Leading the Way with Digitization

Just as technology is changing our personal lives, it’s causing the supply management profession to evolve. And for organizations, that evolution means embracing the latest industrial revolution: Industry 4.0 or digital transformation, says Jim Fleming, CPSM, CPSD, Program Manager, Learning Solutions at Institute for Supply Management^® (ISM^®).

“The world we live in is app-based,” with apps growing at an exponential rate, he says. “Consider the amount of things we can do on our smart phones — and the businesses that have been completely disrupted by that technology. One is Uber, which took an idea and created an app, and now is having a significant impact on rental cars and taxicabs.” Amazon is impacting brick-and-mortar stores, with consumers using the internet — on their phones or laptops — to order goods instead of driving to the stores to buy them, he adds.

“With the world changing in this direction, supply management is also having to change to keep up,” Fleming says. In essence, it must adopt the “app” mindset and embrace new technologies that disrupt processes and generate opportunities, he says.

It takes a look to the past to see how far companies have already come in their business practices. “The telephone, mail, pencils and paper were the thing before computers,” Fleming says. Personal computers debuted in the 1980s, and e-commerce followed with the launch of the modern internet in the 1990s. “So, the world changed, and with that, there was a need for supply chain management to change,” he says.

A big change has been in how companies leverage capabilities, Fleming says. For example, ERP systems have helped companies link internal supply chain systems. But, these days, companies need to do more to move forward, he says: “It used to be that if you have an ERP system, you are as advanced as could be. Today, that’s like a price of entry. You’re just getting started if you have an ERP.”

He continues: “Leading-edge companies that are finding new solutions are heading into digital innovation.” The capabilities they are leveraging include the Internet of Things, robotic process automation (RPA) and artificial intelligence (AI) — and even autonomous vehicles and blockchain. “All these emerging technologies are allowing companies to get more efficient and effective in leaps and bounds,” Fleming says.

Becoming Tech Savvy

What will supply management look like in 2030? That question is at the heart of new research by ISM and CAPS Research, a program jointly sponsored by Arizona State University and ISM, Fleming says. The research looks at 38 tasks that comprise the acquisition framework — from determining need to sourcing, planning, purchase and payment. “These are tasks that people typically do: They have to plan, send out POs and conduct cost analysis. They have to set up logistics,” Fleming says. “What we’re finding is that in the year 2030, automation is going to take over 31 of those 38 tasks. Only seven of those tasks are going to continue to require significant human intervention.”

As organizations move from a transactional to a strategic environment, they have to become more sophisticated technologically, Fleming says. “There is so much data being collected and generated today that humans are unable to keep up with trying to understand what’s going on and make decisions.”

Leveraging AI can help companies make sense of data and provide other efficiencies, Fleming says. For example, IBM leveraged its Watson AI system internally. “They looked across the entire company and discovered they had 30 ERP systems that really didn’t talk to each other. They also found that about 80 percent of their information fell into what they called unstructured or dark data,” Fleming says. By leveraging artificial intelligence, IBM integrated its 30 ERP systems and improved its supply chain capabilities, he says. “They reduced late orders down to 75 percent and reduced inventory levels by 18 percent.” Retrieval of sales, order and supplier data and analysis was 90 percent faster, he adds.

Embracing Disruption

Supply management organizations must accept that technology is going to be part of the future, Fleming says: “Is it perfect today? No. Will there be a significant focus today going forward around technology? Absolutely. Across the globe, there are about 1 million patents generated on an annual basis — and the bulk of those are technology innovation. Large corporations are continuing to invent things and it really is shaping the world.”

Among the up-and-coming technologies, Fleming says, that should be on supply management organizations’ radar:

• RPA, which can improve efficiencies of repetitive tasks and enable workers to move into more strategic and sophisticated jobs, Fleming says. “Proctor & Gamble, for example, through the use of RPA, was able to streamline the organization and free up (US)$5 billion worth of cash,” he says. “P&G improved inventory by 10 days and payables by 30 days. The company has been in the position of being able to reallocate or downsize 2000 head count per year over a five-year period.”

• Autonomous vehicles, which impact logistics and can help improve the trucking industry’s driver shortage.

• Robots and drones, which are being leveraged by last-mile delivery companies.

• Blockchain, which enables companies to track transactions along the supply chain. On the food-safety front, blockchain can help companies respond faster to outbreaks. For example, Fleming says, “by using artificial intelligence and blockchain, Walmart has successfully demonstrated that once there is an outbreak, the seven days (it usually takes to trace where the problem occurred) now takes 2.2 seconds. Instead having to strip all lettuce out of every store, they can identify the shelf with the contaminated lettuce in each store and pull the affected lettuce out.”

Because technology is going to significantly improve supply management, professionals “can’t put their heads in the sand,” Fleming says. “We have to continue to figure out how to leverage this capability. It’s getting more affordable. It’s getting more commonplace. And companies that shy away from it are probably going to cease to exist in the near future.

“As supply management professionals, what we have to do is continue to hone our skills and knowledge, figure out how to leverage technology in strategic fashion and start to find ways to get out of the old-fashioned, tactical mindset.”