Transforming the Global Supply Chain

Yesterday's supply chain won't survive in today's business world.

To save costs and decrease turnaround time, manufacturers typically turn to the supply chain. They break it down so individual product parts are made in different areas of the world during each stage of production.

From the pen in my pocket to the shirt in which it sits to the coffee I’m drinking, it’s all the same story – a complex, global supply that’s designed to get products from point A to B, on time and on budget.

But today’s supply chain must drastically change. The current model of sourcing, manufacturing and distributing to get products to consumers quickly and efficiently is outdated.

And while there is much experimentation going on in the market, there is no alternative model to take its place. In short, the supply chain remains largely segmented and non-digitized.

A new supply chain

The global supply chain of a cotton shirt (click to enlarge).

How do we move forward? The key first step starts with understanding consumers’ wants, needs and desires – and then working upstream.

Brands must translate the huge amounts of information at the local level into demand signals and then digitize the entire supply chain to be more flexible and nimble. This will improve speed to market and reduce excess inventory and cost.

New predictive tools and technologies may transform the supply chain. IBM Metro Pulse powered by Watson combines a diverse set of time-sensitive, hyper-local city data at a neighborhood level — such as weather, local events, traffic or consumer movement — with business data and then applies cognitive computing so brands can more easily make business decisions. This greatly increases MAPE forecast accuracy.

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This new system can significantly improve dispute resolution and helps to maintain trust.

The blockchain, which digitizes transactions between parties to create an unalterable record, combined with Internet of Things (IoT) sensors to track the physical movement of goods, can fundamentally change the way products are managed throughout the supply chain.

This combination provides full visibility across the entire supply chain from product conception all the way to the customers’ hands. As goods move across the ecosystem of suppliers, manufacturers and distributors to store shelves, or B2C distribution centers, and ultimately to consumers, each participant can have secure end-to-end visibility the entire time.

This new kind of system can establish a single version of the truth that significantly improves dispute resolution and helps to maintain trust.

An additional benefit is the ability to authenticate raw materials, production methods and means of distribution. Whether it’s confirming conflict-free diamonds, the use of ethical factories or temperature-controlled shipping, blockchain can verify the origin, provenance and authenticity of each step in sourcing, production and distribution. This protects suppliers, buyers and shippers against theft and counterfeiting, and provides consumers with a higher degree of brand trust.

Tapping into the future

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Digitizing the global supply chain is the future of our industry.

This is only one exploratory example of how digitizing the global supply chain will create new business models. Over time, technology such as 3D printing may have an even more profound impact.

Regardless of the technology, digitizing the global supply chain is the future of our industry. The digital supply chain will make brands more flexible and nimble so they can integrate customer feedback continuously and increase the overall collaboration between consumers, brands, retailers, manufacturers and design partners.

Still, the most difficult part is transforming the culture. Brands need to begin changing how they think about the supply chain and adopt a philosophy of experimentation. If they want a continuous flow of innovation to make and keep their customers happy, they must experiment with the creation and design of a new global supply chain model – or risk falling behind those who do.

This article was first published on the IBM Think blog and was republished with permission.

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Steve Laughlin is General Manager of Global Consumer Industries at IBM.

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