Technological progress is becoming more and more important as it affects every part of the company. Especially in Supply Chain Management, new technologies and trends appear frequently. That is why it is essential that companies understand which trends exist, assess the potential benefits of evolving technologies for their own business and prioritize implementation goals.
The maturity of Supply Chain Management trends and technologies is of great interest to all parties involved in Supply Chain Management as such technologies often help to streamline processes and define the future way of working. Knowing what is going on in the market and which trends may help to make processes more efficient can save costs, optimize capacity allocations, and ultimately increase customer satisfaction.
Capgemini Consulting is permanently researching the latest trends and technologies in Supply Chain Management. Besides others, Gartner’s analyses of Supply Chain Management trends is a good source for the evaluation of upcoming topics in Supply Chain Management. This blog article will be concluded by the presentation of basic requirements for implementing innovative Supply Chain Management solutions and the assessment of what technology has the potential to be of greatest value for supply chain players.
Gartner’s Hype Cycle
Over the course of our studies, Gartner Hype Cycle reports from 2015 until 2017 were analyzed and enriched by additional research and project experience. Gartner examined Supply Chain Management trends and rated them according to their maturity, whereby the exact method used to evaluate the different technologies and factors they identified as being relevant, are not accessible to the readers and hence, are non-transparent.
Capgemini Consulting’s Hype Cycle
Based on the Gartner Hype Cycle, Capgemini Consulting took a closer look at the Supply Chain Management trends considered most relevant and created its own Hype Cycle shown in Figure 1. The identification of changes, business impact, and estimated years to mainstream adoption in the Hype Cycle provide a wider view on the maturity level of the trends.
Figure 1: Capgemini Consulting’s Hype Cycle for Supply Chain Technologies
The Hype Cycle is divided into five consecutive adoption phases:
- Innovation Trigger: Technologies have just been introduced and the expectations from them are increasing rapidly.
- Peak of Inflated Expectation: Expectations reach their maximum and start to decrease as the first hype settles.
- Trough of Disillusionment: Expectations decrease even more and problems as well as negative consequences appear.
- Slope of Enlightenment: Expectations rise again as the trend starts to evolve and first applications can be evaluated.
- Plateau of Productivity: The trend starts to become mainstream and is used by many companies.
The graph shows how the general expectation of a trend develops over time. Most trends go through a process like this, but not every trend enters the cycle at the state Innovation Trigger and leaves after it has reached the Plateau of Productivity. It also has to be taken into account that the graph is not an exact timeline and the time it takes for each individual trend to move from one state to another can vary considerably. The circle brightness represents how long it will take for the specific trend to reach the Plateau of Productivity – the darker the shade, the longer it will take.
The Four Trend Categories
Capgemini Consulting analyzed the Supply Chain Management trends regarding their development between 2015 and 2017. According to the analysis, the Supply Chain Management trends are classified into the following four categories:
- New trends are emerging technologies with the potential to change the future of Supply Chain Management practices in the future.
- Fast-moving trends have an above-average development rate and will have significant impact within the next decade.
- Mature trends are those whose economic value has been generally acknowledged in the market already and they can be considered mainstream.
- Out trends are those which left the Hype Cycle after they have reached maturity or became irrelevant over time.
The current state of the trends that were analyzed are shown in Figure 2.
From Capgemini Consulting’s point of view, it was necessary to introduce a weight distribution on relevant factors to determine the trend’s current development state: For New and Mature trends, the factors “cycle phase” and “benefits” received a higher weight than the “maturity level” as it is more important to know how well the trend is established in the market and what effect a trend will have on future business processes. For fast-moving trends the weight distribution for the factors “benefits”, “steps in 2015-2017”, and “years to mainstream adoption” were the highest ones as those trends are supposed to be ranked on how long it takes them to move from one stage to the next one. The weight distribution for all categories is shown in Table 1.
Trend Description and Project Examples
In the following section, one trend for each category is highlighted and project experience from Capgemini Consulting is presented
First, Algorithmic Supply Chain Planning will is set to change the future of Supply Chain Management practices. Mathematical algorithms are used to automate supply chain planning processes and accelerate the decision-making process. Management carries the responsibility to identify, based on availability of relevant data sources, the implementation of algorithms, and invest in training and development of planners. Since the resulting best practice solutions can be applied automatically, the daily tasks of planners are therefore shifting from a case-by-case planning basis to algorithm management and exception handling. The use of risk scenarios results in better visibility and more accurate short-term responses.
Capgemini Consulting experienced the necessity of Algorithmic Supply Chain Planning during its work with a wind power company, where most of the production planning was conducted with priority-based rather than cost optimizing methods. A learning algorithm could automate the planning process while eliminating large amounts of master data which was created by the maintenance of priorities.
For most companies in the fast-moving goods market and in areas with volatile customer behavior where quick decision making is relevant, planning optimization is key to better meet customer expectations, achieve better fulfillment rates, and reduce stock. The real opportunity lies in a better understanding of customer demand behavior and automatically integrating these insights into the planning cycles.
As per our analysis, the fast-moving trend Predictive Analytics will have significant impact within the next decade – or even earlier – and is accomplished by taking descriptive analytics a step further. Predictive analytics makes use of historical data and various algorithms to intelligently predict the outcomes of various what-if scenarios for all supply chain processes. This way, markets, customers, and external partners can be better understood and costs can be reduced significantly by e.g. detecting and analyzing machine faults and product defects at an early stage.
Capgemini Consulting helped an automotive company to introduce an automated forecast of sales contribution margins with the help of time series creation and machine learning models. By enriching internal sales data with external data such as stock shares and macro-economic data, the sales contribution margin could be predicted with an accuracy of more than 95 %. This way, data-driven decision-making and steering were improved.
Another example is the prediction functionality of Supply Chain Control Towers, defined in a project Capgemini Consulting conducts for one of the largest energy power plant manufacturers globally. The prediction element of the control tower is able to analyze current disruptions and forecast at what point in the supply chain risks may occur due to an existing problem. The client’s supply chain managers receive an early warning regarding upcoming problems or, in the opposite direction, when a current issue has no predictable negative impact on the remaining process steps.
Global Logistics Visibility is described as a trend which has already proven its value for Supply Chain Management. It improves the connectivity and interoperability of events by identifying problems and thereby minimizing threats. This results in a visible connection between trading partners, suppliers, customers, and logistics service providers. It is important that organizations integrate other supply chain applications (e.g. TMS, WMS, Supply Chain Planning and ERP) as data sources to get a more comprehensive view of their supply chain processes. As organizations expand cross-border, the supply chains become more complex and risky, which makes visibility of potential problems even more crucial.
Not only the external partners are important players to connect with; it is also vital that internal process flows are visible in terms of progress. Capgemini Consulting has successfully designed a Supply Chain Control Tower for a global leading wind power manufacturer in order to ensure stability and on-time delivery in their service process area. The solution makes all steps in the order management process visible – from placing orders at suppliers via the inbound process down the chain to the final delivery. With this control tower for order management, our customer is able to identify any disruption in the process in real-time and can directly act on the issue. The result is a much better customer delivery reliability and cost reduction as issues are identified immediately and can be resolved without adding extra cost for returns or complaints. The service levels increased by more than 10 %.
There are also trends that seemed to be promising and finally turned out not to be frequently used in reality or are considered a common technology now. One of those trends that is out of the Hype Cycle as it became commodity, is Strategic Network Design. Nowadays, many companies use optimization tools to continuously analyze and revise their networks for supply, distribution, transportation, and manufacturing. Therefore, the existing network structure and costs are taken as a baseline which is then compared to different alternative scenarios with adjusted parameters such as demand fluctuations, the involvement of third-party logistics, freight rates, etc. Strategic Network Design is still important as supply chain networks change due to e.g. mergers & acquisitions, customer shifts, and the variability of raw material prices.
Capgemini Consulting analyzed and optimized the supply chain network design for one of the largest ship service and chemicals company. They faced problems caused by indistinct roles and responsibilities, a low transparency of supply chain costs, and a high inventory level. The overall supply chain costs could be reduced by more than 10 % through among others a clear responsibility allocation, the introduction of cross-docking locations, and a lean product portfolio.
Supply Chain Management needs to stay innovative, flexible, proactive, and transparent to be able to keep up with the technological progress. It became clear that the willingness to adopt new trends, as well as the technological capabilities and know-how needed to implement relevant trends, is a basic requirement for a competitive supply chain. These requirements are summarized and explained in Figure 3.
Figure 3: Characteristics of a Competitive Supply Chain
Trends in Supply Chain Management will continue having different life cycles: some will make it to a maturity stage where the former trend becomes a standard, some will never reach this state. A great example at the moment is the Blockchain technology. While being technically mature, the business cases still largely need to be identified for the Supply Chain Management area.
To stay on top of Supply Chain Management trends and adopt some of the new, hyped technologies, a company has to decide which of the trends are relevant for their specific supply chain processes and set-up, and whether they have the capabilities to implement it. This decision should be based on an in-depth analysis of the supply chain processes to guarantee that the conditions have been fulfilled, the needed (master) data and information exist completely, and introducing the new technology is actually going to help the company evolve.
Not to forget that with new technology the basic and fundamental idea of supply chain management – connecting and managing end-to-end with the highest possible level of customer satisfaction and efficiency – is finally becoming real. Technologies enable the necessary connectivity and data availability, and analytics allow for informed decisions. We are a clear step ahead of the situation we faced only a few years ago and the upcoming trends offer a lot of additional opportunities for achieving supply chain excellence. Capgemini Consulting would be keen to support you on this journey.
 For more information on SC Control Towers, please refer to the paper “Global Supply Chain Control Towers – Achieving end-to-end Supply Chain Visibility” (G. Bhosle et al., Capgemini Consulting, 2011).
Vice President & Head of Supply Chain Management
Analyst Supply Chain Management
Senior Consultant Supply Chain Management
Nick van den Boogaart
Consultant Strategy & Transformation