Key Supply Chain and Logistics Trends to Watch in 2017

“The digital transformation is no longer just a buzzword.” This was a well-fitting conclusion from Prof. Dr. Raimund Klinker at last year’s international logistics congress in Berlin. For several years now, we have all been aware of the fact that processes (especially in logistics, but also in many other economic areas) are becoming more and more digitalized. This trend will accompany us for the next five years, too. There are, however, other changes along the supply chain accompanying digitalization – changes in procurement approaches and along internal delivery chains, in interactions with partners, suppliers and customers as well as when creating new and modifying existing business models. Here is a look at some of the trends to watch in 2017:

1. Consistency is in the past – the business model of tomorrow is versatile

Both logistics expertise and the understanding of cost-efficient delivery and value-added chains are of the utmost importance, but not quite enough. The businesses from which we will hear the most about in 2017 will be those with particularly deep IT knowledge, intuition with regard to the rapidly changing customer demand, and advanced digital capabilities. Having reached these competencies, Google and Apple might pose considerable challenges to the new automobile industry (even though the hardware sector may stay unaffected). At the same time, Amazon will be included in the list of large logistics companies.

In order to ensure an agile and flexible workflow within the organization, the necessary groundwork must first be developed. This requires flat hierarchies and short decision paths. This is the only way that digital innovation, which usually takes years to implement, can be quickly prepared for use in order to compete on an international scale.

2. Digital transformation instead of change resistance

Actual business operations have shifted into the virtual world. Companies without a ‘virtual counter’ will lose their customers in the long-run. According to a study from the German E-Commerce and Distance Selling Trade Association, online trading grew by twelve percent in 2015. In 2016, this number will probably be even higher once the final reports are in. IT experts, digital natives and data scientists are vital for this development.

IT managers have to co-develop the digital transformation opportunities for their companies, even outside the classic online trade. Small and medium sized enterprises and wholesale operations are not exempt from the digital transformation. This shift requires openness of the management team toward disruptive, sometimes even paradoxical sounding ideas and changes of supply chain processes. In this industry, you will often find rigid processes and a reluctance to take risks. This resistance to change restricts innovation advancement and impedes competitiveness whenever the supply chain is undergoing modifications. Use 2017 to step outside that comfort zone and begin the transformation, before it is too late.

3. Breaking down digitalization: cross-level data usage

Various movement and traffic data is generated across all levels of the supply chain: when purchasing, in the sales department, in production, across the distribution network and in the warehouse. Yet there are not many who use this data efficiently, despite the fact that data rules the new world.

At present, the data is notably collected in areas of customer support and customer acquisition. The use of Customer Relation Management (CRM) and ERP systems is quite common. Moreover, the demand to display management-relevant key figures graphically and generate the right evaluations with a few clicks is steadily growing. “Business Intelligence” is on the rise. But what about the data from internal networks and the internal supply chain? I expect the digitalization of small-part, deeply integrated processes in the supply chain to become a trend in 2017. The automation of routine supplier orders, the increasingly employed VR-driven acquisition of movement data and the merging of suppliers and partners onto one internal planning platform will all be trends to watch, and implement in 2017. Only those who share data can expect to profit from better results.

4. The customer dictates the rhythm

In the coming year, not only in terms of individualized production, but also in series production and in trade, businesses will be increasingly driven by the end of the value-added chain – meaning the customer. According to this year’s trend survey from BVL International, increasing “complexity” is also an accompanying factor. Rigid, old processes, for which the production machine set the pace in the past, are outdated. The future of the industry will be networked and scalable. This means that communication within supply chains will be thorough, and even medium-sized enterprises will be able to afford technological solution concepts. These approaches should enable the industry to be in control of the aforementioned complexity while increasing market orientation.

Conclusion

New, unexpected and innovative ideas and developments in manufacturing, trade and IT might surprise us in 2017. In order to survive in today’s market, all these different areas must be bridged together. Digital data experts and professionals supported by intelligent software systems are, therefore, imperative for successful operations. Increasing complexity within the supply chain can be kept under control through the prioritization of the deluge of data and the effective employment of important information. It will also be important to call upon human expertise at the right moment and integrate this knowledge into the digital strategy. In the context of customer satisfaction, all of this should help ensure long-term competitiveness.

Are you prepared for the innovations and trends in 2017?  What topics will define this year in your opinion?

This article was originally written by Ludger Schuh in German and was published on the BVL blog (National Logistics Association – Germany). It was translated by the Inventory and Supply Chain Blog Team. The original article can be read here.