Supply chain industry must close gap in innovation investment

MHI study finds companies understand the technology available but are slow to ramp up their capital expenditures

03/19/2014


The key results of the first MHI Industry Report, "Innovations That Drive Supply Chains," were:George Prest, CEO of MHI

  • The top two strategic priorities of executives are supply chain analytics and multichannel fulfillment.
  • The two major barriers preventing innovation in the supply chain are a talent shortage and a continuing focus on cost reduction.
  • Three emerging innovations are not yet top-of-mind for executives, but may be soon: sustainability, mobility/machine-to-machine technology and 3-D printing.

(Source: MHI Report)

The speed of data and the speed of technology change are driving major changes in supply chain and logistics strategies. The ability of industry leaders to stay ahead of the changes will be a big factor in how the industry responds to the rapid rate of change. That was the overall finding of the first MHI Industry Report, "Innovations That Drive Supply Chains," presented at the 2014 MODEX Show in Atlanta March 19. George Prest, CEO of MHI, and Scott Sopher of Deloitte, which helped conduct the study, presented the findings at the biannual MODEX Show. Prest promised it would be the first in an annual series of reports benchmarking the industry's opportunities and challenges.

Many of those opportunities revolve around technology advancements, many of which were on display on the MODEX trade show floor. The study found there is a gap between the innovations available and the actual investment in those innovations. Prest said many supply chain executives are "undervaluing the strategic importance of investing in new supply chain solutions." Prest noted that two-thirds of respondents were planning to make new investments in the next three years. "That's the good news,” he said. “Many say it will be to maintain, and not to drive competitive advantage. That's our challenge as an industry."

With plant floor analytics available everywhere, the ability to use that data to drive better decisions is one of the key trends emerging in the supply chain industry, according to the study. "There is cheaper data storage, faster processing time, and we can connect to Internet anywhere anytime," Sopher said. 

"We have better analytics than at any time. More and more companies using visualization tools with analytics to change behaviors."

But while 79% of the 450 executives surveyed for the report said analytics was seen as a strategic imperative for their organizations, fewer than half said they had well-defined strategies in that area, and only 54% of respondents said they were planning more investments in analytics. The emerging trend of using a single distribution source for all time of production distribution—a concept called omnichannel distribution—is another emerging trend for the supply chain industry. 

Fulfilling orders for retail, e-commerce and wholesale from a single center will require investments in technology and training. Again in this area there is a gap between the perceived importance of the issue (61% of survey respondents described it as important) and the technological capabilities of their organization (fewer than 20% rated their capability as "high"). That gap needs to close, Sopher said. "I believe to really serve and improve in multi-channel distribution, the industry is going to need improved material handling equipment.”

The rapid industry growth is expected to deliver a large number of new jobs. With an estimated 1.4 million jobs expected to be created in supply chain and logistics, companies are finding an acute skills gap to meet and fill those jobs with the technological skills needed. Prest put it succinctly: "The talent shortage is a barrier to innovation.” 

The three emerging trends in supply chain and logistics—Sustainability, 3D printing and additive manufacturing and machine to machine (M2M) communications and mobility—all face the same gaps in capabilities within their current organizations. For example, while four out of five executives feel sustainability is an important goal within their companies, 60% of respondents said there are significant gaps in their sustainability efforts. Of the three, mobility appears to be the one with the most immediate use within the facility. 

Several MODEX exhibitors were showing wearable equipment to help warehopuse personnel pick and place inventory. "It could provide people with the right information at the right time," said Sopher. "When you combine with analytics, that's a very powerful combination."

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