The Changing Role of IT in End-to-End Supply Chain Management

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Business processes are shifting. Technology is evolving. The Internet of Things (IoT) is exploding. Is your global end-to-end supply chain management (SCM) strategy set to keep up? Industry 4.0 is here, and it’s bringing with it a whole new world, one that’s likely going to involve substantial change to your IT infrastructure. By 2020, Cisco predicts there will be 50 billion IoT connected devices. Gartner believes this will add $1.9 billion in economic value, resulting in IDC’s forecast of $7.1 trillion of IoT solutions sold within that same timeframe. Availability and utilization of data will be key in driving that growth.

Doing More with Available Data

The McKinsey Global Institute, a leading technology research firm, says less than one percent of available data is currently being accessed by businesses – who primarily mine it for alarms and real-time control. They say so much more can be done to use that data to help transform business processes and enable new business models through the use of optimization and prediction. Industry 4.0 can’t just be driven by technological advances. There has to be strategy behind the selection, deployment and interaction of these new devices and networks. Zoltan Pekar, the VP of Roland DG’s Global SCM Division, recently discussed this very topic at Kinexions, the Kinaxis annual user and training conference. During his presentation, he noted two emerging technologies his company is focusing on as they move toward the future – artificial intelligence (AI) and machine-to-machine (M2M) interfaces. Both need to be based on big data analytics, advanced algorithms and human-machine interfaces. They focus on using data for prediction and optimization, implementing machines and AI to manage the day-to-day, freeing up Roland’s people to focus on exception management and innovation. Pekar believes one of the core competencies driving Industry 4.0 is the next revolution of supply chain management. SCM 4.0 is a critical component to successfully completing this paradigm shift.

The Rise of End-to-End SCM 4.0

For Roland DG, SCM plays a connecting role in its “glocal” orchestration. No, that’s not a typo. Glocal is what Pekar describes as a blend of global integration and local responsiveness. And at the heart of that? Global SCM. It bridges the market, and its associated functions (sales, marketing, service), with manufacturing (including R&D). The company is using a hybrid of lean and agile to execute its SCM. What Pekar and his team quickly realized was that Industry 4.0 requires SCM 4.0 in order to succeed. He says sustainable growth through business creation and a shift of business models is necessary. According to Pekar, SCM 4.0 is digital, agile and data-driven. It’s sensing, intelligent and social, and provides network-wide value through real-time, responsive control. It acts as the management system for Industry 4.0 and provides the backbone for new business context involving AI and IoT, and a new corporate culture, strengthened by collective leadership.

SI&OP as the Foundation

Focused on creating an integrated global system that can better predict the future, and in turn support sales and production planning activities, Roland DG used sales and inventory and operations planning (SI&OP) as the foundation for its move to Industry 4.0. SI&OP functions as a global control tower in managing Roland’s data-driven flows. With continuous and collaborative SI&OP, the company has been able to improve visibility into issues, reduce resolution time and achieve alignment across business functions; Collaborative demand planning that’s driven by the global supply chain. Pekar’s hope is to reduce active demand planning to a two-week cycle and active inventory management to a one-week SCRUM cycle. That AI and M2M I mentioned earlier is how. Plan and do will be executed by machines, enabled by IoT and a new IT infrastructure. Check and act will be controlled by humans, allowing for intuition and compromise to play a role. The role of IT within global SCM is expanding thanks to rapidly changing technologies and a new level of connectivity. Big data, advanced algorithms and analytics and IoT are leading us down a path of data use for optimization and predictability. The impacts on business revenue and growth, as well as global SCM is huge, but there has to be a driving strategy behind it all. Industry 4.0 requires SCM 4.0. SCM 4.0 requires IT investment and restructuring, as well as a corporate shift in culture. All of it requires a clear strategy with end-to-end, interconnected data, people and processes at its heart. What role has IT played in your global SCM strategy? Let us know in the comments area below.

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