Digital transformation of supply chains
by Mathieu Grosch, President of the Alliance for European Logistics (AEL)
17 March 2016, Brussels: Digitalisation is transforming and shaping all sectors and industries and has a vast impact on the future supply chains.
The logistics sector is part of this on-going digital transformation where new and disruptive business models will change the way in which the sector and supply chains operate. As such, big data and Internet of Things (IoT) are two concrete examples that will vastly improve supply chain efficiency. The total value of IoT is expected to exceed one trillion euros in 2020 (source European Commission).
Big data can enhance operational efficiency, for instance through internal and Business to Business (B2B) networks that bring together different elements of the supply chain and improve purchasing processes. Through cloud connections, these networks connect different partners, enabling cost savings for companies big and small.
The Internet of Things has the potential to transform the traditional value chain from manufacturing to delivery. It begins from digitalised manufacturing process, integrated warehousing operations, real time and improved traffic and fleet management to consumer connections through smart phones, and improved last mile delivery options.
In addition to these developments, collaborative robots and improvements in robotics will drive innovation in the sector. Self-driving trucks and drones may soon be available to deliver packages and goods. In manufacturing, 3D printing has the potential to encourage decentralised manufacturing and regionalise distribution. However, what do we actually need to make all of this innovation to happen?
- Customer centricity: The power of the end customer has increased, and their purchasing behaviour has changed through web rooming and show rooming. In addition to this, the use of computers or email is diminishing: it is therefore important that businesses adapt to these new behaviours and opportunities for product individualization.
- Increased B2B networks focus: There is currently not enough focus on B2B networks, and how business models have changed through social, mobile and big data. While certain aspects of B2B and Business to Consumer (B2C) networks may be converging, therefore, consumer and B2B aspects need to be equally addressed in the debate.
- Use of data: with Big Data, privacy has to be ensured while allowing for data analysis and manipulation techniques that turn vast raw data into valuable information. As a result new and disruptive business models emerge that will change the logistics and supply chain flows.
- Independent cloud services as a utility: In order to ensure that no single business or user can take ownership of data networked in the cloud sphere, providing for an independent cloud operator would be essential. A European cloud project is welcome in this regard.
- Interoperability: Organisations, companies will continue to have mixed technology environments for the foreseeable future. The ability for these systems to communicate with each other reduces the cost of building and supporting a heterogeneous infrastructure, which is why enhancing interoperability is important.
- Digital skills: The digital transformation does not only require tools and technology, it also requires workforce with the right skill sets to navigate through the digital transformation. The EU, Member States and the industry should work together to offer the necessary qualifications and training.