Investment in Supply Chain Technologies to Increase Dramatically in 2019 as Hiring Qualified Workers Continues to Be Biggest Challenge
Chicago, IL – MHI has released the sixth in a series of MHI Annual Industry Reports developed in collaboration with Deloitte Consulting LLP. The 2019 MHI Annual Industry Report, titled “Elevating Supply Chain Digital Consciousness” provides new insights into trends and technologies that are having a dramatic business impact on supply chains and the people who run them.
Eight out of ten survey respondents believe digital supply chains will be the predominant model within just five years. The survey results also suggest that investment in supply chain innovation is at a critical inflection point, with a trend of declining investment from 2015 to 2018 being more than countered by a 95% increase in projected spending for 2019.
- 57% of respondents are planning new technology investments totaling more than $1 million over the next two years (up 10% over last year’s survey)
- 34% plan to spend more than $5 million
- 22% plan to spend more than $10 million.
Manufacturing and supply chain professionals are facing many challenges but, according to the report, the top one continues to be hiring qualified workers (65 percent).
This year’s report provides updates on the innovative technologies MHI predicted would have the most potential to transform supply chains. The report also covers the potential of these technologies to disrupt the industry as well as their adoption rates and common barriers to adoption. The eleven technologies covered in the report are:
- Robotics and automation
- Predictive analytics
- Internet of Things
- Artificial Intelligence
- Driverless vehicles and drones
- Wearable and mobile technology
- Inventory and network optimization
- Sensors and automatic identification
- Cloud computing and storage
- 3D printing
These eleven technologies work together to create next-generation supply chains that can meet these challenges because they are digital, on-demand and always-on.
“The pace of supply chain innovation over the six years of our survey is truly astounding, creating real and measurable competitive advantage for early adopters,” said George Prest, CEO of MHI. “With supply chain complexity showing no signs of slowing, the risk of inaction is only growing. Leading manufacturing and supply chain executives agree that technology is the key to future success.”
Potential to disrupt and create competitive advantage
The top technologies respondents say can be a source of either disruption or competitive advantage are:
- Robotics and automation (64 percent)
- Predictive analytics (59 percent)
- Artificial Intelligence (55 percent)
- The Internet-of-Things (IoT) (52 percent)
- Driverless vehicles & drones (51 percent)
Cloud computing and storage has the highest current adoption rate (56%). Adoption is expected to grow to 79% over the next two years, and to 91% over the next five years.
Over the next five years, Predictive Analytics is expected to reach an 87 percent adoption rate, followed by IoT at 80 percent, Robotics and Automation at 72 percent, Artificial Intelligence at 55 percent and Driverless Vehicles and Drones at 51 percent.
Top Barriers to Adoption
The top three barriers to adoption of these technologies are:
- Tackling the supply chain skills gap and workforce shortage (65%)
- Customer Demands for lower prices (56%)
- Customer demands for faster responses times (54%)
Supply Chain Talent Gap
A highly-skilled and increasingly digital supply chain workforce is needed to implement these technologies. This has been a theme in all six annual reports and the talent gap is growing as the adoption of these technologies increases.
The top critical skills needed to compete in the next-generation supply chain according to the survey and consistent with previous years; analytics/modeling/visualization (40%), strategic problem solving (37%) and general business acumen and cross-functional knowledge (31%).
Four Stages of Digital Adoption and the Supply Chain Digital Consciousness Index (DCI)
It is clear that data and technology will empower supply chains in the future, but it’s not a single technology-it will be a combination of the 11 highlighted in the survey.
The report defines a pyramid of digital adoption that has four technology stages, starting with the collection of data through digital connectivity, and then moving up the pyramid to generate increasing supply chain value and insights from that base data through automation, advanced analytics, and ultimately artificial intelligence.
The report includes a Supply Chain Digital Consciousness framework, developed by MHI and Deloitte, to help organizations assess their digital mindset and gauge their progress on the journey to becoming more digitally conscious.
The Supply Chain Digital Consciousness framework characterizes a supply chain on four levels of awareness – from dormant to elevated – and across five digital categories
The five digital categories span all dimensions of supply chains, from leadership, talent development and workplace culture, to technology and innovation adoption, to customer experience.
This framework can help companies understand their current level of digital adoption and then identify gaps and next steps to boost digital consciousness and supply chain performance.
Within this framework, the report includes an assessment tool companies can use to measure where they are on their digital adoption journey via a Supply Chain Digital Consciousness Index (DCI).
The Supply Chain DCI measures progress regarding the five digital categories:
- Customer Engagement
- Workplace Environment
The Supply Chain DCI quantifies the current level of supply chain digital consciousness, as well as measuring progress made toward the desired end-state. It helps firms determine the current state of their digital consciousness, determine and prioritize gaps in order to develop a comprehensive strategy for digital consciousness that meets their unique business goals.
“Leading companies are elevating their ‘supply chain digital consciousness’ to drive the kind of innovation that enables them to gain competitive advantage and thrive in today’s always-on economy,” said Prest.
The report also provides real-world case studies of digital supply chain technologies and recommendations for leaders for developing strategies to implement these innovations.
“As digital capability fuels customer expectations to unprecedented heights, NextGen supply chains must be proactive, predictive and prescriptive, with all of its links interconnected and synchronized to the same drum beat of consumer demand,” said Scott Sopher, principal, and leader of the global supply chain practice at Deloitte Consulting LLP.
“As the pace of supply chain innovation escalates, so does the price of inaction. Leaders will outpace their competitors faster than ever,” added Prest.
The findings in this report are based on survey responses from over 1,000 manufacturing and supply chain industry leaders from a wide range of industries. Sixty percent of respondents hold executive-level positions such as CEO, Vice President, General Manager, or Department Head. Participating companies range in size from small to large, with 59 percent reporting annual sales in excess of $100 million, and 10 percent reporting annual sales of $10 billion or more.
Download the complete report at mhi.org/publications/report.