Investing in Supply Chain Technology: Don’t Wait for ‘Right Time’

By August 27, 2019Power of the Profession
190822 August Cover

Supply chain leaders face countless challenges each day. They are constantly being asked to run a more efficient, agile and lower-cost supply chain operation. As the pressure on leaders continues to increase, and with a potential recession looming in the United States, many continue to look to technology as a key component of their strategy.

Supply chain leaders invest in new or replacement supply chain technology for a variety of reasons, as seen in the figure below.

190822 August Graphic 1 Web

As highlighted, the three biggest factors motivating organizations to invest in supply chain technology over the next three years are:

  • Reducing operating and support costs
  • Enhancing decision making
  • Customer expectations or demands

We know the reasons and motivations for organizations to invest in technology, but what technologies are organizations investing in? Are leading supply chain organizations investing in the latest and greatest technology trends or are they focusing more on foundational technology to run their day-to-day operations?

The answer? A bit of both.

But before we go any further, let’s define what we mean by foundational versus emerging.

Foundational Technology: These are technologies that most companies view as a necessary base, core or “foundation” to effectively run and execute their day-to-day operations. Examples include software and solutions such as:

  • Supply chain planning
  • Warehouse management
  • Order management
  • Transportation management
  • Manufacturing execution
  • Product lifecycle management

Emerging Technology: These are technologies that are newly formed or their use case for supply chain has recently become more prominent. Many organizations are implementing or exploring how these technologies can further enhance their supply chain capabilities. Examples include software and solutions such as:

  • Artificial Intelligence
  • Internet of Things (IoT)
  • Robotic Process Automation (RPA)
  • Autonomous Things
  • Blockchain
  • Digital Twin

Leading supply chain organizations are viewing their technology investment strategy with a dual perspective, focusing on both foundational and emerging technology. First, there is a continued focus on upgrading and expanding the capabilities and reach of foundational technology. During the research process for the Gartner Supply Chain Top 25, we spoke with 39 companies that shared which foundational technologies they implemented or upgraded in 2018. All of these organizations upgraded or implemented at least one foundational supply chain technology in 2018 and the vast majority (85%) implemented or upgraded three or more. The table below provides a breakdown:

190822 August Graphic 2 Web

Remember the reasons organizations are investing in supply chain technology? Those higher percentage numbers for supply chain planning, visibility and transportation management are all related to reducing costs, improving decisions and customer expectations. Regardless of the motivating factors, organizations are continuing to look at foundational technology to support and enhance their supply chain capabilities.

But what about emerging technologies? We asked the same 39 companies if they conducted pilots or implemented emerging technologies in 2018. As was the case with foundational technologies, all of these companies had piloted or implemented at least one emerging technology in 2018 and an even higher majority (92%) had done so with three or more. The table below provides a breakdown:

190822 August Graphic 3 Web

Once again, it is easy to see the higher percentages for advanced analytics, RPA and IoT and relate them back to the motivations of reducing costs, improving decisions and customer expectations.

But what does this all mean and what should you take away from these statistics?

For more mature supply chain organizations, the higher percentages for emerging technologies make sense. Those organizations will have invested earlier in foundational technologies and are now in position to explore what newer and emerging technologies can do to enhance their operations.

Different industries and strategies will focus on specific technology areas and may avoid others. For example, retailers may not see the same level of potential benefits as an industrial manufacturing company in the use of a digital twin. Or a company that has made a strategic decision to outsource their transportation function will not be implementing a transportation management system.

Finally, leading companies get ahead, or widen their competitive gap, over their competitors by not being risk averse in uncertain times. While many companies begin to reduce spending or delay investments in new technology when economic warning signs start to appear, leaders move ahead with their plans.

There are three things that you should remember when deciding if now is the time to invest in new technology:

  • If your organization falls into a lower level of supply chain maturity, put more focus on the foundational technologies first. You cannot build a solid house without a strong foundation.
  • Make sure you identify, pilot and implement technologies that align to your unique business and industry needs. Don’t get caught up in hype and buzzwords.
  • Be bold and don’t avoid technology investment in downturns. Seize on opportunities when your competitors may become hesitant and leverage the right technology, both foundational and emerging, to distance yourself from the pack.

The pace at which technology is evolving has never been faster. The supply chain technology market is filled with cutting-edge capabilities and constant innovation. Don’t wait for the perfect time to purchase and implement technology. If you do, there is a good chance your competition will be waving as they pass you by.

Brock Johns, Principal Analyst, Gartner Supply Chain

 

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