For Many Manufacturers, Supply Chain Digitalization Is a Major Initiative

Technology investments are going toward inventory optimization and integrated planning

Author: Krista Garcia

April 5, 2018

Expectations for faster fulfillment and delivery have seeped into the manufacturing world, exemplifying just one more result of the so-called Amazon effect.

JDA surveyed US manufacturers and wholesalers in February 2018 to see how they prioritize tech investments. Fully 43% of respondents said they were investing in inventory optimization to meet consumer demand and compete with Amazon, while 41% said they were focused on integrating planning and execution technologies.

Only 18% of those polled currently operate a fully integrated digital supply chain, but this is a priority for most. Some 70% of respondents said supply chain digitalization is a major initiative or will become a major priority within 12 months. When digging deeper, the most popular technology used right now as part of their company's supply chain strategy is the internet of things (IoT), cited by 57% of respondents. Cloud-based applications, mobile applications and advanced analytics were also important.

The possibilities of consumer IoT applications are a little more exciting, but using this tech operationally is clearly a high priority for manufacturers. There are many potential applications for the supply chain. Goods could be tagged with RFID or other sensors to better track inventory, planning, shipping, or even to collect and relay data like length of time at a location or temperature during storage.

When Dell Technologies asked business leaders worldwide in August 2017 which tasks they anticipated being automated by 2030, 42% selected inventory management, the highest rate among those listed. Logistics and supply chain was also high on the list, cited by 37% of respondents. This timeframe is considerably further out than the two to three years considered by the manufacturers in the JDA study, but their short-term investments are laying the foundation. 

In December 2017, IDC released its 2018 worldwide supply chain predictions. In its report, the company said it expects 50% of manufacturers will use analytics, IoT and social collaboration tools to integrate planning processes in real time by the end of this year. And by the end of 2020, 33% of all manufacturing supply chains will be using analytics-driven cognitive capabilities, boosting cost efficiency by 10% and service performance by 5%.

Investing in the digitalization of the supply chain would be futile if no one saw results. The biggest values cited, according to respondents in the JDA survey, was greater profitability (49%), increased customer service levels (38%) and reduced spend (38%).