Michael Hu, Principal, A.T. Kearney & Sean T. Monahan, Partner, A.T. Kearney
Advances in digital technologies such as the Internet of Everything, Deep Learning, 3D Printing and Big Data are expected to disrupt business models and their respective supply chains.
Things get even more interesting when digital technologies converge to create synergistic interactions, leading to more powerful and less predictable disruption. Consider how the convergence of three digital technologies – Artificial Intelligence (AI), Internet of Everything and cloud based mobility–could impact so-called Last Mile home delivery. Embedded in Google-style driverless cars Al algorithms would allow real-time route optimization– becoming even more effective when cars start interacting with sensors embedded in phones, buildings, and other smart cars equipped with cheap, ubiquitous sensors. Advances in mobile commerce applications will allow consumers and retailers to intuitively coordinate real-time order delivery and drop points based on location and availability.
The Rise of Platforms
As supply chains become more digital, they increasingly benefit from platforms–sets of common digital technology-powered processes, tools and approach allowing users to create value by adding products and services in mutually synergistic ways.
Platforms can be internal, such as model development in the automotive industry that share common design blueprint, components and sub-assemblies. Or, they can span industries as in the case of smart-phone operating systems where Mac OS and Google’s Android provide developers a common set of software APIs to rapidly develop apps; and Facebook (social media); Google (online advertising); and Uber(public transportation). The pace of new platform creation increases as disruption from digital technologies accelerates.
Platforms create synergies in two ways. First, platforms provide users with sets of standardized tools and processes. Second, platforms allow users to create and harness mutual synergy from each other. In the Google Android case, app developer benefit from increased consumers of Android based tablets and consumers in turn are more attracted to Android as more developers offer innovative apps. As platform grows in its number of users, the resulting synergistic benefits amplify and grow disproportionately.
Informational Supply Chain Platforms
Two types of platforms are emerging in future supply chains – Informational Supply Chain Platforms and Physical Supply Chain Platforms.
Informational Supply Chain Platforms are foundational sets of technologies and processes promoting supply chain information sharing and coordination. The Last Mile Digital Marketplace, for example, is an emerging information platform for same day e-commerce home delivery. (Figure 1). Time-pressed consumers use a smart phone to browse and shop a broad range of products aggregated from nearby participating retail stores. Customer orders are “shopped” to nearby independent couriers – taxi, limo, and other delivery professionals– for pick-up and delivery to the customer. It also facilitates frictionless confirmation, payment and consumer survey activities.
The platform unlocks increasing mutual synergies for its various participants as a function of its install base. Greater retailer participation gives consumers broader assortment choices and increases the likelihood of finding the right inventory nearby. Connecting more couriers improves chances for same day order fulfillment and delivery. A larger mobile shopper base creates both critical density for cost effective delivery and valuable digital shopper information for platform owners around which to create additional “plug in” services and applications. Startup efforts like Google Express, Shuttl, and Task- Rabbit are all variations of this type of platform.
Physical Supply Chain platforms
A Physical Supply Chain Platform is a foundational set of digital enabled physical assets and technologies–warehouses, factories, robotics, sensors, etc. – which companies leverage to enable breakthrough physical product handling and flow performance.
Consider the following future UPS “Printed Supply” business that illustrates how a Physical supply chain platform might operate.
In this scenario, business-to-business (B2B) companies requiring last minute critical production and manufacturing spare parts can easily search an aggregated digital catalog of products across the global supply base using a UPS’ orchestrated online repository. When an order is placed, UPS leverages its network of 3D printing facilities co-located with its 528 global UPS Supply Chain Solution centers and network of 1,990 UPS Stores to real-time print products for Same/Next Day delivery across its logistics fleet. Traditional parts Original Equipment Manufacturers (OEMs) simply have to make their product blueprints and CAD design available to UPS for printing. They are paid commission on subsequent orders. This hypothetical “print and deliver” platform replaces today’s multi-step supply chain with a simple one-step operation, drastically reducing handling and transportation costs while improving lead-times.
Adopting Platform Thinking
What is important for executives is not predicting the exact future supply chain platforms that will emerge in their sectors or across supply chain functions, but how to integrate platform design thinking into their future supply chain strategy design:
• Future Proofing: Incorporate tools for developing a “futurist perspective” on industries and markets and developing flexible models for thinking about and designing supply chain of the future.
• Economic Analysis: Develop an understanding of the economic value-creation potential of high-priority, future supply chain platforms; assess top line (service, innovation, lead time) and cost savings impact the platforms will have on your current supply chain model as well as those of your suppliers, partners and even competitors. What is the end-to-end win-win potential?
• Identity: Decide if you want to be a leader in managing and building the platform for others in the eco-system or whether will you be a fast follow. What are the advantages and disadvantages of such actions?
• Value Sharing: Understand value-sharing dynamics between your company and other users of future supply chain platforms including platform switching costs and barriers to entry.
As digital technologies proliferate and embed themselves across supply chains, they will inevitably rewire and reconfigure existing firm centric models into industry platforms. The question is not “If” or “When”, but how best to anticipate and get ahead of supply chain platform disruptions.