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Tech Explainers


WHAT ARE THE FUTURE TECHNOLOGIES IN THE SUPPLY CHAIN?

9/12/2023

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Next-gen technology is revolutionizing consumer goods supply chains, offering
CPGs and retailers unprecedented visibility and predictive insights to
proactively address challenges and capitalize on supply chain technology trends.
In fact, 24% of grocers plan to implement supply chain automation in the next
12-18 months, according to RIS News and Progressive Grocer.   


HOW TECHNOLOGY IS TRANSFORMING SUPPLY CHAIN

Technology is helping supply chains evolve by enabling companies to receive more
visibility into their operations, as well as make predictive bets about
obstacles that could occur. In doing so, CPG companies have the ability to
proactively head off issues before they occur (or become too damaging to
manage). 

However, although companies are investing extensively in technology, digital
transformation plans for many supply chain planning leaders are lagging because
teams are not adopting the new tools — in part because of a lack of trust,
according to Ingrid Gonzalez McCarthy, senior director analyst, Gartner. This
skepticism can be attributed to a variety of reasons, including data limitations
or a lack of clarity about data sources  

“Planners may also test the tool and find discrepancies between its output and
those of the legacy tools they are comfortable using, such as spreadsheets,” she
says. “These discrepancies can erode confidence in the reliability of the output
of the new tool they are being asked to use.”


WHICH TECHNOLOGIES WILL HAVE THE BIGGEST IMPACT ON SUPPLY CHAIN PERFORMANCE? 

The list of technologies that will impact supply chains is lengthy, but there
are a few that stand out as holding particular potential in the CPG industry.
Here, we identify the three technologies that are reinventing the supply chain: 

Digital twins: Digital twins serve as virtual models of systems, processes,
physical items, or even consumers, and are instrumental in preemptively
identifying disruptions in the global supply chain. In the consumer goods supply
chain, they are especially valuable for their capability to proactively detect
interruptions, thus mitigating risks.



Artificial intelligence: A well-functioning entire supply chain involves
handling vast volumes of data from multiple origins and stakeholders. With
supply chains becoming increasingly complex at top CPG companies, AI and machine
learning offer the capability to rapidly detect data patterns — beyond human
speed — allowing organizations to act preemptively. Additionally, for consumer
goods companies contending with myriad regulations, such as sustainability and
ethical labor standards, supply chain technology serves as an essential tool for
maintaining transparency.

IoT: Although the Internet of Things (IoT) is not a new concept, it continues to
see increasing adoption throughout the supply chain due to ongoing technological
advancements. It has been enhancing supply chains with tracking and tracing
capabilities for years, but recent significant improvements in miniaturization
and accuracy have led to a surge in data generation for monitoring items in
transit, according to Lindsey Peters, retail and consumer goods lead at
Celonis. 

In addition to these technologies, the digitization of consumer goods is
expected to have its own impact on supply chains. This could prove to become a
challenge as simpler chips become more difficult to secure since chipmakers are
financially motivated to build factories with state-of-the-art equipment, rather
than prior-generation equipment, says John Harmon, senior analyst at Coresight
Research, which could in turn potentially create shortages of these simpler
chips as the electrification of consumer goods grows. 



“Some manufacturers actually are adding older-generation manufacturing
equipment, and leading-edge factories are adding capacity and constantly
developing smaller feature sizes, which means more chips on a wafer,” he notes. 


WHAT ARE THE PREDICTIONS FOR 2023 SUPPLY CHAIN? 

In placing bets and looking at the role of technology in supply chain
management, we tapped a number of industry experts, and there were a few common
themes.   

Mike Graziano, consumer products senior analyst with RSM US LLP, notes that,
pre-pandemic, supply chains were often an afterthought for businesses given the
consistency in price and timing for receiving goods. Times, of course, have
changed — quite a bit — and more companies are re-evaluating their supply chains
and are expected to continue to do so to mitigate single-source risks and shift
production closer to the end consumer in order to shrink time to market. 

“Although the pandemic appears largely behind us, it has left a higher degree of
volatility in its wake,” he adds. “The U.S.-China tech rivalry is likely to also
add volatility to supply chains, as a great deal of electronics manufacturing
and assembly is performed there. Manufacturers and retailers need to keep a
closer eye on their suppliers and their suppliers' suppliers so as not to get
caught flat-footed in future supply chain shortages. The subsidies in the U.S.
CHIPS act and Intel's move into the foundry space could ensure that more chips
are available domestically.”

“Given recent events, supply chains are likely to place a significant emphasis
on resilience – trying to adapt to factors such as pandemics, natural disasters,
geopolitical events, and supply chain bottlenecks,” adds Sourav Banerjee,
Infosys SVP and industry head, consumer retail and logistics. “As customer
demand continues to evolve, supply chains might become more capable of
delivering hyper-personalized products and experiences. We already have the
technology expertise to do that.”


HOW TECHNOLOGY WILL CHANGE SUPPLY CHAIN IN THE FUTURE 

In short, leveraging technology in supply chain operations will result in a
supply chain that’s more resilient and collaborative, enabling retailers and
manufacturers can better meet consumer and retailer needs. It also has the
potential to increase sustainability, as properly leveraging technology can
increase efficiency and reduce waste.  

Indeed, in looking at the future of supply chain, Banerjee notes that a focus on
sustainability is likely to intensify. “We might see more localized and agile
production reducing the need for extensive inventories and increasing
responsiveness.”




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