How Supply Chain Disruptions Are Fueling Tech Investments
Within the many side effects of pandemic-induced supply chain disruptions, good news has been hard to find. The ongoing challenges have left companies struggling to shape current and future business strategy as they put out one fire after another.
But a silver lining apparently glistening within this troublesome disruption cloud is a commitment to investing in technology that has become more urgent than in the past.
According to the 2022 MHI Annual Industry Report, “Evolution to Revolution: Building the Supply Chains of Tomorrow,” almost 80% of supply chain leaders surveyed indicated their “digital transformation has accelerated due to the pandemic.” As a result, investment in supply chain innovation is expected to increase “dramatically” over the next two years.
“Supply chain leaders have never been in a better position to drive impactful and lasting change for the industry,” said John Paxton, CEO of MHI in a statement. “With the white-hot media spotlight chronicling the after-effects of the pandemic, the importance of supply chain is finally coming into focus in boardrooms across the world.”
Transforming Supply Chains Through Innovation
The 2022 report is the ninth in a series of annual industry reports published by MHI and Deloitte. In it, updates are provided regarding the “innovative technologies that have the most potential to transform supply chains.”
This year’s findings are based on survey responses from more than 1,000 manufacturing and supply chain leaders from various industries at the end of 2021—with 81 percent holding executive-level positions. Companies that participated ranged in size, “with 59% reporting annual sales of more than $50 million, and 13% reporting $1 billion or more.”
In the report, projected adoption rates over the next five years for each of the 11 categories of technology covered in the report are analyzed, along with common barriers to adoption. The combined analysis offers “new insights into trends and technologies that are transforming supply chains and the priorities of the people who run them.”
The technologies covered in the report are:
Inventory and network optimization
Robotics and automation
Wearable and mobile technology
Driverless vehicles and drones
Internet of Things
Cloud computing and storage
Sensors and automatic identification
Tech Investment and Adoption Trends
According to a release announcing the report, among the 64% of respondents who said they will be increasing technology investments over the next two years:
Two out of three—plan to spend more than $1 million
41%—plan to spend more than $5 million
18%—plan to spend over $10 million
Additionally, respondents indicated that “all technologies covered by the survey are expected to achieve an adoption rate of 66% or higher over the next five years.”
Report authors said current and future adoption trends for the various technologies look like this:
“Cloud computing, which is now the standard platform for most supply chain software, continues to have the highest current adoption rate at 40%.”
“Inventory and network optimization is expected to rise to the top over the next five years, with an expected adoption rate of 87% (in a statistical tie with cloud computing at 86%).”
“Artificial intelligence is expected to see the most accelerated growth – rising from 15% to 73% over the next five years, a nearly five-fold increase.”
“Predictive Analytics, currently at 22%, is expected to grow to 82% over the next five years.”
“Industrial Internet of Things, currently 21%, is expected to grow to 80%.”
“Robotics and automation, currently at 28%, is expected to reach 79%.”
Quoted in the release, Thomas Boykin, Supply Chain Specialist Leader, Deloitte said, “Supply chains are becoming more and more a technology-driven industry. While firms have not adopted some technologies as quickly as they thought they would back in 2014 or 2015, what we are seeing now is a big jump in these investments. Where we used to say evolve or die, what we now say is transform or die.”
Supply Chain Challenges and Solutions
Report authors said that over the past nine years during which the survey has been conducted, the leading supply chain challenge has consistently been “hiring and retaining qualified workers.”
Not surprisingly, “supply chain disruptions and shortages” topped the list this year (57%) with talent issues (54%) and customer demands (51%) remaining “top challenges” that “must now be addressed in the context of avoiding future supply chain disruptions.”
As a result, companies are turning to technology to help “improve agility and efficiency,” as well as reduce reliance on “repetitive, manual labor.”
Underscoring the fact that investments in innovation can create “more rewarding” supply chain jobs, report authors described the opportunity at hand: “This could provide a new path to upskilling current employees and attracting new talent – creating a more modern, capable workforce that can quickly adapt and adjust to changes in the technology and market landscape.”
“Supply chain automation and technology provide tools to mitigate disruptions, but the real solution goes much deeper,” said Paxton. “It’s having the right culture and the right people in place to implement this technology and to bring it all together to exceed your customer demands and expectations – whether they are fast delivery, personalization, low cost, delivery transparency or ESG goals.”
Primary Barrier to Adoption
Report authors said that for the first time in the history of the MHI Annual Industry Report, “lack of a clear business case to justify the investment” was cited as the leading barrier to adoption for each of the 11 technologies covered in the report.
“Company leaders understand at a theoretical level that their supply chains could greatly benefit from investing in innovation, but potential gains often take a back seat to short-term profit targets and concerns over the cost associated with new technology and the threat of disruption to day-to-day operations,” according to the release.
“Building a business case provides the roadmap to supply chain technology investment, but it’s so much more,” Paxton said. “It tells the entire story of why change is imperative to delivering on-going value. It really all comes back to using these technologies to better serve the customer.”
To learn more about how digital supply chain technologies are being applied through real-world examples and to access recommendations to help supply chain leaders with strategy development, please download the complete report.