SUPPLY CHAIN MANAGEMENT UNIT 5

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UNIT: 5 SUPPLY CHAIN INNOVATIONS

SUPPLY CHAIN INTEGRATION :

Supply chain integration is a strategy that establishes a single system that can bring
together multiple stakeholders involved in the process for greater efficiency, both in
terms of productivity and cost savings.

"Integration of supply chain is how everyone in the team and company and its trading
partners work in sync to achieve the same business objectives via integrated business
process and information sharing"

Achieving an integrated supply chain.

Supply chain integration is a process where the all the parties involved with the
fulfillment of a product are integrated into a single system. An integrated supply chain
drives top-line business growth and profit margins and enables the business and
marketing plans of the organization. Additional benefits of an integrated supply chain
include increased efficiencies, sufficient supply, reduced waste and happier customers.
This requires significant coordination and alignment in order to ensure everyone is
effectively working toward the same goal at all times.

• Baseline - This is the first stage, and it is when every department or system within a
company is managing their own supply chain, and related issues. Companies also refer
to this as a siloed approach, and while it can have some benefits, it is quite inefficient.

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• Functional Integration - In this next stage, all the different departments within a
company will work together to help to improve efficiency and reduce cost. This could be
done by combining orders, scheduling jobs together, or other important steps.
• Internal Supply Chain Integration - All the departments within a company are
connected using the same systems. This will almost always involve using some type of
IT infrastructure solution that allows the departments to work efficiently together,
share their needs, and identify collaboration opportunities.

• External Supply Chain Integration - The final stage involves external vendors as well
as all of the internal departments. Providing a vendor with system access, and
encouraging them to function almost as another department helps to generate the best
possible results.

When it comes to integrating supply chains within a company, there are quite a few
things that need to come together. The following are some of the key steps that most
companies will need to take during this process:
 Choosing Vendors - Choosing vendors is more than just finding one that can
provide the necessary parts. In addition to that, the vendor must be able to
supply their piece at the needed time and place based on the overall supply
chain.
 Internal Teams - Working with the internal teams of a company to work based
on the needs of the overall system rather than just their department. Having set
procedures based on the big picture can help to eliminate waste, and improve
efficiency.
 Waste Elimination - While often overlooked, waste elimination should be an
important part of an effective supply chain integration. This can happen when
either a vendor or an internal team will physically relocate in order to more
efficiently complete the work that needs to be done.

There are many other things involved with effective supply chain integration. This can
seem like a very complex process, and in many ways, it really is. Once the initial
integration is completed, the system should run very smoothly for years to come.
In most cases, the initial integration of the supply chain will require that all parties get
together to discuss their abilities, as well as their needs. Going over all the logistics in an
open environment will help provide everyone the opportunity to make suggestions,

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express concerns, and overcome obstacles, before it is ever implemented into a

production environment.
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THE BULLWHIP EFFECT :
An unmanaged supply chain is not inherently stable. Demand variability increases as
one moves up the supply chain away from the retail customer, and small changes in
consumer demand can result in large variations in orders placed upstream. Eventually,
the network can oscillate in very large swings as each organization in the supply chain
seeks to solve the problem from its own perspective. This phenomenon is known as the
bullwhip effect and has been observed across most industries, resulting in increased
cost and poorer service.

 The Bullwhip effect (or whiplash effect) is an observed phenomenon in forecast-

driven distribution channels.
 It occurs because the demand for goods is based on demand forecasts from
companies, rather than actual consumer demand.
 The concept is also known as the Forrester effect.
 Since the oscillating demand magnification upstream a supply chain reminds
someone of a cracking whip it became famous as the Bullwhip effect.
 The bullwhip effect on the supply chain occurs when changes in consumer
demand causes the companies in a supply chain to order more goods to meet the
new demand.
 The bullwhip effect usually flows up the supply chain, starting with the retailer,
wholesaler, distributor, manufacturer and then the raw materials supplier.
 The best illustration of the bullwhip effect is the well-known beer game.
 In the game, participants play the roles of customers, retailers, wholesalers, and
suppliers of a popular brand of beer. The participants cannot communicate with
each other and must make order decisions based only on orders from the next
downstream player. The ordering patterns share a common, recurring theme.
The variability of an upstream site is always greater than downstream site. This
order variability cause players’ irrational decision making.
 The bullwhip effect is a consequence of the player’s rational behaviour within
the supply chain.
 Demand variations are amplified when moving up the supply chain.

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Causes of the Bullwhip Effect :

Sources of variability can be demand variability, quality problems, strikes, plant fires,
etc. Variability coupled with time delays in the transmission of information up the
supply chain and time delays in manufacturing and shipping goods down the supply
chain create the bullwhip effect. The following all can contribute to the bullwhip effect:
 Overreaction to backlogs
 Neglecting to order in an attempt to reduce inventory
 No communication up and down the supply chain
 No coordination up and down the supply chain
 Delay times for information and material flow
 Order batching - larger orders result in more variance. Order batching occurs in
an effort to reduce ordering costs, to take advantage of transportation economics
such as full truck load economies, and to benefit from sales incentives.
Promotions often result in forward buying to benefit more from the lower prices.
 Shortage gaming: customers order more than they need during a period of
short supply, hoping that the partial shipments they receive will be sufficient.
 Demand forecast inaccuracies: everybody in the chain adds a certain
percentage to the demand estimates. The result is no visibility of true customer
demand.
 Free return policies

Impacts of the Bullwhip effect:

The Bullwhip effect can lead to:
 inefficient production

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 excessive inventory as the producer needs to fulfil the demand of its predecessor
in the supply chain.
 low utilisation of the distribution channel..
 hazard of stock-outs resulting in poor customer service..
 leads to a row of financial costs.
 the damage of public image and loyalty an organisation..
 lead to contract penalties..
 hiring and dismissals of employees to manage the demand variability induce
further costs due to training and possible pay-offs
===================================================================

SC PROCESS RESTRUCTURING:
Restructuring of supply chains helps a firm in moving the entire efficiency frontier in
the downward direction. Supply chain restructuring involves significant changes in the
supply chain structure in terms of the way material and information flows are managed
in the chain.

Supply chain process restructuring involves playing around with at least one of the
three dimensions of the supply chain in the direction as shown below:
 Postpone the point of differentiation. By moving the point of differentiation as
much as possible, a bulk of the activities can be carried out using the aggregate-
level forecast rather than the variant-level forecast.

 Alter the shape of the value-addition curve. Shift the bulk of the cost addition
as late as possible. This will reduce the inventory in the chain and also help the
firm in having some flexibility. If the bulk of the cost addition takes place at a
later point in time in the chain, one will be in a position to respond to unforeseen
changes with the least cost.

 Advance the customer ordering point. Move from an MTS to a CTO supply
chain. By moving the customer ordering point as early as possible, one can carry
out the bulk of the activities against an order, which reduces the importance of
forecasting. If one were also able to postpone the point of differentiation, one
will be able to move from an MTS to a CTO supply chain. In a CTO supply chain,

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since the point of differentiation takes place after customer order, one does not
have to prepare a variant-level forecast.

Before we get into a detailed discussion about supply chain restructuring, it will be
important to compare it against supply chain integration and supply chain optimization.
As can be seen in Figure (graph), supply chain integration and supply chain
optimization focus on lowering the value-addition curve. This results in overall
reduction in cost and time and will result in an absolute shift in the point of
differentiation but the relative position of the point of differentiation
does not change. Unlike these two approaches, supply chain restructuring affects the
shape of the value-addition curve, shifts customer ordering, or shifts the point of
differentiation. This will essentially require supply chain process restructuring and may
also involve a change in product design or a change in the product service bundle
offered to customers. Supply chain restructuring is likely to bring in substantial
business benefits in general and in special cases it fundamentally changes the way in
which the supply chain is managed by moving from the MTS to the CTO business model.
===================================================================
INFORMATION TECHNOLOGY (IT) IN SUPPLY CHAIN:
Information is crucial to the performance of a supply chain because it provides the basis
on. which supply chain managers make decisions. Information technology consists of
the tools used to gain awareness of information, analyze this information, and execute
on it to improve the performance of the supply chain.

Enabling Supply Chain Management through Information Technology:

IT in an organization has multiple roles:
(a) it increases scale efficiencies of the firm’s operations;
(b) it processes basic business transactions;
(c) it collects and provides information relevant to managerial decisions and even
makes decisions;
(d) it monitors and records the performance of employees and function units;

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(e) it maintains records of status and change Use of information across the supply chain
in the fundamental business functions within the organization and maintains
communication channels.
Use of information across the supply chain

IT PLAYS THE FOLLOWING FUNCTIONAL ROLES IN SUPPLY CHAIN MANAGEMENT:

There are four major functional roles of IT in supply chain management: transaction
execution, collaboration and coordination, decision support and supply chain
measurement and reporting. Each of these functions needs different sets of capabilities
to be enabled by IT.

 IT supports frictionless transaction execution through supply chain execution

systems. This forms the core of supply chain management. Processes related to
the subject of order management, manufacturing execution, inventory
management, procurement, transportation execution and warehouse
management are mapped.

 IT is a means for enhancing collaboration and coordination in supply chains

through supply chain collaboration systems. The collaborative part focuses
primarily on cooperation with partners and customers via the Internet.

 IT-based decision support systems (DSS) can be used to aid better decisions
through supply chain planning systems. This provides capability to supply chain
management to process and evaluate decisions related to supply chain
management using different optimization techniques.

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 It is important for companies to measure their supply chain performance to

know if they are improving. IT-based business intelligence (BI) includes a
technology stack with layers for reporting and analysis tools, data warehouse
platforms and data integration tools.

All four functional roles are essential for each stage in a supply chain. Each stage should
know what is to be done in collaboration with upstream and downstream stages. And it
must execute the plan to achieve the performance targets it wants to meet. There are
numerous supply chain systems in existence. These can be categorized according to the
stages in the supply chain on which they focus and the functional role for which they are
used. The graph below provides a framework to map a particular supply chain
management system.

IT map for a supply chain (Graph)

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The following are the reasons why information technology is important for the
supply chain:
1. Effective Information Management: Effective information management can help
ensure that a firm meets the logistical needs of its customers.

Firms need to place priorities on logistical elements such as on-time delivery, stockout
levels, order status, shipment tracking and expediting, order convenience, order
completeness, creation of customer pick up, and backhaul opportunities and product
substitution.

2. Useful Combination of Software and Hardware : Logistics information systems

combine hardware and software to manage, control, and measure logistics activities
that occur within specific firms as well as across the overall supply chain.

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Hardware includes computers and servers, internet technologies, ancillary technologies

such as barcode and RF devices, communication channels, and storage media.

The software includes systems and application programs used for logistics and supply
chain activities.

3. Helps in Decisions Support Systems : Companies need better information on their

customers (such as customer service and sales forecasting), information on their
suppliers. (such as production planning and sourcing and purchasing).

Areas of technology systems including decision support systems/information

technology and logistics management activities were not delivering needed information
to the management for making strategic decisions.

4. Digital Order Processing System : The order processing system is the nerve center
of the logistics and supply chain system.

A customer order provides the communication message to set the logistics process in
motion.

The cost and efficiency of the entire communication can result in loss of customers
or excessive transportation, inventory, and warehousing costs together with possible
manufacturing inefficiencies caused by frequent changes in the production line.

5. Computerization of Firm Activities : Leading-edge organizations are utilizing

computers extensively to support logistics activities.

Computers are used in order entry, order processing, finished goods inventory control,
performance measurement, freight audit/payment, and warehousing.

6. Competitive Advantages : Computer-based decision support systems (DSS) support

the executive decision-making process in logistics and supply chain management.

To support time-based competition, firms are increasingly using information

technologies as a source of competitive advantages.

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Systems such as a quick response (QR) just in time (JIT) and efficient consumer
response (ECR) are integrating a number of information-based technologies in an effort
to reduce order cycle times, speed responsiveness, and lower supply chain inventory.

7. Fast Connectivity through WEB : Today, companies are restructuring their

businesses to function in the new era of electronic commerce.

Organizations can have a deluge of information on websites, business to business

requirements, and online customer and supplier linkages.

ERP systems, purchasing databases and data warehouses, electronic data interchange
(EDI, business to business electronic commerce are recent development which applied
in logistics and supply chain management.

Role of Information in Supply Chain:

 Hardware and software used throughout the supply chain is used to gather and
analyse information. The IT captures and delivers information needed to make
good decisions.
 Effective use of IT in the supply chain can have a significant impact on supply
chain performance.
 Relevant information available throughout the supply chain allows managers to
make decisions that take into account all stages of the supply chain
 It also allows performance to be optimised for the entire supply chain, not only
for one stage.
 It leads to higher performance for each individual firm in the supply chain.
 Information must be accurate, accessible in timely manner and must be of right
kind.
 Information provides the basis for supply chain management decisions,
inventory, facility and transportation.
 It should provide the supply chain visibility.
 Information is used at all phases of decision making: strategic, planning and
operational.

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 For example, any location decisions can be strategic one and what products will
be produced during today’s production run is the operational decision to be
made.
 The demand patterns, carrying costs, ordering costs are inventory decisions to
be made.
 Costs of transportation, customer locations, and shipment sizes include the
transportation decision factors.

 The location, capacity, schedules of a facility; need information about trade-offs

between flexibility and efficiency, demand, exchange rates, taxes, etc. are facility
decisions.
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AGILE SUPPLY CHAINS:

An agile supply chain is about delivering goods and services quickly, achieving cost-
saving while doing so, being flexible to changes in market conditions and consumer
demands, and maintain the overall productivity of the organization.

Due to the changing environment and recent advancements in supply chain network,
processes of supply chain must be flexible and responsive in order to deliver value
added services. Agile in supply chain model is known as the ability to deal with such
events that are unpredictable by prompt response to the situations and take necessary
decisions. Delivering smooth performance to make this management approach more
successful, this crucial factor requires more commitment from all the involved
stakeholders of the processes. Overview of a framework for agile supply chain is shown
in figure.

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Framework for Agile Supply Chain

To further deal with unavoidable situations and problems an additional technology is

necessary. Because of the rising new strategies in manufacturing such as Mass
Customization and Agile Manufacturing, organizations are forming an integrated chain
of network where the optimum level of core competencies can be achieved.

Consequently, availability of real-time information related to production and product

will become more convenient as the whole supply chain and its processes are
virtualized and it also ensures the smooth inter-company operations. It expands the
company boundaries with the help of exchanging data through autonomous systems
throughout the value chain that is supported by embedded systems (Brettel, et al.,
2014).

There are three features of an agile supply chain that are important to understand in the
changing world around us.

i) Supply Chain Visibility:

Real-time visibility is when you can view the issues of your end-to-end supply chain.
This transparency allows for planning the entire process according to the individual
business needs or work silos.

Companies can also find issues or delays in their operations early on when there is
improved visibility across the supply chain processes. The main benefit of visibility into
the supply chain cycle is having clarity into your vendor network, so you can rate and
compare their services if any changes arise.

ii) Operational Sync:

Not your entire supply chain member is aware of the updates in business processes and
organization changes. When your supply chain operations are well synced on one
platform, it allows sharing of information in real-time with the right members of your
supply chain. Therefore, it is imperative that your supply when should be well-synced
across the connected networks.

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iii) Real-Time Collaboration:

Real-time collaboration is about bringing all of your members and stakeholders

together to meet the company’s objective. It allows you to reach the end goals as one
cohesive business unit. Working together in a collaborative environment allows
handling multiple scenarios in the supply chain processes. You can also evaluate the
whole process of the supply chain without a long list of emails or texts that can be
difficult to sort through. Supply chain disruptions help make changes where needed to
optimize for the future. The agility in supply chain management allows you to manage a
tremendous crisis and gives you a chance to improve. Also, the supply chains with low
visibility across the network may no longer work for companies and need to be changed
according to future requirements.

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LEAGILE SUPPLY CHAIN:

Leagility, which links both lean and agile, was introduced by Naylor et al. (1999).

This strategy aims to build an agile response solution on a Lean platform, striving to
apply Lean principles to the point of decoupling, and agile principles beyond that point
to customers.

Leagile is defined as the combination of lean and agile paradigms that, applied to the
strategy of supply chain, respond, satisfactorily, to the volatile market demands (Hock
et al., 2001).

Leagile is the combination of the lean and agile attributes within a total supply chain
strategy.
 From lean e.g: it takes efficiency and continuous improvement.
 From agile e.g: it takes flexibility and responsiveness.

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A lean supply chain focuses on promising the best customer value for a product
ensuring the best quality. On the other hand, agile strategy ensures the minimum
waiting time to deliver a product. Hence, many researchers have advocated that a lean
focused supply chain model appears incomplete as agility became coveted. A number of
case studies is available in literature from different industrial prospective indicates the
growing interest of the leagile supply chain implementation.

As stated above, a leagile supply chain essentially consists of lean and agile supply chain
connected by means of a decoupling point. The significance of decoupling point in a
leagile supply chain is illustrated in Fig. 4 and it should be positioned best suited the
need for responding to the customer demand downstream yet providing level
scheduling upstream from the decoupling point. Fig shows a typical framework of
leagile supply chain based on the placement of DP. The choice of decoupling point is
solely based on the nature of the product and demand, and the total lead-time, for
example, in case of dairy industry, the decoupling point for milk may be placed at the
distributor level where milk could be supplied directly from the producer and packed in
various quantities as per demand.

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Distinct Attributes Lean Supply Chain Agile Supply chain Leagile Supply
Chain

Market demand Foreseeable Volatile Volatile and

unforeseeable

Product variety Low High Medium

Products life cycle Long Short Short

Customers ‘drivers Cost Availability and Service level

response time

Profit margin Low High Moderate

Dominant costs Physical costs Marketing costs Both

Inventory penalties Long- term contracts Immediacy and No storage space

volatile

Shopping policy Product shopping Guaranteed capacity Inventory at final

retailer

Information Highly desirable Compulsory Essential

enrichment

Forecasting Algorithm Advisory Both

mechanism

Local products Commodities Fashion products Products that

customers demand

Response time Essential Essential Desirable

compression

Losses elimination Essential Desirable Arbitrary

Fast reconfiguration Desirable Essential Essential

Strength Arbitrary Essential Desirable

Quality Market qualifier Market qualifier Market qualifier

Cost Market winner Market qualifier Market winner

Response time Market qualifier Market qualifier Market qualifier

Service level Market qualifier Market winner Market winner

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GREEN SUPPLY CHAIN MANAGEMENT:

Green supply chain management is defined as "the process of using environmentally

friendly inputs and transforming these inputs into outputs that can be reclaimed and re-
used at the end of their life cycle thus, creating a sustainable supply chain.

Green supply chain management is defined as managing the environmental effects of

“researching developing, manufacturing, storing, transporting, and using a product, as
well as disposing of the product waste.”

Green supply chain is the integration of eco-friendly methods into the conventional
supply chain so as to minimize waste and carbon footprints and increase efficiency.
While it has been well proven that effective supply chain design and management hold
strategic value for firms; managing environmental impact of supply chains creates
additional challenges in terms of product lifecycle management, product pricing,
inventory management, reverse logistics design, remanufacturing capabilities and
relationships with supply chain partners.

Green supply chain management framework

The various components of green supply chain management can be further understood
from Figure. While green design, green manufacturing, green remanufacturing, reverse
logistics and waste management are aspects of green supply chain management, it is
expected that such improvements would result in benefits to firms in terms of price
premium, cost reduction or consumer demand expansion which should lead to
increased profits.

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The term sustainable or green supply chain refers to the idea of integrating sustainable
environmental processes into the traditional supply chain. This can include processes
such as supplier selection and purchasing material, product design, product
manufacturing and assembling, distribution and end-of-life management. Instead of
mitigating harmful impact of business and supply chain operations, green supply chain
involves value addition and/or value creation through the operations of whole chain.
Undeniably, reducing air, water and waste pollution is the main goal of green supply
chain, while green operations also enhance firms’ performance in terms of less waste
manufacturing, reuse and recycling of products, reduction in manufacturing costs,
greater efficiency of assets, positive image building, and greater customer satisfaction

Green supply chain has a lot of benefits:

1. High customer loyalty
2. Reduces operation cost
3. Sustainability of Resources
4. Ensures regulatory compliance
5. Improves company reputation
6. Positive impact on environment
7. Enhances product quality
8. Digital Transformation helps in Reducing Risk
9. Creates a Competitive Advantage

Example: Green supply chain of child’s crib manufacturer

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===================================================================

REVERSE SUPPLY CHAIN MANAGEMENT:

 A reverse supply chain deals with the reverse flow of material, where the
product moves back from the end customer (point of use) to the manufacturer. It
can deal with either the entire product or a part of product (e.g., packaging
material like the bottles in which Coke is sold). A firm has to manage this process
during different phases of the product life cycle.

 There can also arise situations of product return at an intermediate stage of the
product life cycle, as observed in the recent case of Mattel, where the company
recalled its product because of lead paints in toys (In 2007, the global toy
manufacturer and marketer Mattel, Inc. recalled almost 800,000 Chinese-made
toys.)

There are four different types of reverse supply chains:

1. Returns Management: The process of managing the returns of products back to the
company.
2. Recycling: The process of taking used products and components and recycling them
into new materials.
3. Refurbishment: The process of taking used products and repairing them to be sold
again as new or like-new products.

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4. Resell: The process of taking used products and selling them as is, usually at
a discounted price.

A product can enter back into the supply chain under the following scenarios:
i. Commercial returns - Liberal retail policies and intense competition in the retail
sector are leading firms to provide customer friendly return policies. A 30-day, 60-day
or 90- day return policy often leads to large scale returns. Guide and Wassenhove
(2009) report that retailers such as Home Depot in the U.S. can have return rates as high
as 10% of its sales. Products that are returned to the retailer or reseller within these
stipulated time periods by customers are called commercial returns.

ii. End-of-use returns – Customers often tend to return their phones in return for
technological advanced phones, or under removal of operating system support, several
customers return their functional desktops, laptops, tablets, etc. These functional
products are considered as End-of-use returns.

iii. End-of-life returns – Products which are past their total life cycle usage and contain
no further utility for the customer are often returned back and are considered end-of-
life returns. Cathode ray television sets, small utility vehicles which are past their life
are considered end-of-life returns.

Reverse supply chains despite being different in its each unique case, generally has
following five key processes:
1. Product acquisition,
2. Reverse logistics
3. Inspection
4. Product disposition
5. Sale and distribution

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1-Product Acquisition : At acquisition stage, the product is collected from the

customer. There are three main sources of product acquisition: from forward supply
chains, which is associated with collection of defective or damaged products; from
an established RSC, called market-driven systems; or from the waste stream, where
the consumer has discarded the product. Market-driven systems have less variation
since they follow a minimal standard in quality. Although reverse supply chain may
include the same contact partners as the forward supply chain, generally the reverse
flows are partially or entirely supported by alternative channel partners such as
junkmen, scavengers, dealers, brokers and non-OEM remanufacturers.

2-Reverse Logistics : Due to growing concern of going green, sustainable

development, fierce globalised competition, future legislation, increased product
returns, environmental consciousness of customers and so on, reverse logistics
(RL) has gained increasing attention among researchers and practitioners worldwide. It
is “the process of planning, implementing, and controlling the efficient, cost effective
flow of raw materials, in-process inventory, finished goods, and related information
from the point of consumption to the point of origin for the purpose of recapturing or
creating value or proper disposal". RL involves planning, implementation and
controlling backward flows of raw materials, in-process inventory, packaged and
finished goods, from a manufacturing, distribution or end-use point, to a point of
recovery or to a point of proper disposal.

3-Inspection : The core objective of inspection is to know the quality level of returning
material and to select appropriate product disposition strategy for the same.

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4- Product disposition : If product upgrade is found to be the most suitable

disposition plan for a product, it is assigned to a reconditioning operation, such as
refurbishing, repair, or remanufacturing. Disassembly operation involves
complications. Due to difficulty involved in separating and sorting the components, and
the diverseness and complexity of materials, the process is predominantly manual.
There are four kinds of product disposition strategies which have further sub-types in
each of them:

i) Direct Reuse: It involves reuse or reselling the product immediately.

ii) Product upgrade: It implies repairing, repackaging, remanufacturing or
refurbishing the product. “Repair” involves returning the used products to "working
condition”. “Refurbishing” involves evolving used products up to a defined quality
level. “Remanufacturing” involves evolving the used products up to new product like
quality standards.
Iii) Materials recovery: It includes cannibalization and recycling. Cannibalization
involves recovering a limited set of reusable parts from used products or components.
For example, Aurora a US firm cannibalizes integrated circuits. The firm separates the
parts it needs from a computer and then tests, straightens, redips, polishes, and sells the
chips.

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SUPPLY CHAIN TECHNOLOGY TRENDS :

Supply chains are now used to support a company’s business strategies. Most
companies recognize their supply chain is a key business process versus a cost center,
as what was thought of in the past. Distribution networks are evolving from centralized
to distributed and then to hybrid. Companies are also utilizing multimode logistics and
transportation instead of a single mode. In addition, more companies are shipping
directly to their customers, in addition to channel shipping. These trends have resulted
in the growth in supply chain risk, including disruptions due to adverse events.

These trends lead to a variety of challenges including the need for improving
communication with suppliers, multisourcing of goods and services, careful safety stock
auditing, improved risk planning techniques, and the diversification of offering and the
customer base. Further, more firms are placing an emphasis on social and
environmental responsibility, which improved energy resource utilization, and reduced
material consumption. Technology can help companies meet these challenges.

Until recently, technology has been considered an enabler for improvements in

underlying supply chain and logistics operations. However, recent trends in society and
business, such as mobile computing, social media, and online retailing, have significantly
changed almost every aspect of the supply chain and logistics landscape. In this study
the following technologies were found to have a pervasive role in altering this
landscape:
 Maturing technologies
Based on industry study, the following technologies are considered maturing
technologies, whose aim is to improve service and efficiency.
• Optimization software
• Sensors/Telematics
• Cloud computing
• Data warehouse and integration
• Automated storage (AS) and retrieval
Current adoption levels for these technologies are at 35% and are projected to reach
80%_90% by 2019 (MHI, 2015).
 Growth technologies

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The following technologies are considered growth technologies, whose adoption rates
are currently about 20%, but are expected to grow steadily in the next 3_5 years (MHI,
2015).
• Mobility
• Wearability
• Data analytics
• Social media
 Emerging technologies
The following technologies are considered emerging technologies, with current
adoption rates of 10% (MHI, 2015). These technologies are viewed as disruptive in
nature and thus have the potential significantly to alter supply chain and logistics
operations in unforeseen ways:
• 3D printing
• Drones
• Autonomous vehicles
 Exponential technologies
These are technologies that have just begun to make their way into general use in
supply chain management.
• Blockchain
• Internet of Things
• Virtual reality (VR)
• Machine learning
===================================================================
ARTIFICIAL INTELLIGENCE (AI):

Artificial intelligence (AI), which supports the delivery of timely and accurate
information, tops the list of promising technology areas for the supply chain.
Technology innovation allows organization to streamline the supply chain, increase
agility and visibility, control inventory more efficiently, and reduce inventory costs.

The ability of a machine to perform human-like functions such as perceiving, reasoning,

learning, interacting with the environment, problem solving and exercising creativity to
form plans, make decisions and achieve goals. Use in supply chain planning:

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 Amplify the value of your existing processes and people with machine-assisted
planning, which can help you bridge the knowledge gap between experienced
and inexperienced planners, and gain real-time recommendations based on
historical and current data analysis.
 Improve your supply chain visibility and risk insight by using AI to track and
predict possible supply chain disruptions based on inputs and correlations
across multiple data sources, including weather forecasts, news and even social
media.

The main aim of integrating AI in the supply chain is to create a fully automated and
self-adjusted decision-making system. AI-powered supply chain management enables
businesses to accurately predict demand spikes and adjust the routes and volumes of
material flows.

Currently, a mere 12% of businesses are deploying AI in supply chain management, as

per a recent report from MHI and Deloitte.

Here are five ways in which AI can positively impact the Global Supply Chain:

i) Improving Overall Performance: AI is a disruptive technology that brings together

various forms of learning, supervised, and unsupervised. With the help of both these
forms of learning, AI can detect the issues in the company’s operational structure,
analyze the supply chain performance and adopt a four-pronged approach. To reduce
the areas that lower performance, increase those which enhance the functionality,
ensure compliance and finally ensure timely delivery of goods.

ii) Forecasting Demand : Demand forecasting is an integral part of Supply chain

management. There is a lot of data available for studying the demand patterns. The flow
of sales, the geographical navigation, the trajectory of the deliveries help an
organization to understand the trends in demand. AI can use the data to forecast
demand and plan for logistics to minimize wastages and losses.

iii) Better customer experience : The primary goal of supply chain management is to
ensure the timely delivery of goods to end-users. AI can greatly be used to monitor
thelevel of customer satisfaction and personalization. Companies can offer a bot service

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to oversee if the goods are delivered to the customers timely. They can also be used
immensely to address customer queries and build lasting relationships with them.

iv) Minimize Transportation Risks : One of the critical areas of logistics is the safe
transportation of goods. In transportation, there is a lot of scope for manual errors,
traffic rules, and accidents. AI can provide a lot of solutions to answer these. These
solutions can be effectively deployed to ensure the best traffic arrangements, consider
maximum safety and reduce wastages that may happen in accidents. Companies are
increasingly deploying AI and Machine Learning to avoid any kind of such untoward
incidents, or else they result in huge cost overruns.

v) Efficient and quicker sorting of goods : Sorting of goods can be one of the most
cumbersome and time-consuming processes when it comes to logistics. A lot of costs
also go into employing people only for sorting and packaging the goods. The larger the
company’s operations, the more is the time and costs that go into the process. Not only
does it leads to high costs, but it could also lead to a delay in deliveries. AI-Based
solutions for efficient sorting and packaging is a boon, especially in peak times.
================================================================================

ADVANCED ANALYTICS :

Advanced Analytics is "the use of new mathematical approaches and tools aimed to turn
data into new insights. One should think about regressions, forecasts, segmentation and
driver-analyses but also think about use-cases around you: e.g., the forecasting accuracy
of your Amazon deliveries or your smart Google maps route recommendations.

Advanced Analytics applications in Supply Chain:

The sole role of analytics is to support decision making. Through Advanced Analytics,
a supply chain can leverage more insights with more accuracy. This empowers to take
decisions better, faster and/or with more confidence. Specific use-cases include the
following:

 Create inventory visibility and visualize which products rotate at which speed
through your warehouse and why (decreased sales, increased returns). Use the
available data to segment your products in high- and low-rotating units and

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provide this as input to your warehouse manager to relocate goods and alter
safety stock levels.

 Derive root-causes of delivery promise failures such as vendors who deliver

to late, fulfilment partners who exceed average delivery times - and identify
supply-chain improvement initiatives.

 Get smarter into product development by leveraging data-driven insights on

your customer- and order base: what are my customers segments, how did they
grow over time, how are they in one region vs. another region, what are
their shared preferences, which products features do they like

 Reduce lead time by understanding when which drivers impact lead-time at

what impact: which parts increase the risk of production delay, which parts
require a strategic inventory? With no IT investment, a solid data-mining
exercise through your supply chain order-, production- and delivery data can
likely already identify low hanging fruit opportunities.

 Optimize inventory space and value by forecasting demand with accuracy. Do

you overestimate, you will likely overproduce and stack up inventory; do you
underestimate, you will miss sales. Through analytics we can analyse your
historical sales data and assess patterns driven by seasonality, partner
activity, marketing activeness, offline sales agents, weather or even country-
specific GDP. Turning these patterns into inputs, we predict sales and thus
prescribe needed inventory levels.

 Locate geographical growth opportunities by visualizing all order, delivery-

and customer-locations and deriving sweet spots for new sales hubs, production
sites or warehousing depots. Assess supply-chain merger potential by
visualizing overlapping supply-chain networks, assessing overlap and thus
assessing strategic added value.

 Assess failure patterns of production machines to understand which drivers

are recurrently causing failure (volumes, #batch switches, temperature, speed,
operator). Then translate these drivers into inputs building an early-warning-
trigger tool/model to pre-empt failure (first steps of predictive maintenance).

=========================================================================

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INTERNET OF THINGS (IOT):

Internet of Things (IoT) is a system that can establish the connection between the
interrelated computer systems, mechanical and digital machines and human computer
interaction. Although propounded in 1999 for the first time, IoT has made great
strides with the developments of hardware in recent years.

IoT is a network of physical objects connected to the internet. The IoT already plays a
significant role in the supply chain, but it will likely continue to grow in importance with
increasingly diverse applications. In just a few years, 50% of companies could be using
other advanced technologies to support supply chain operations.

IoT in manufacturing and supply chain can also be used to improve warehouse
management, fleet tracking, inventory control, and even technological and mechanical
maintenance. It could be even used to create entirely smart warehouses and fleets,
increasing the efficiency.

There are many brands and companies in logistics and supply chain where you can use
research and development technologies to reach the target of more than 100% shipping,
delivery, receiving, 30% faster order process, and 30% reduction in the cost of labor.

The Internet of Things goal is to guide you to the perfect control of all the moving parts
of your warehouse. It helps you reduce the risk and avoid the mistakes or accidents that
might generate losses in the supply chain by early detection.

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Sensors in the warehouse can control temperature, moisture, and other situations. Data
coming from shipping transports, vehicles, and the outputs themselves can be blended
to decrease fraud, duplication, alteration, and spoilage.

This system synchronizes all your data whether it’s automated or manual, it all goes
into an easy-to-access network that helps optimize the inventory control, labour
planning and consumer experience.

There are many other examples concerning location tracking, fleet management,
etc.

i) Asset tracking - All these years, the most commonly followed methods for asset
tracking were sequence numbers and barcodes. But with IoT, companies can expedite
the process of tracking goods, while adding more transparency too. With IoT sensors
and cameras, product developers can not only get data on the location of the product
but also get granular data on its status, at any point. For example, the concerned
authorities can check the time the product reached the store from the airport, the
temperature the product was being stored at, if the quality of the product was being
compromised anywhere, and so much more.
Right from the point of manufacturing to the point of consumption, IoT sensors gives a
clear picture of how the product is being treated on its journey to the store or customer.
This way, companies can get a tight hold of the product flow, which will ultimately allow
speedy deliveries, thereby enhancing customer experience.

ii) Fleet management - Along with asset tracking, another prominent place where IoT
helps supply chain professionals is in connecting the fleets and tracking the shipments.
Companies have to ensure that all their means of transportation or carriers are
connected with each other. For example, if there is a delay in taking off , then the vehicle
driver should be notified in advance. The driver can then use the precious time to
accomplish some other task rather than just wait. IoT helps companies achieve such
time effectiveness. Besides, IoT sensors can help companies to track other factors like
driver idle time, driving pattern, vehicle speed, or time taken to reach the store.

==========================================================================

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ROBOTIC PROCESS AUTOMATION (RPA):

The term robotics was defined by Brady (1985) as the intelligent connection of
perception to action. Since this connection is intelligent, AI’s role in robotics is
undeniable.

RPA, software robots backed with high-level ML capabilities and cognitive potential,
opens up a host of opportunities for the supply chain industry. RPA replaces all the
manual, labor-intensive, time-consuming, error-prone business operations while
allowing employees to focus on high-quality jobs. In our case, RPA helps the supply
chain companies to automate their back office activities, optimize their productivity,
and facilitate smooth movement of goods.
Let’s list down a few activities that can easily be handled by RPA in the supply chain
scenario:
 Order processing and transactions
 Order tracking with clients
 Email automation
 Internal reporting
 Supplier reporting
Irrespective of the movement of goods via any medium of transportation, the supply
chain and logistics industry has a plethora of beneficial and exciting opportunities
offered by new-age technologies to fit into the rapidly changing market circumstances
and fulfill the heightened customer expectations. But before companies leverage these
trending technologies, they should primarily analyze which technology will best fit their
business needs, identify specific requirements for technology adoption, identify relevant
solutions to fill in the missing gaps, and then adopt supply chain technological trends to
profit immensely.

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According to the Gartner report “global RPA revenue in 2021 is expected to be 19.5%
more than in 2020.” Forrester, a consulting company and Innovecs
partner, calculates that one in four employees working with the databases gets
information from software bots, which is a vivid example of RPA implementation in
2021. And with the course of the worldwide pandemic and demand for distant working,
RPA is getting more and more widespread. This software technology helps to build and
manage software robots emulating human activities and interacting with digital
business systems.

Benefits of RPA:

 Low technical barriers

 Increased accuracy
 Meeting regulatory compliance standards
 No interruption of work
 Increase in productivity

Robotics solutions boost the productivity of logistics operations with zero-defect,

helping companies to cut costs and meet customer demand.

i)Autonomous mobile robots (AMR) : These are small robots embedded with robust
sensor technology that can deliver inventory all over the warehouse. These robots
interpret the environment through sensors and computers, identify data on each
package and accurately sort it.

ii) Automated Guided Vehicles and Carts (AGVs, AGCs) : Automated guided vehicles

and carts are great solutions for large warehouses as they can transport inventory
around it following a track laid in your warehouse.

iii) Aerial Drones : Aerial drones scan locations for automated inventory without
markers to guide them. They also scan the inventory much faster than humans can and
immediately send data to your warehouse inventory management system.
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BLOCKCHAIN:

Blockchain is “a technology that enables people who don’t know each other to trust a
shared record of events,” according to Bank of England.

Blockchain was first introduced in a seminal work (Nakamoto, 2008). Blockchains are
implemented on a distributed network of computers, called nodes, with each node
representing a participant in the blockchain. The size of the network is indicative of
trust among the parties. Blockchain is essentially a bookkeeping method that chains
together ledger entries so that they are very difficult to modify later. This enables
groups of unrelated parties to jointly keep a secure and reliable ledger of transactions
recording a transfer of ownership of information between two parties. Instead of a
central system, a shared protocol is utilized employing consensus algorithms so that all
nodes agree upon what data comprises the legitimate blockchain.

Blockchain and the supply chain industry make a ‘power couple’. High-level traceability
with minimal involvement of middlemen is an important need of the supply chain
industry. And blockchain helps companies achieve this need.
As soon as we place an order for a product, we await its arrival. We check the shipment
details every now and then. With blockchain, we can track the status of the product in
real-time. We can retrieve the exact location of our package. Blockchain allows supply
chain professionals and courier companies to update a blockchain ledger in real-time,
which helps customers to track their products by themselves. The reasons for delay can
also be recorded on blockchain, which helps customers to have better visibility on why
a product is arriving late.

Smart contracts, one of the applications of blockchain, have built-in automation, which
makes a lot of sense for transaction and payment management. With the help of smart
contracts, sellers can payments to the middlemen when the product reaches the factory.
There will be no need for a separate team to work on raising invoices and carrying out
transactions.

Blockchain is a new technology that securely synchronizes the same information

across a distributed network of partners, such that all parties see the same thing. This
avoids the need for relying on a central intermediary to validate and synchronize
information and enables more information symmetry across parties. This feature alone

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can have profound benefits on reducing operational transaction costs, particularly in

supply chain and logistics operations. Fertile areas of application include sourcing, track
and trace, payment processing, logistics and shipping, supply integrity and safety, and
trucking, among others.

Like many new technologies, blockchain does have caveats and may not exactly live up
to hyped expectations without careful consideration. Access vulnerabilities, node and
software integrity, transaction curation and validation, and lack of standards are issues
that still need to be overcome. Also, early trials have shown that it is impractical to store
all information regarding every transaction in a blockchain due to system and data
processing constraints. Furthermore, while blockchain can eliminate functional
intermediaries to handle data, other intermediaries can still exist in the form of systems
and software.

Unless enterprises evolve their supply chain business and operational models, they may
cease to exist. Blockchain offers an alternative for enabling newer business models by
increasing efficiencies per the discussions in this chapter. Such efficiencies can improve
one’s ability to scale, and can help companies enrich their existing business models,
move them forward, or create newer ones.

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There are basically three types of blockchain systems, namely public blockchain,
private blockchain and hybrid blockchain (Niranjanamurthy et al. 2018). Each type has
both advantages and disadvantages, which allow them to meet the needs of various
applications:

(1) Permissionless (public); is the mostly used blockchain, anyone can participate in
the network without authorization by a third party and has access to full data
transparency for all participants. Blockchain uses an open ledger or so-called
“distributed open ledger”, which can enable all network participants to authenticate and
submit data. Examples included: Bitcoin, Ethereum, Litecoin, Lisk, Stratis.

(2) Permissioned (private); blockchain system uses a private ledger or so-called

“distributed ledger” and limits participations by central authority (mostly a company)
exercising the power to control as to who can view, read or validate transactions on the
blockchain. System is only accessible to selected members. Examples included:
Hyperledger Fabric, R3, Corda, Ripple, MultiChain.

(3) Hybrid (consortium); blockchain system combines both permissionless and

permissioned ledgers in a solution. Companies can secure background transactions with

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business partners on a private ledger, while also sharing product information with
customers on an open ledger. It also allows flexibility to invite more players into the
blockchain.
The blockchain is managed by a group of participants. A hybrid blockchain is secure and
helps to protect privacy. Examples included: XinFin, DragonChain.

Blockchain is an enabler for maintaining symmetric information across a network. It

can provide an alternative to realizing a consistent view of the same information
distributed across many nodes using the principle of “once and done.” Simply put, once
a transaction is completed, it cannot be repudiated. Embedded within the hash value is
transaction history information that cannot be easily altered or compromised, thereby
making the information immutable. This proof of provenance renders the information
as trustworthy when viewed by different participants at different nodes. The
distributed nature of blockchains is somewhat counter to the concept of large,
centralized databases. This feature also eliminates the need for an intermediary system
to house a centralized image of a piece of information, leading to cost savings in
transaction verification and auditing (a concept known as costless verification). It also
discourages transaction validation costs from outpacing transaction benefits, which is
characteristic of information asymmetry (Catalini & Gans, 2016). It remains to be seen
how the benefits of blockchain’s ability to cost-effectively disintermediate information
can outweigh the benefits of intermediation, such as curation and certification, as
the network scales.

Benefits of Blockchain for Supply Chain Solutions

Blockchain solutions can enable stakeholders to increase transparency, as well as
reduce cost and risk across the management of the supply chain.

 Increased traceability of material supply chain to ensure corporate standards are

met
 Lowered losses from counterfeit/gray market trading
 Improved visibility and compliance over outsourced contract manufacturing
 Reduce paperwork and administrative costs

Characteristics:
 Inherently Traceable
 Time-stamped

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 Censorship resistant
 Distributed ledger
 Near real-time
===================================================================

IMMERSIVE EXPERIENCE / TECHNOLOGY:

Immersive experiences such as augmented reality (AR), virtual reality (VR) and
conversational systems are changing the way people interact with the digital world. “In
supply chain, organizations might use AR along with quick response (QR) codes and
mobile technology to speed up equipment changeovers in factories,” said Mr. Titze.
“Immersive user experiences will enable digital business opportunities that have not yet
been fully realized within global supply chains.”

An immersive experience can be defined as a situation where you have the perception
of being in a virtual place, environment or situation different to the one you are in
currently. For this sensation to be realistic, it should at least involve your senses of
sight, sound and touch. As Google describes the technology, an immersive experience is
like diving into a virtual world.

Immersive experiences rely on three technologies: virtual reality, augmented reality

and mixed reality. These can be defined as follows:

i) Virtual Reality (VR):

Virtual reality is when a digital environment completely replaces the physical
environment. A contemporary example would be a computer game played with a virtual
reality headset. In VR, there's no sense of the real environment and no interaction with
it.

ii) Augmented Reality (AR):

Augmented reality technology is the superimposition of virtual content over a live-
stream image of the real world, a bit like the Pokémon Go game. This technology is
useful for providing additional information while completing tasks in the real world.

iii)Mixed Reality (MR):

As the name implies, mixed reality is a combination of VR and AR. While in some ways,
MR may be considered an advanced form of AR, the technology allows users to fully

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interact with virtual items superimposed on the real world, such as placing a virtual
piece of furniture in your home.

Creating an Immersive Experience in the Supply Chain:

There are a number of potential uses for immersive experiential applications in the
supply chain, particularly those related to on boarding, warehousing and operation of
complex manufacturing and processing systems. For example, Deloitte sees immersive
experience opportunities in product and process design, process visualization and
experience-based learning.

Possibly the most obvious applications are those associated with employee training.
Using immersive technologies can help new starts master the required skills faster and
with greater confidence. In other instances, MR devices can support supply chain
personnel performing daily tasks. For example, they can aid warehouse pickers by
guiding them to the right location and automatically recording bar codes while picking.

Examples of an Immersive Experience in the Supply Chain:

Immersive technology is already in use in numerous supply chain applications. Here are
some examples.

 Virtual automotive test drives :

The Jaguar Land Rover allows customers to conduct a virtual test drive of some
of their vehicles. This together with a 360-degree view allows prospective
customers to view the vehicle interior and by touching hotspots, to obtain
additional information.

 Virtual design :
Ford uses Microsoft HoloLens headsets to review design changes to vehicles as
though these were already incorporated into a real vehicle. A good example is
evaluating how changing door mirror aesthetics will affect the driver's view of
their surroundings.

 DHL's use of AR-based vision picking:

DHL is using an augmented reality system based on Google smart glasses that
gives operators a heads-up display showing inventory requirements and
location. This allows warehouse employees to pick items without needing to
reference hard copies or visually read inventory locations.

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==================================================================================

CONVERSATIONAL SYSTEMS:

AI-based conversational technologies let users gather information or perform functions

through speech and natural language. By integrating these conversational technologies
into devices or applications, your customers can do business with you—automatically—
by speaking or using online chat.

Conversational systems for supply chain management focus on using the automation
process to facilitate smooth management and reduce errors. Pairing the logistics system
with the inventory management chatbots can help track the demand and the
requirements related to the supply. Using Conversational AI can remove menial and
repetitive tasks like updating CRM, scheduling meetings, creating documents, and more.
It can help in improving the overall productivity by channelising the needs to more
essential aspects.

A business has multiple inventories to manage. Right from the raw material to the
finished product, everything needs to be addressed most appropriately. A Zurich Insider
report stated that 63% of the companies still do not use technology or monitor the
supply chain performance.

Automating the supply chain process presents better stock visibility, data tracking, and
benchmarking management. Collecting inputs can ensure smooth business operations.

Conversational Solutions For Logistics And Supply Chain:

Businesses can optimize supplier, distributor and delivery experience with

Conversational AI solutions like chatbots on the messaging channels that their
customers are already on, such as WhatsApp, SMS, Telegram, Meta Messenger, etc. The
conversational messaging solution can help businesses:

 Get pre-trained logistics-specific AI models for automating processes like pre-

booking, booking, customer support, payment, and consultative selling
workflows
 Provide a smooth experience for new prospects and nurture them from your
website/app. Turn random visitors into loyal customers.
 Print and paste QR codes on the packaging of the shipments and facilitate easy
returns, reorders, refunds, etc.

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 Schedule delivery and returns of stocks conveniently on a chat-based interface

hosted on your favorite messaging channel.
 Reduce customer wait times considerably. Enable suppliers and distributors to
place orders and resolve their payment-related queries quickly.
 Support suppliers and distributors round-the-clock with the AI-powered
tracking assistant. Enable them to handle orders in real-time at all times.
 Get AI-powered self-serve conversational tools specific for your logistics and
supply chain workflows.
 With advanced APIs, get pre-built, customisable sequences to plugin, use and
accelerate the automation of key logistics and supply chain workflows.
 Interact and transact with your suppliers, distributors and delivery teams across
30+messaging channels.

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