Half of manufacturers revamping digital supply chain to counter ‘Amazon effect’
Manufacturers are increasingly going direct to consumers in an attempt to ape and counter the ‘Amazon effect’. A new study into digital supply chain transformation finds manufacturers are seeking to make their supply chains slicker with new digital technologies, and to even open direct access to their products to consumers in the process.
Retail pressure from Amazon is felt upstream, prompting manufacturers to re-evaluate their supply chain operations. Almost half (46 per cent) are actively engaged in upgrading their systems with new digital technologies, according to US-based consultancy JDA Software, which published the ‘intelligent manufacturing survey’. This is in response to external factors like the ‘Amazon effect’, which is disrupting the global retail market, and internal factors like near-shoring, where business operations are being brought closer to home, it said.
The new survey attends a parallel report on digital supply chain transformation, by Deloitte, which finds 56 per cent of manufacturers proclaiming the wisdom of digital change, and just 28 per cent actively pursuing it. The Deloitte survey, taking a dimmer view of similar change-statistics, puts the perceived imbalance down to cultural conservatism among the manufacturing elite.
The JDA Software study says manufacturers are prioritising inventory optimisation solutions (43 per cent) and integrated planning and execution technologies (41 per cent). More than half (51 per cent) are looking to establish better collaboration between internal and external agents in their supply chains. A considerable number are also looking to improve their forecasting with demand sensing (44 per cent) and data science (33 per cent) technologies.
The so-called ‘Amazon effect’ has reduced expectations among consumers of order fulfilment times, the survey notes, and manufacturers are tightening up planning and execution processes in their digital supply chain in response.
“Now, more than ever, planning and execution processes must be more tightly coupled. Yet even while our data shows a portion of respondents understand the importance of prioritizing both short-term execution and strategic long-term planning, too often we see manufacturing companies focused on one and not the other, and it’s limiting the value of their planning efforts,” said Fred Baumann, group vice president of industry strategy at JDA.
Baumann said incorporating real-time data inputs across both the planning and execution can bolster an integrated approach. The report claims 61 per cent of respondents taking an integrated approach reported greater profitability, 49 per cent claimed increased customer service levels, and 48 per cent claimed reduced spend.
The same proportion of manufacturers, around one in five, are either “pre-digital” or “digitally mature” in their supply chains; the penny appears to have dropped for the rest of them, but they are variously prepared to make the transition in their digital supply chain. Around a third (35 per cent) reckon they will get there within two or three years.
Unsurprisingly, JDA Software pressed home the importance of supply chain transformation. “Supply chain digitalization is no longer a ‘nice-to-have.’ It’s a strategic mandate and a dramatic differentiator that drives revenue and market share growth,” said Baumann.
“The companies that are investing in their supply chain today, that have support from their leadership teams, and those that are positioning the supply chain function as a key point of differentiation – these are the companies that will excel and achieve profitable business growth.”
He added: “To be equipped to successfully go up against Amazon, these manufacturers will need to make digitalization a priority now.”
The report also showed manufacturers’ awareness of new talent and training in the digital era, with 78 per cent planning to invest in skills in the next 12 months and 55 per cent committed to cross-training employees across supply chain needs.
The ‘internet of things’ (IoT) is having a huge impact on the way companies approach supply chain management. The deployment of sensors now allow companies to monitor the condition of products in shipment, and cloud platforms can optimize delivery routes. These are just some of the technologies disrupting the way supply chains are managed.
Digitalisation of supply chain and factory floor operations is a key growth area for the booming IoT. Enterprise IoT Insights chatted with Intel, Bosch Rexroth, and the Manufacturing Enterprise Solutions Association about best practices for stakeholders looking to leverage IoT solutions.