The pandemic has sent shockwaves through global supply chains, forcing business leaders to reexamine and recalibrate their procurement and outsourcing strategies.
Manufacturing and logistics will likely be disrupted for many months to come. And in the long term, there will almost certainly be a greater emphasis on supply chain resilience to better withstand future crises. Businesses will be looking to technology, and 5G in particular, to provide some of the answers.
One of the trends emerging out of the pandemic is that supply chains will become shorter and more regional, with less demand for suppliers based in hubs like China. This is a significant reversal of what had been occurring in the past few years, when purchasing managers tended to seek the best deal wherever in the world the supplier might be situated.
While the pace of transformation was already accelerating before Covid-19, the pandemic has encouraged businesses to invest more heavily in digital solutions to give them the agility to weather the crisis.
Amid the pandemic, many companies see an opportunity to reboot the system and reconstruct the supply chain for the evolving needs of businesses. This trend is particularly noticeable in consumer goods, where the speed of customers moving toward online shopping has been accompanied by growing customer expectations for customized goods and services.
Supply Chain 4.0 Meets The 5G Future
McKinsey describes the main characteristics of what it calls Supply Chain 4.0 as faster and more efficient, flexible, granular and accurate than existing systems. These features could all be achieved by leveraging the advantages promised by the 5G-enabled Internet of Things.
Increased levels of automation are being introduced at all stages of the supply network, coordinated by planning and control systems that use artificial intelligence. Big data from production, logistics and sales channels can be aggregated and analyzed. Automation can also enable predictive planning and shipping, in which finished goods begin their journey to the next stage in the supply chain even before an order has been placed. By ultimately using 5G to connect all stakeholders to a supply chain cloud, collaboration along the value chain could improve, dramatically reducing lead times and enabling rapid troubleshooting of disruptions.
Under Supply Chain 4.0, the future possibilities are endless. Imagine: Inbound delivery trucks driven autonomously have their location tracked via satellite. After arrival at the automated warehouse, all operations—from picking to transporting items to the automated production line—are handled by robots or automatic guided vehicles, and information on their flow is continuously fed back to the control system over the network. By sharing the dispatch and onward shipping information with the customer, control is smoothly handed over to the next stage in the supply chain. For small-quantity deliveries, or delivery to the end customer, drones and small robotic delivery trucks are dispatched to cover the last mile.
The ultimate in zero-touch delivery may also be achieved in some instances using in-situ 3D printing, also known as additive manufacturing, where only the design file for the product or part is transmitted over 5G and is then actually produced in the location where it’s required.
The Case For Shorter Supply Chains
This tighter overall control of supply lends itself to pivoting toward local or regional suppliers. Hubei province in China, the epicenter of the global outbreak, is a manufacturing hub for a variety of goods that were being shipped all over the world. In addition to disrupting factory schedules, Covid-19 triggered airport closures and canceled flights, which not only caused delays and unpredictability but also increased freight costs for the foreseeable future.
The World Trade Organization has forecast that the pandemic will cause global trade to contract between 13% and 32% over 2020, with prospects for recovery in 2021 still uncertain. Accenture identified that 94% of Fortune 1000 companies had seen supply chain disruptions due to Covid-19, with 75% reporting negative or strongly negative impacts on their businesses.
Even in 2019 before the pandemic, political and economic tensions were already causing a slight reduction in global trade, and this trend is exacerbated by increased uncertainty about the resilience of long-distance supply chains. Recent research highlighted in this article found that imports of manufactured goods from over a dozen countries in Asia shrunk by 7% between 2018 and 2019, prior to the pandemic.
Better Connectivity For Industry
It’s clear that tighter, more responsive supply chains can provide one of the solutions for doing business in the post-Covid new normal. Making supply chains shorter and more local is one clear way to foster resilience. Dual-sourcing is another proven practice for enhancing resilience, but it also adds complexity.
In the future, adopting a supply chain cloud—a joint supply chain platform connecting multiple suppliers and customers along the value chain using 5G connectivity—could allow unprecedented levels of collaboration, real-time planning and could even feature a shared logistics structure and joint planning capability.
As industry and commerce adjust to new constraints that may extend well into 2021, accelerating the 5G digital transformation could provide the catalyst needed to help strengthen supply chains and provide competitive advantage.
Now that Supply Chain 4.0 is top of mind, have you thought enough about Industry 4.0 and IIoT? Make sure these five considerations inform your game plan.