For 2020, we looked to the experts for their thoughts on the future of supply chain management trends that we may see in the new year. Between robots, the ever-growing cloud, capacity crunch, security and more, we’ve gathered a lot of interesting topics to discuss. Here are five SCM software trends for 2020:
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1. Robots Cause Competition
For years, we’ve all been hearing about how autonomous mobile robots (AMR) are changing the landscape of the supply chain. But beyond huge players like Amazon, we haven’t heard much on their widespread adoption. However, this might be changing in 2020. We spoke to Steve Banker, VP of ARC Advisory Group, about his thoughts.
One of many future trends in supply chain management that he’s seeing is “the emergence of a class of autonomous mobile robots built to optimize the picking process … In effect, this layer of logic is similar to what a warehouse management system (WMS) does. WMS suppliers have new competitors from a field they might not have expected: hardware suppliers.”
As AMR becomes more cost-effective and accessible to businesses in the mid-market, we’re only going to see this competition increase. However, while both AMR and WMS can help warehouse managers optimize their processes, they do ultimately very different jobs. Banker continues, “While the AMR optimizes the picking, they don’t handle processes like scheduling trucks during loading and put-away. And many e-commerce warehouses also have portions of the warehouse devoted to traditional pallet and case picking, which these systems don’t handle, but WMS does. So while AMRs might squeeze the WMS market, it won’t take the market away.”
Banker also discussed what he’s heard from executives at large WMS companies. While WMS vendors see the threat, they understand the solution is to work with robotics. This means we may see a greater effort by WMS companies to make sure their systems can work with AMR systems in 2020. We may also see a greater emphasis on automation in general, for the small segment of the market that would have to choose between the two products.
2. Capacity Crunch Aftermath
Last year, you couldn’t open up your internet browser without seeing something related to “capacity crunch.” And while the extreme demand for transportation was very real, Inbound Logistics’s annual survey indicates it tapered off in 2019. While 62% of shippers said they experienced a shortage of truck capacity in 2018, only 43% could say the same in 2019. Nevertheless, 86% of shippers saw rate hikes this past year and 1 in 5 shippers still see finding capacity as their biggest challenge.
So what does this mean for the market in the coming year? Potentially, 2020 could be a major correction year for the trucking industry. John Hitch of FleetOwner reports that a recession is likely, based on previous market patterns. He mentions that the Institute of Supply Chain Management reported a PMI of 47.8% — the lowest it’s been since the last month of the Great Recession in 2009.
To compound a contracting market, there is also an excess of trucks. These are vehicles that were purchased to compensate for rapid growth and to provide quick aid to victims of Hurricanes Harvey, Irma and Maria in 2017. Of course, this slows down the production of trucks, which also affects the manufacturers that would normally supply the materials.
A weak trucking economy means that shippers will have more leverage to dictate prices and the payment cycle. Inbound Logistics also reports that what has historically been a 30-day period to make payment is now a 45-day period. The organization also notes this is likely to move to 60 days.
This means that it’s going to be more important than ever for companies to keep track of their business processes in an agile way that can keep up with changes in the market. Truck manufacturers will need to invest in manufacturing software that can help them automate processes and cut costs to help make up for lost business. Shippers and trucking companies may need stronger supply chain collaboration systems to navigate a changing landscape which has been otherwise stable for the past decade.
However, as any part of the supply chain goes into recession, companies will be less likely to make an upfront investment of thousands and sometimes millions of dollars to access a top of the line system. One solution to that is to move to the cloud.
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3. The Market for Cloud-Based Products is Growing
Cloud systems today offer the same level of functionality and security as their on-premise counterparts, while also reducing the sunk costs and customization woes that plague traditional software. Few companies truly need an on-premise system, and so naturally, the market for cloud SCM is expected to grow in 2020.
When we spoke to Jim Tompkins, Chairman and CEO of Tompkins International, he gave us a few reasons for this growth. The biggest reason he gave above all else was that “people are over the fear of someone else controlling them.” In the past, many opponents of cloud-based software were worried about an outside party having any access to their software, especially with complete control over their uptime and security. But as cloud-based systems gain popularity, these vendors have proven themselves to be reliable and trustworthy business partners.
Since people aren’t so afraid of the cloud anymore, they can focus on the actual benefits of this deployment over traditional systems. “Now, [people are starting to think about] speed of implementation, cost of upgrades, the overall lifecycle of the software and working in the cloud environment in a way that follows the best practices of the developer of the product.” He noted that companies looking to invest in an SCM solution should be ready to adapt to their new system. This is because many new buyers believe a system should be customized to their business’s exact processes and requirements in order to work.
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In reality, businesses should consider how an SCM product can be configured to support their ultimate goals. With this in mind, businesses will have to be a little more flexible with cloud-based systems than they might be with ultra-customizable on-premise solutions. An on-premise solution allows you to customize your software to support your business processes exactly as they stand. Configurability means your software will support your business overall, but you may find yourself changing some processes to work better with the technology. Configurability as a feature will gain traction in the coming years as the disruption cycle becomes shorter and shorter.
4. Distributed Inventory
Tompkins also gave his thoughts on distributed inventory in the near future. With how most businesses handle distribution, retailers can offer fast shipping at high costs or slow shipping at low costs. But more and more customers are wanting fast and cheap. He notes, “Amazon has spoiled the customer.” He went on to discuss how customers routinely choose three to five-day shipping but when their package takes more than a day or two to arrive, they’re ultimately disappointed. So how do retailers meet the expectations set by Amazon?
“The only way to do that is to distribute the inventory. As the distances get longer, the prices [and] time to delivery go up.” Tompkins states the solution is in reducing the cost of the last mile with more warehouses. However, these warehouses need to be cost optimized, which can’t happen if they are primarily used as storage.
Instead, he says they need to be points of inventory flow. To do this, he predicts a tool called distributed inventory flow forecasting (DIFF) will become increasingly popular. With DIFF, “we are able to forecast the flow of materials to maximize order fill rate while minimizing inventory levels.” Tompkins says current software simply doesn’t provide strong enough data analytics for most distributors to utilize distributed inventory. But as DIFF becomes more readily available, we’ll see an increase in distributed inventory and shorter shipping times.
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5. Stronger Security Measures
According to a recent Forbes article by Mitch Free, CEO of ZYCI, security challenges are going to grow for manufacturers, especially those in the American aerospace and defense supply chains. He states, “Until fairly recently, espionage and spying happened by means of these in-person courtings: an American aviation employee was targeted while traveling and being entertained lavishly on a Chinese contacts’ expense account.” But in today’s digital era, manufacturing trade secrets are stolen remotely through cyber attacks. Some of these attacks are aided by the use of unauthorized microchips installed on devices at major companies like Apple and Amazon to steal data.
Free discusses that although protecting these trade secrets has become a priority, many manufacturers are finding it difficult to maintain complete security as defense manufacturing expands. Those particularly at risk include small- to medium-sized businesses, as they’re less likely to be aware of their own vulnerabilities and have fewer resources to combat such attacks.
With such a critical need for improved security within this industry, it’s very likely that we’ll see manufacturing software vendors reinforce and add further security measures to their products. This includes tools like user-based access levels which provide audits for employees and denies admission into privileged parts of the system. There may also be an emphasis on sourcing and procurement tools, which according to Free is where many companies put themselves at risk.
Further, a 2018 report from the National Counterintelligence and Security Center (NCSC) states cybercrime within all supply chain software may be on the rise in the near future.
6. Artificial Intelligence and the Internet of Things
When we reached out to Kushal Nahata, CEO of FarEye, he was focused on how software can give businesses a competitive edge. “Stakeholders will [need to] know the status of every resource and when and where their shipments are … In today’s time where eCommerce is disrupting the landscape of online shopping, supply chain management can be a brand differentiator. In order to keep the customers hooked and loyal towards one brand, a lot of effort [should be put] into upgrading the technology.”
The first supply chain management technology trend Nahata predicts will grow in 2020 is the Internet of Things (IoT). “The main drivers behind the growth of IoT are the availability of cheap and reliable sensors, penetration of internet, the massive increment in data storage and processing capabilities, and the emergence of AI. The future of IoT is predicted to lead to a 15 percent productivity increase in the delivery and supply chain industry. Many logistics experts are using these new resources to enhance their supply networks, reduce costs and look for opportunities to generate revenues.”
He also predicts an increase in artificial intelligence to solve the many inefficiencies still present in today’s supply chains. “The supply chain has historically been like a black box for enterprises, with customers not knowing where and what condition their goods are in. Manufacturers are losing a lot of time, money and inventory due to unpredicted freight movement. India alone spends about $160 billion on road logistics, twice [what is spent by] countries with an efficient transportation infrastructure.” Nahata states many companies are already turning to AI to optimize their supply chains, as it easily reduces time and money spent while speeding up processes.
He continues, “Artificial intelligence can reinvent business models by revamping the way in which you look at supply chain management future trends. AI has the ability to analyze the patterns of today’s operations to predict the possible outcomes of tomorrow’s scenarios. This can be used to automate lower-level decision-making and balance the supply with the forecasted demand. Managers can thus indulge their skills in high-level decision making and strategizing.”
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To Sum it Up
Next year will bring both new challenges and technologies to businesses working in the supply chain. First, companies will have more options when it comes to warehouse management technology in the form of both WMS solutions and automated robots. However, this means the producers of these two products may see some increased competition from each other.
Next, the capacity crunch could lead to a trucking recession, forcing companies to find more ways to cut costs. One of the ways businesses might be able to save resources upfront is with cloud-based SCM. The cloud market will continue to grow as more businesses become less fearful.
In addition to cutting costs, businesses will have to find new ways to stay competitive. New technology will likely become popular to help implement distributed inventory, allowing smaller businesses to keep up with Amazon. Lastly, the need for security within the supply chain will likely continue to be addressed into 2020 as AI and IoT grow in ubiquity.
In order to keep up with the coming changes to the supply chain industry, businesses may benefit from adopting an SCM software solution. To learn more about what an SCM solution can do and how to choose the right one for your business, make sure to check out our SCM Software Buyer’s Guide. By implementing a strong system now, you’ll be better equipped to deal with the challenges on the horizon.
Contributing Thought Leaders
One of the best-known industry analysts covering Supply Chain Management and a frequent speaker at industry events. He is a coauthor of Logistics Viewpoints and a Forbes contributor. Steve’s user-focused research has included ROI analyzes of a variety of supply chain applications, benchmarking, and best practice reports. He has aided users in supplier and consultant selections and suppliers with acquisitions and product roadmaps.
Dr. James A. Tompkins is an international authority on supply chain strategy, focusing on implementation of end-to-end supply chains that are demand driven. Jim is the founder and CEO of Tompkins International. His 35-plus years as CEO of a consulting / integration firm and his focus on helping companies achieve profitable growth give him an insider’s view into what makes great companies even better.
Kushal is responsible for driving the vision, strategy, and growth as CEO and Co-Founder of FarEye. A dynamic leader, Kushal drives the culture of ‘customer-first’ at FarEye which enables the team to deliver value to FarEye’s 100+ clients globally. He is an effervescent thinker who is passionate about enabling the digital transformation of logistics enterprises. Under his leadership, FarEye has achieved a 300% growth rate with an impressive geographical expansion.
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