In his essay ‘The End of History?’, Francis Fukuyama argues that we have reached ‘the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government.’ Essentially, progress is at an end and the only way now is backward.
In supply chain management, it seems that we are fast approaching a similar point. The Internet of Things (IoT), machine learning, and blockchain are surely the final technologies for supply chain management to really embrace. We are, so to speak, handing the keys to the farm over to the machines.
The phrase supply chain was coined in 1982, the same year the computer won Time’s Man of the Year. Since then, technology and supply chain have always gone hand in hand. The explosion in communications technologies over the past twenty years, in particular, has revolutionized the way organizations approach supply chain management. The pivotal moment came when Microsoft released Internet Explorer 1.0 in 1995, enabling cost-effective dissemination of information between disparate parties in the supply chain, real international production networks, and lean manufacturing.
Communication between machines - the IoT - is the next and likely final phase in the communications revolution. Technologies such as sensors, communication devices, servers, analytics engines, and the decision-making capabilities that are made possible with machine learning algorithms will link the physical and information worlds more closely than ever before. Using a closed loop based on bits, it creates fundamentally new, non-linear ways to manage what has traditionally been a linear sequence of steps, expanding options for managers looking to create value.
Growth has already been rapid. In a 2014 study by LNS Research, 43% of manufacturing executives didn’t understand or know about the IoT, presumably, therefore, also not knowing how the IoT could impact their supply chain. However, according to a recent Accenture report, the adoption rates for big data analytics and IoT will increase from 30% in 2015 to 43% by 2020. This will, in turn, see 182,000 new jobs created during the same period. Eyefortransport research also found that IoT technology investments went up significantly between 2014 and 2016, with IoT sensor and monitoring technology increasing by 19%.
The benefits are clear. When used effectively, IoT can cut costs and improve efficiency, meaning companies can do things faster, more accurately, and with less personnel. For example, it can be used is the constant monitoring of machinery for signs of damage. This will allow organizations to deal with potential problems as early as possible, rather than waiting for them to pass crisis point. Not only does this prolong the life of a company’s machinery, it could also prevent potentially dangerous incidents from occurring, even shutting down any connected equipment that might worsen a situation. IoT technology can also help keep check on demand at any point in the chain. Automated messages can be sent as to where a product is needed, leading to better inventory designation.
The amount of data that will be produced by the plethora of sensors installed throughout supply chains will also be tremendous - too great for humans to deal with. For the potential of IoT to be realized, this ocean of data needs to be converted into actionable, contextualized information. This is dependent on machine learning algorithms to find the patterns, correlations, and anomalies from which analysts will be able to make improvements to supply chain processes, inventory management, and so forth.
Another technology that is pushing supply chain management to new heights is blockchain. In terms of hype, blockchain has almost been on par with that of IoT and AI. Blockchain is the technology behind Bitcoin. It is a cryptographically secure public register of transactions operated by a decentralized peer-to-peer network that has implications for every industry, and its implications for transparency will help few areas more than supply chain. Indeed, Jerry Cuomo, IBM’s vice president for blockchain, has argued that, ‘Supply chain is the most likely application for the technology after financial services.’
We have already seen blockchain technology adopted by a number of supply chains, who have recognized that it the added level of trust that it provides - particularly important in establishing provenance of products so that you can best verify their quality and sustainability.
Provenance enables greater transparency in supply chains by providing all physical products with a record authenticating its origins and is vital to the quality and value of many products. IBM’s new Everledger service uses the company’s LinuxOne system to allow supply chain customers to build and test blockchains in a secure cloud. This protects all supply chain partners against theft, counterfeiting, and other forms of corruption. Everledger Chief Executive Officer and Founder Leanne Kemp notes that, ‘When you are in the business of provenance, secured records, access and transparency are everything. There is no compromise when it comes to security and one cannot underestimate the expertise required to enable this. Having the opportunity to build, test, scale and refine Everledger on IBM Blockchain, underpinned by a security-rich infrastructure, is a game changer. It has accelerated our ability to move fast and deliver the most innovative solutions to our partners internationally and confidentially.’
We are at the beginning of the IoT, machine learning, and blockchain journeys, but their impact will turn supply chain management on its head and likely leave it changed forever. This is not to say that supply chain managers are going to be rendered redundant any time soon. There will be people needed to oversee the handover, but many jobs will likely fall by the wayside, and when the three technologies are utilized strategically, their responsibilities are likely to be limited to nurturing and maintaining partnerships and watching machines do all the work. The worry is that supply chain managers may be reluctant to adopt such technology as a result, fearing that they are essentially training up their replacement. They may be right to be fearful, or we could see human supply chain managers finding new ways to make themselves relevant. As Fukuyama notes, ‘perhaps the very prospect of centuries of boredom at the end of history will serve to get history started once again.’ How this manifests itself remains to be seen.