy,” he adds. “You could potentially use the systems and the data you’ve got to introduce a lower level of strategic and tactical redundancy.”
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Ultimately, it can be difficult to predict whether these crises were inevitable. Even without digitisation, our global supply chains have become incredibly complex, with moving parts spread out across multiple continents.
In many regards, the timescales between problem and visibility have been squeezed, allowing us to see the issues sooner. For UK consumers, we are also in the perfect storm, where issues from a global pandemic, a major political shift, along with the ongoing threat of climate change.
As such, the need to be more efficient, to use data intelligently and create truly smart supply chains can help mitigate many of these challenges.
“This is a transitionary period,” Carden says. “If we carry on this route of increasing digitisation, and increasing use of digitisation, then we will get better at anticipating problems and dealing with them before they happen.
“We will get better and faster at finding ways out of problems and learning from them.”
Join the Conversation: Digital Transformation 2021 Summit
The role digitisation can play in making industries more efficient will be a key theme at the upcoming Digital Transformation Summit on 28th October.
Now in its sixth year, the Summit has established itself as Scotland’s largest annual conference focussed on digitalisation and organisational change.
For more information on how to register a free place visit: https://www.digifutures.co.uk/