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Moving to an Autonomous Supply Chain: Q&A with Capgemini’s Joerg Junghanns – Part 1

 

Introduction

Supply chain management is an area currently facing considerable pressure and is a key target for transformation. NelsonHall research shows that less than a third of supply chain executives in major enterprises are highly satisfied with, for example, their demand forecasting accuracy and their logistics planning and optimization, and that the majority perceive there to be considerable scope to reduce the levels of manual touchpoints and hand-offs within their supply chain processes as they look to move to more autonomous supply chains.

Accordingly, NelsonHall research shows that 86% of supply chain executives consider the transformation of their supply chains over the next two years to be highly important. This typically involves a redesign of the supply chain to maximize available data sources to deliver more efficient workflow and goods handling, improving connectivity within the supply chain to enable more real-time decision-making, and improving the competitive edge with better decision-making tools, analytics, and data sources supporting optimized storage and transport services.

Key supply chain transformation characteristics critical for driving supply chain autonomy that are sought by the majority of supply chain executives include supply chain standardization, end-to-end visibility of supply chain performance, ability to predict, sense, and adjust in real-time, and closed-loop adaptive planning across functions.

At the KPI level, there are particularly high expectations of high demand forecasting accuracy, improved logistics planning and optimization, leading to higher levels of fulfillment reliability; and enhanced risk identification leading to operational cost and working capital reduction.

So, overall, supply chain executives are typically seeking a reduction in supply chain costs, more effective supply chain processes and organization, and improved service levels.

 

Q&A Part 1

JW: Joerg, to what extent do you see existing supply chains under pressure?

JJ: From a manufacturer looking for increased supply chain resilience and lower costs to a B2C end consumer obsessed with speed, visibility, and aftersales services, supply chains are now under great pressure to transform and adapt themselves to remain competitive in an increasingly demanding and volatile environment.

Supply chain pressure results from increasing levels of supply chain complexity, higher customer expectations, a more volatile environment (e.g., trade wars, Brexit), difficulty in managing costs, and lack of visibility. In particular, global trade has been in a constant state of exception since 2009, creating a need to increase supply chain resilience via increased agility and flexibility and, in sectors such as fast-moving consumer goods and even automotive, hyper-personalization can mean a lot size of one, starting from procurement all the way through production and fulfillment. At the same time, supply chains are no longer simple “chains” but have talent, financial, and physical flows all intertwined in a DNA-like spiral resulting in a (supply chain) ecosystem with high complexity. All this is often compounded by the low level of transparency caused by manual processes. In response, enterprises need to start the journey to autonomous supply chains. However, many supply chains are still not digitized, so there’s a lot of homework to be done before introducing digitalization and autonomous supply chains.

JW: What do you understand by the term “autonomous supply chain”?

JJ: The end game in an “autonomous supply chain” is a supply chain that operates without human intervention. Just imagine a parcel reaching your home, knowing it didn’t take any human intervention to fulfill your order? How much of this is fiction and how much reality?

Well, some of this certainly depends on major investments and changes to regulations in areas such as sending drones to deliver your parcels, flying over your neighborhood, or loading automated trucks crisscrossing the country with nobody behind the steering wheel; major steps in lowering costs and improving customer satisfaction can already be undertaken using current technologies. Recent surveys show that only a quarter of supply chain leaders perceive that they have reached a satisfactory automation level, leveraging the most innovative end-to-end solutions currently available.

JW: What benefits can companies expect from the implementation of an “autonomous supply chain”?

JJ: Our observations and experience link autonomous supply chains to:

  • Lower costs – it is no surprise that supply chain automation already helps to lower costs (and will do even more so in the future), combining FTE savings and lower exception handling costs coupled with productivity and quality gains
  • Improved customer satisfaction – as a customer you may ask, why should I care that the processes leading to the delivery of my products are “no touch”, that it required hardly any human intervention? Well, you will when your products are delivered faster, and that from order to delivery your experience was transparent and seamless, requiring no tedious phone calls to locate your product(s) or complains about delivery or invoicing errors!
  • Increased revenue – as companies process more, faster, with fewer handling and processing errors along the way, they create added value for their customers and benefit from capacity gains that eventually affect their top line, particularly when operational savings are passed on to lower delivery/product prices, thus allowing for a healthy combination of margin and revenue increase.

We have seen that automation can do far more than simply cut costs and that there are many ways to implement automation at scale without relying on infrastructure/regulation changes (e.g., drones) – for example, by leveraging a digitally augmented workforce. Companies have been launching proofs of concept (POCs) but often struggle to reap the true benefits due to talent shortages, siloed processes, and a lack of a long-term holistic vision.

JW: What hurdles do organizations need to overcome to achieve an autonomous supply chain?

JJ: We have observed that companies often face the following hurdles when trying to create a more autonomous supply chain:

  • Lack of visibility and transparency – due to 1) outdated process flows, and 2) siloed information systems often requiring email-based information exchange (back and forth non-standardized spreadsheets, flat files)
  • Lack of agility (influencing/impacting the overall resilience of the supply chain) – the inability to execute on insights due to slow information velocity and stiffness in their processes, often focused on functions as opposed to value-added processes cutting across the organization
  • Lack of the right talent – difficulty in finding talent in a very competitive industry with new technologies making typical supply chain profiles less relevant and new digital profiles often costly to train and hard to retain
  • Lack of centralization and consolidation – leading to high costs, poor productivity, and disjointed technology landscapes, often unable to scale across the organization due to a lack of a holistic transformation approach and proper governance.

One thing that many companies have in common is a lack of ability to deploy automation solutions at scale, cost-effectively. Too often, these projects remain at a POC stage and are parked until a new POC (often technology-driven) comes along and yet again fails to scale properly due to high costs, lack of resources, and lack of strategic vision tied to business outcomes.

 

In Part 2 of the interview, Joerg Junghanns discusses the supply chain flows that benefit from automation, describes client case examples, and highlights the success factors, adoption approach, and key technologies behind autonomous supply chains.

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