2020 Digital supply chain survey

DRAFT

2020 Digital supply chain survey

FROM DISRUPTION TO DIGITAL OPPORTUNITY

A collaborative research initiative conducted by Grant Thornton, the Manufacturing Leadership Council and the National Association of Manufacturers

2020 Digital supply chain survey 2

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Contents

Overview

Finding 1 : Reassessing risk and resiliency

Finding 2 : New budget priorities

Finding 3 : Accelerating digital maturity

Finding 4 : Predictive insights and augmenting the workforce

Finding 5 : Digitally driven redesign

Future-proof supply chains

Contacts 26


It’s not over yet, of course, but the intense initial panic around disruptive global COVID-19 lockdowns in the spring of 2020 has since been tempered by reactive restructuring and partial recovery. Manufacturers are now taking a step back and reassessing both the impact so far and the potential implications for the future.

Conducted in the early fall of 2020, new research suggests there are clear indications that the pandemic has highlighted numerous areas of deficiency in manufacturing supply chain operations. These deficiencies need urgent attention to mitigate future risks, streamline operations and minimize potential vulnerabilities.

Generally lower supply chain budgets are planned for 2021 in light of lost business and continuing economic and political uncertainty. With costs continuing to rise over the past few years, manufacturers have realized their level of digital maturity is still relatively low. Many are seeking to grasp the opportunities offered by increased digital adoption.

As a result, many are now reprioritizing their future supply chain spending while rapidly accelerating their digital investments. This will provide them with the advanced tools they need to help control costs, improve visibility, reduce risks, gain more predictive insights, and augment their human workforce with a variety of supportive and increasingly autonomous technologies.

Overview


There’s no doubt the pandemic has had a disruptive impact on many manufacturing companies and in many areas of activity.

Three-quarters of respondents reported some level of pandemic-related supply chain disruption. Roughly half had to rapidly reforecast demand, almost a third had to reduce production, and two in five began to identify new suppliers as their existing global networks tried to cope with the initial disruption.

Yet, despite such intense COVID supply chain disruption and the possibility of other future supply chain risk factors, 41% of manufacturing respondents still reported having no supply chain risk management or modeling capabilities in place.

What kinds of supply chain risk management and modeling capabilities do you have in place today? Select all that apply.

None

Subscription-based risk models from external providers

Situational or scenario-based planning that follows a cadence

Systematic end-to-end business continuity planning to mitigate risks of supply chain disruptions that uses sophisticated

modeling capabilities

41%

9%

46%

11%

Finding 1

Reassessing risk and resiliencyOnly 23% of manufacturers say they are very capable of identifying supply chain risks.


Only 11% of companies reported having truly systematic end-to-end business continuity planning in place to mitigate risks of supply chain disruptions. The most common approach is the use of situational or scenario-based planning, cited by 46% of respondents. A smaller number (9%) use external providers and depend on their subscription-based services.

Reacting rapidly to a sudden disruption is less effective without practical risk management and modeling tools, especially for medium-size and smaller companies. What the survey reveals is an apparent opportunity for companies to further explore more formal and extensive risk management approaches. This will allow them to increase their responsiveness to disruption and improve the resiliency of their supply chains.

“Supply chain disruptions such as COVID-19 are a low probability and rare occurrence, but they have major financial impacts in comparison to higher probability disruptions such as equipment failures or short-term labor constraints.” Eaton said.

“Many companies suffer from a failure to properly track, quantify and interpret risk factors” Grant Thornton National Supply Chain Practice Leader Jonathan Eaton

Proper interpretation of risk is wheremost clients struggleUnderstanding the actual probability of a disruption and correctly modeling it relative to all other possible events is a criticalsuccess factor for effective risk management:

FukushimaNuclearfailure

Covid-19Pandemic

Politicalinstability

Naturaldisaster

Tradewar

Inventoryavailability

Laborshortage

Equipmentfailure

Actualdistribution+- Normal

distribution

Financial impact on your business$ Gain$ Loss

Prob

abili

ty o

f dis

rupt

ion

Most risk management capabilities assume a normal probability of known risk factors to occur; but they miss the unexpected, low probability events that result in the most severe supply chain disruptions like the COVID-19 Pandemic


Identifying risk Even with such tools available, many companies still have significant problems in identifying supply chain risk.

When asked how respondents would rate their company’s ability to identify risk, only 23% say they rate their efforts as “very capable.”

Over two-thirds of companies (71%) admit they are still only somewhat capable of identifying supply chain risks. This suggests many blind spots exist in their approach and they have significant room for improvement. A troubling 6% of companies say they are not capable of identifying any supply chain risks.

How would you rate your capabilities to identifysupply chain risk?

Not capable

Somewhat capable

Very capable 23%

6%

71%


In a world where supply chain risks can suddenly emerge for multiple reasons – such as economic, health, geopolitical, new tariff regimes, climate disruption, material shortages or partner failure – the swift identification of key risk factors, and the rapid development of the right mitigation strategies, are critical to business continuity, effective operations, and competitive positioning in volatile global markets.

Eaton explained that, “at a macro level, there are four key impact zones and eight risk factors that must be continuously evaluated. A differentiator for the companies with the best supply chain risk management programs is the continuous evaluation of risk using a recurring cadence followed by a thorough business continuity planning framework.”

One of the lessons of the global pandemic, which has driven widespread production shutdowns and severe transportation disruptions, is that the complex global supply chains built by many companies over the past few decades can be especially vulnerable.

Such long supply chains can’t be changed overnight. It may take years for some companies to restructure their supply chains closer to key markets, or establish more redundancy in their supply networks, to achieve greater resilience and responsiveness

Supply and demand

With supply chain execution at risk, how are you calibrating it with rapidly changing customer demand?

External factors

How do you quantify and interpret the unexpected risk of hard-to-predict external factors on your supply chain?

People and labor

How would devastating losses in planned labor or a steep increase in human capital impact your supply chain?

Liquidity and cash flow management

How much working capital is at risk today? What steps are you proactively taking to avoid in solvency issues?

Focus on 4 key impact zones and 8 risk factorsThese impact zones relate to one another when assessing and measuring negative risk impacts. Quickly assessing each zone, including the risk factors, helps prioritize mitigating responses and enhance overall resiliency – ultimately creating better results.

Resiliency

Bran

d

Growth Financial results

External factors

Supply and dem

and

P

eopl

e and la

bor

Liquidity and cash f ow m

anagement

Critical RiskFactorsO

ther

major

disruptions

Regulatory,political changes,currency valuation

Supply

chain

execution

Dem

and

Labo

rde

pend

enci

es

Human

capitalLiquidity and solvency

Working

capital

Proper evaluation of risk enables resiliency planning and competitive advantage


Changing supply chainsInterestingly, over 57% of survey respondents reported that, over the past 24 months, they have begun significant changes to their supply chains to deal with identified risks. Many of those changes may have been prompted by the pandemic over the past six months, but overall, there is a clear indication that supply chains are already undergoing transformation as companies seek to avoid and manage disruption.

This is a trend that looks set to continue. Over 40% of companies say they intend to make further changes to their suppy chains over the next 24 months.

Yes

No

In the past 24 months, have you made significant changes to your supply chain to deal with identified risks?

57%

43%

Yes

No

Are you contemplating changes to your supply chain in the next 24 months?

43%

57%

What are the primary risk factors driving this change to your supply chain?

Changes in significant suppliers

Changes in location of sourced products

Onshoring in the US

Other (please specify)

40%

35%

8%

17%

Driving factorsFor many companies, there are two primary risk factors driving this overall supply chain trend: Changes in significant suppliers was cited by 39% of respondents, and changes in the location of sourced products were reported by 36% of executives.

There are multiple reasons for this. More aggressive trade and tariff regimes have been introduced in recent years, impacting existing business relationships with countries such as China, parts of North and Central America, and Europe. The issue of Brexit and the UK’s global trade position are also unresolved, all of it forcing companies to rethink which global suppliers they feel most confident doing busines with, while avoiding potential rising tariffs and financial penalties.

M and A activity, which tends to consolidate activity among Tier 1 and 2 suppliers, also changes traditional supply partner networks and redefines the competitive supply chain landscape.

While the change in global suppliers and where they are located may be prompting the adoption of more regional supply chain strategies, there is also emerging evidence that the U.S. itself is reshoring its supply dependency, noted by 8% of repondents, to help limit potential international vulnerabilities.

A Bank of America Global Research Report from February 2020, which surveyed analysts covering over 3,000 companies, found that companies in more than 80% of 12 global sectors representing $22 trillion in market cap across North America, Europe, and Asia Pacific (excluding China) have implemented or announced plans to shift at least a portion of their supply chains from the current locations.

After 30 years of offshore supply chains, clearly there is a movement toward reshoring.


The impact of the pandemic experience on future supply chain budgets also appears to have been significant.

The number of companies that say they will now be decreasing their supply chain budgets for a few months at least, compared to their initial budget plans before the COVID crisis began, has almost doubled.

However, in light of the business disruption, the number of companies now planning to decrease their supply chain budgets by some level in the near future has leapt to 53%, with almost a quarter (24%) expecting that reduction to be 10% or more. Over one-third (34%) expected their supply chain budgets to stay more or less the same, while 40% aimed to increase their budgets to some degree.

How had your company planned to change its supply chain budget in 2020 vs. 2019?

Decrease significantly

Decrease somewhat

Decrease slightly

Remain the same

Increase slightly

Increase somewhat

Increase significantly

9%

7%

11%

35%

21%

14%

5%

How has your company changed its 2020 supply chain budget as a result of the COVID-19 pandemic?

Decrease significantly

Decrease somewhat

Decrease slightly

Remain the same

Increase slightly

Increase somewhat

Increase significantly

24%

16%

13%

20%

14%

10%

5%

However, in light of the business disruption, the number of companies now planning to decrease their supply chain budgets by some level in the near future has leapt to 53%, with almost a quarter (24%) expecting that reduction to be 10% or more. The number of companies expecting their budgets to remain the same has also fallen notably, from its initial level of 34% at the beginning of the year, down to just 20% as a result of the COVID pandemic. The number of companies continuing to plan any budget rise at all has also fallen steeply, from 40% to 29%.

The question is, with this level of budget cuts ahead, what changes in priorities are companies now considering as they rethink their supply chain strategies and refocus their spending plans over the next few months?

Finding 2

New budget prioritiesCompanies will need to review budget priorities as they refocus their supply chain strategies for the future.


Rising costs to serveFor many companies, there are two primary risk factors driving this overall supply chain trend: Changes in significant suppliers was cited by 39% of respondents, and changes in the location of sourced products were reported by 36% of executives.

One key priority for many supply chain leadership teams, as they strive to overcome the business losses of and implement recovery strategies with potentially limited budget funds, is how to best manage the supply chain costs across their operations.

Only about a quarter of the surveyed companies (23%) reveal they currently have adequate systems and processes in place to effectively measure and track the costs to serve, by both product and customer. Around half (51%) say they have some form of metrics, but only at a macro level. More than a quarter, however, admit they do not have any capabilities to measure or track costs to serve.

Yet managing this key metric is becoming increasingly important. While around a third of companies say their costs to serve have remained more or less the same over the past 36 months, a full 37% say they have seen their costs to serve actually increase over the same period, generally up by around 5%, according to a quarter of respondents (26%).

Do you measure and track your total supply chain costto serve?

No

Yes but only at a macro level

Yes and we know the cost to serve by product and customer

26%

52%

23%

How much has your total supply chain cost to serve changed in the past 36 months?

Decreased significantly

Decreased somewhat

Decreased slightly

Remained the same

Increased slightly

Increased somewhat

Increased significantly

7%

10%

14%

33%

26%

7%

3%

More than three-quarters of those respondents confirm that they have already taken some form of action to help mitigate these rising supply chain costs to serve. Half of the companies, for example, have already put in place vendor performance monitoring programs to better manage their partner networks. Thirty-nine percent have also established an ability to better manage their inventories in real time, and 35% have introduced dedicated systems aimed at increasing the visibility and transparency of their supply chain operations. Around a quarter have also begun to automate their purchasing and procurement activities to increase the effectiveness of their supply chain spend.

“There are seven disruptive forces regularly impacting supply chain and operating models,” Eaton said. “Over time, rising supply chain costs, specifically supply chain cost to serve, is the number one issue impacting supply chains.”

Disruptive forces that impact our clients supply chains and operating models

SKU proliferation

Omnichannel effect

Rising supply chain costs

Risk and supply chain disruption

Labor shortages

Tax implications

Supply chain digitization


Amazon has a sophisticated and well-managed supply chain, yet their supply chain cost to serve as a percentage of net sales rose from 16.6% to 26.5% over an 11-year period. This pattern is often worse for other companies.

Eaton said “companies should focus on the combination of five activities to drive down supply chain cost to serve. Advanced analytics are a key component of the recurring and proactive analysis. In fact, the 2020 Grant Thornton CFO survey found that investments in advanced analytics was highest on the list of the CFOs surveyed.”

Amazon’s escalating logistic costs

Amazon’s fulfillment and shipping costs in total and as a percentage of net sales*

Shipping costs Fulfillment costs Logistics costs as a % of net sales

$3.8b$3.1b

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$80 billion

$60 billion

$40 billion

$20 billion

0

$2.5b $5.5b $8.6b $11.6b $15.2b $19.5b $24.9b $33.8b $47.0b $61.7b

15.6%16.3%16.6% 16.0% 17.8% 18.9% 20.4% 21.9% 23.3% 24.8% 26.4% 26.5%

*Fulfillment costs consist of costs incurred in operating and staffing fulfillment centers, customer service centers and physical stores as well as payment processing costs

Source: Amazon.com


Distribution network and logistics operating model

Align manufacturing and distribution footprint with sales channels and customer demand, then design the optimal logistics operating model.

Transportation cost reduction

Conduct lease/own analysis for private fleets, then negotiate rate reductions in high cost lanes or outsource to best fit 3PL provider.

Customer and SKU analytics

Analysis of all customers and the SKU portfolio to identify the poor-performing SKUs and unprofitable customers, or both.

Order fulfillment optimization

Evaluation of deployment and flow paths along with the order fulfillment terms for all SKUs and customers and the associated costs.

Focus on supply chain cost to serve issues within client logistics and transportation operating models with an emphasis on value creation and minimizing disruption

Total supply chain cost to serve

Developing total supply chain cost to serve advanced analytics and optimizing supply chain networks to lower costs and effective tax rate.

What actions have you taken to mitigate rising supply chain cost to serve? Select all that apply.

Automated purchasing

Increased transparency/visibility

Real-time inventory management

Vendor performance monitoring

None

24%

35%

39%

50%

23%

Nevertheless, just over one-fifth of all the companies in the survey admit that they have yet to take any of these mitigation actions to manage their costs to serve. This is another example of the headroom that still exists for many companies to be more diligent and proactive in managing their supply chains.

All of these mitigation strategies have one thing in common: They provide valuable and insightful data to the supply chain team to help streamline essential processes and increase the visibility, management and monitoring of their activities. This is one of the key trends likely to accelerate in the post-COVID world.

With supply chain budgets likely to be under increasing post-COVID pressure, a renewed focus on the provision of key data and the adoption of more automated approaches looks set to feature strongly among manufacturing industry supply chain budget priorities.


The following diagram highlights the supply chain levers that create shareholder value and what leaders must do now.

Supply chain provides a long list of value Ingredients to unlock cost and cash for reinvestment into growth and profitable scalability.

Shareholder value drivers

Revenue growth

Operating margin

Asset efficiency

Business resiliency

Levers within the supply chain to create value

• Supply chain network design and product flowpath and territory assignment optimization

• Inventory deployment strategy, safety stock setting and inventory investment optimization

• Network-wide rough cut capacity planning, capacity management and long-range planning

• Demand and supply planning, balancing and Sales and Operations Execution (S and OE)

• Sales and Operations Planning and cross-functional Integrated Business Planning

• Contract carrier procurement, freight spend management, shipment consolidation and routing and scheduling

• 3PL provider strategy, selection and management

• Total cost to serve and delivered cost as a % of sales

• Customer, channel, product and inventory segmentation and ABC-XYZ classification

• Production equipment utilization and line sequencing and scheduling

• Waste, yield, maintenance and lean operations

What leaders must do with their supply chains

• Align the supply chain operating model with segmented customer-centric GTM strategies

• Redesign the network and flow path strategy in purpose-fit fashion to enable the GTM

• Optimize inventory investments and service level commitments accordingly

• Leverage connected planning processes and next-generation technology platforms to deliver efficiency, agility and synchronization

• Modernize procurement, sourcing and contract management, and integrate with planning to drive lower cost of goods sold (COGS)

• Deploy supply chain digital twin platforms to measure, monitor and optimize cost-to-serve and decisioning continuously

• Develop supply chain risk mitigation strategies to ensure resiliency

Shareholder value

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ck “

burie

d” c

ost a

nd c

ash

from

the

supp

ly c

hain

and

use

it to

feed

the

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br

and,

top

line

and

valu

e cr

eatio

n en

gine

s th

roug

h co

ntin

uous

and

sus

tain

able

cul

ture

.


With many supply chain budgets expected to be under post-COVID pressure in the year ahead, the survey results show that supply chain budget priorities are likely to be increasingly focused on accelerating the adoption of digital technologies and approaches to help streamline operations and support the redesign of supply chain processes to be more resilient, agile and responsive to change.

Underpinning these new priorities is the realization among many manufacturing companies that their relatively low level of digital maturity has room for improvement.

The vast majority of companies say that they have only digitized some of their supply chain functions, both internally (plan, source, make and deliver) and externally (supply and logistics partnerships). The number of companies who have achieved a higher level of digital maturity in their supply chains, however, remains relatively low. Only one-fifth say they have fully digitized their internal supply chain functions, and only 11% their external activities. It also appears that many manufacturing industry companies are still operating with largely non-digital processes, both internally (13%) and externally (20%).

Which description best characterizes the digital maturity level of your internal supply chain (plan, source, make, deliver) today?

Still largely in an analog state

Some functions are digitized

All functions are digitized

Don't know

14%

63%

21%

2%

Which description best characterizes the digital maturity level of your external supply chain (supply and logistics partnerships) today?

Still largely in an analog state

Some functions are digitized

All functions are digitized

Don't know

20%

67%

11%

2%

Finding 3

Accelerating digital maturityManufacturing is at an inflection point in harnessing the power of digital supply chains to improve the business.


Please indicate the extent to which your supply chainfunctions are integrated today.

Still largely siloed

Partially integrated

Fully integrated

Don't know

23%

58%

17%

2%

Do you plan on investing in supply chain digitization and innovation and if so, when?

No immediate plans

Next 6 months

Next year

When COVID-19 subsides

36%

23%

29%

12%

“The seamless integration of data sources up and down the value chain to enable data-driven supply chain execution offers untapped benefits. Data integration also offers a more accurate view of what is happening within the supply chain and early warning signs for issues that can be proactively addressed through advanced analytics,” Eaton said.

The need for integrationIn addition, very few organizations have fully integrated their supply chain functions, a prerequisite for effective digital thread collaboration. Almost a quarter (23%) admit that their organizational structures remain entirely siloed. Of those who have embarked on integration initiatives, the vast majority (58%) say their efforts have yielded only partial integration, and less than one-fifth (17%) have managed to achieve full integration.

This situation looks likely to change swiftly over the next two years as companies begin to accelerate digital supply chain investments.

The timeline for increasing the adoption of innovative digital supply chain approaches is also expected to be steep and ambitious. More than half of all respondents (53%) say they have clear digital investment plans in place and suggest they will now be implementing these plans within a six-month (23%) to one-year (29%) horizon.

A further 12% of respondents are also ready to invest in more digital solutions, but remain cautious about a specific time frame and say their investment plans will be determined by when the current pandemic subsides.

Data driven supply chain execution

Data sources

Data transformation

Data storage

Information intelligence

Information consumption

Structured

Unstructured

External

Data management

Datavisualization

Metadata

ETL

Metadataand content

Intelligent scanning

Social sentiment and subscription data

Content management

Direct access

Direct access

Direct Access

Data strategyData integration Advanced analytics

Analytics

Machinelearning

Artificialintelligence

* ETL: Extract, transform and load


Digitization by supply chain functionA deeper look at where digitization is underway in specific supply chain functions reveals that demand forecasting and sales and operations planning, currently all digital in 21% of companies, and customer fulfilment and service, now all digital at 20% of companies, seem to be the areas of primary focus so far. Logistics and distribution and sustainability rank among the least-digitized functions at most companies.

Looking ahead to likely targets for further digitization investment, almost every supply chain function is likely to see some degree of digital transformation over the next two years. Most notable increases of between 10-15% are expected in the full digitization of functions. These include demand forecasting rising to 34% of companies becoming all digital, customer fulfilment rising to 32%, supply planning rising to 31%, and sourcing and procurement rising to 29%. Even logistics and distribution and sustainability will see marked increases in their digital status, increasing to all-digital at 24% and 18% of companies respectively.

Please indicate the extent to which you have digitized the following supply chain functions today—and will digitize in 2 years’ time. (Ranked on scale 1: non-digital to 5: all digital)

Demand forecasting

Sales and operations planning

Supply planning

Sourcing and procurement

Manufacturing operations

Logistics and distribution

Customer fulfillment and service

Sustainability

9% 22% 30% 18% 21%

11% 22% 24% 23% 21%

9% 19% 26% 27% 20%

11% 22% 22% 27% 18%

6% 19% 34% 24% 17%

8% 18% 38% 24% 13%

7% 11% 30% 32% 20%

20% 23% 30% 18% 8%

All analog No label No label No lable All digital

Today In two years

Demand forecasting

Sales and operations planning

Supply planning


Manufacturing operations

Logistics and distribution

Customer fulfillment and service

Sustainability

5% 9% 21% 31% 34%

12% 11% 24% 36% 18%

5% 15% 14% 38% 28%

6% 7% 20% 36% 31%

7% 7% 21% 35% 29%

4% 6% 24% 38% 28%

3% 8% 28% 36% 24%

4% 5% 19% 41% 32%

Vs


1111++1111++1111++1111++1111++1111++1111++1111++1111++AA“We anticipate further investment in Industry 4.0 technologies to drive supply chain integration,” Eaton said.

“Cybersecurity, big data, systems integration and cloud computing have become table stakes for companies that are leading the way in their pursuit of Industry 4.0 proficiency.”

Cyber security

Internet of Things

Cloudcomputing

Augmentedreality

Systemsintegration

Big data

AutonomousrobotsSimulation

Additivemanufacturing

Industry 4.0technologies

Introduction to Industry 4.0

Defining the technologies

Protects networks, data, devices from unauthorized access or criminal use to ensure confidentiality and data security

Real time use of text, graphics, audio and other virtual enhancements integrated with real world objects

Physical objects of embedded technology to sense, communicate, or interact with the external environment

Scalable, elastic IT-enabled capabilities are provided as a service to external customers using Internet technologies

Integrating data in complex systems with new hardware, packaged or custom software for seamless communication

Mathematical or computer representation of a physical system for the study and modeling of constraint effects

Data needed for cost effective, innovative processing to enable insight, decision making, and process automation

Things that operate unsupervised with a defined context or to complete a task (mind robots, drones, vehicles, etc.)

Creating a physical object from digitally encoded designs through the deposition of material via 3D printing process


“The use of augmented reality, autonomous robots, additive manufacturing, simulation and the Internet of Things offer additional opportunities for companies to unlock value through end-to-end integration,” Eaton said. “We expect to see companies continue to invest in these areas as a part of digitizing their supply chains.

The benefits are substantial, including cost reduction, improved return on assets, higher overall equipment efficiencies, higher customer satisfaction, higher employee satisfaction, improved data integrity, improved quality, greater flexibility and agility, and opportunities for predictive maintenance.”

0 1 – 20 21 – 40 41 – 60 61– 80 81 – 100

Our point of view on value impact

Cost Reduction

OEECustomer

SatisfactionEmployee

SatisfactionData

IntegrityQuality

Flexibility and Agility

Predictive Maintenance

Return on Assets

Cybersecurity

Augmented Reality

Big Data

Autonomous Robots

Additive Manufacturing

Simulation

Systems Integration

Cloud Computing

Internet of Things


Business prioritiesSo, what is motivating manufacturing companies to pursue such extensive supply chain digitization strategies across different functions of their business?

The customer clearly comes first. Sixty-five percent of respondents ranked improved customer experience as a high priority to their business goals, followed by cost reduction (62%), and greater agility and responsiveness in decision-making (60%).

“Aligning the supply chain strategy and subsequent investments with the overarching growth strategy is essential and ensures the supply chain is accretive to the company’s growth agenda. And, a customer-centric mindset is at the very core of any plans for growth and innovation,” Eaton said.

Interestingly, new business models supported by digital transformation to deliver greater competitive advantage was ranked next on the survey respondents’ list of high priorities (47%), even higher than increasing supply chain resiliency (41%).

Greater agility and responsiveness in decision-making

Cost reduction

Improved customer experience

New business model/competitive advantage

A more environmentally sustainable supply chain

Increase supply chain resiliency

Increase security

Please rate the importance of the following business goals associated with your digitization efforts.

60% 36% 4%

High Moderate Low

62% 35% 3%

65% 29% 6%

47% 44% 9%

14% 55% 31%

41% 49% 10%

38% 48% 14%


Key transformational technologies power the digital waves of change across multiple supply chain functions in today’s manufacturing companies.

More than half of the respondents identified automation projects as the most significant investment priority (54%), followed by increased adoption of AI, Internet of Things and machine learning technologies (45%), and risk-monitoring and resiliency tools (26%).

The concept of creating virtual models of supply chain networks may still be in the early days of development, but 17% of respondents believe this is an important area for future investment as part of their digitization and innovation efforts.

In what specific types of supply chain digitization andinnovation are you planning to invest? Select all that apply.

Automation

Digital twin of your network

Risk monitoring and resiliency

AI, IoT, and machine learning

None

54%

17%

26%

45%

22%

Digital investment plans At a deeper level of detail about company digitization plans, the top 10 specific technology areas identified by survey respondents as the most important for future investment over the next two years include:

Finding 4

Predictive insights and augmenting the workforceTop technology investment priorities for the next two years highlight analytical and predictive tools, human-centric augmentation, and autonomous devices.

Artificial intelligence and machine learning

Exoskeletons

Drones

Smart helmets/Google glass

Wearable

Augmented reality and virtual reality

Blockchain

Advanced analytics

Automated guided vehicles

Collaborative robots

92%

90%

87%

79%

79%

77%

76%

73%

63%

62%


Predictive insightsFuture investment in AI and machine learning systems (92%) and advanced analytics (73%) will allow companies to pursue more real-time visibility, preventive alerts, and predictive insights across their production operations and supply chains.

Such predictive technologies also allow them to better anticipate and respond to changes in markets, global trading flows, material scarcity, partner responsiveness and quality, or sudden climatic, health, or political upheavals.

Leading examples of these kinds of AI-enabled applications include supply chain teams at a large U.S.-based confectionary company benefiting during the pandemic by rapidly creating a digital supply chain risk dashboard that highlighted potential constraints to its supply base using aggregated advanced geographical data analysis of virus hot spots around the world.

A global pharma company, meanwhile, has developed an award-winning AI-enabled personal digital assistant for its supply chain team. It provides access to multiple information sources and provides professionals with answers to any questions they may have about global operating status, materials flows, product location, etc., all via voice demand.

“In addition to investments in these technologies, many companies are leveraging the trove of data that already exists and adding machine learning and new algorithms to develop insights and analytics that are not currently available in any single system or platform”Grant Thornton National Supply Chain Practice Leader Jonathan Eaton


Please indicate what technologies you are currently using today to digitize your supply chain and what you expect to be using in two years.

Today In 2 Years

Advanced analytics/big data(e.g., predictive analytics)

Artificial intelligence/machine learning

Augmented and virtual reality

Automated guided vehicles

Blockchain

Cloud

Collaborative robotics

Conventional analytics (BI software)

Cybersecurity

Drones

Edge computing

Exoskeletons

GPS

Internet of things

Mobile devices

Sensors

Smart helmets/ "Google Glass"

Standard supply chainmanagement software

Wearable technologies

38%

73%

17%

92%

33%

77%

47%

63%

24%

76%

78%

42%

49%

62%

79%

37%

88%

29%

20%

87%

52%

59%

10%

90%

72%

45%

75%

40%

91%

31%

90%

35%

33%

79%

78%

46%

27%

79%


Augmenting the workforceThe other primary investment focus area highlighted in the survey is around a group of complementary technologies that help digitally augment the human workforce itself.

One aspect of this are technologies with the ability to deliver more rapid, real-time and easily assimilated consolidated information remotely to workers using virtual models or visual platforms, such as augmented reality systems (77%), smart helmets and glasses (79%), and wearable wrist or body devices (79%).

At a physical level, there are also a number of technologies designed to maximize or automate human effort and assets on the plant floor, including collaborative robots (62%) that work hand-in-robotic-hand alongside human workers to achieve precision or supportive tasks, or provide critical space between workers in a socially distanced plant floor environment.

“The availability of labor for manufacturing and logistics-based jobs has become a challenge for all industries,” Eaton said. “It is not uncommon to see full-time jobs go unfilled for months, given the competition for qualified candidates. And, temporary staffing agencies have been unable to close the gap. Investments in automation to reduce cost and improve quality happen frequently, but the pace is picking up to offset the labor shortage many companies are experiencing. In fact, the Bank of America Global Research Report from February 2020 states that the global industrial robot-installed base is expected to double in the next five years.”

The survey results also show a marked increase in the intended investment for exoskeletons (90%), intelligent semi-robotic devices that can be worn by workers and act as amplifiers to augment, reinforce or improve human performance in physical environments. In fact, although current adoption levels may be low, these new kinds of supportive human-centric automation devices show the sharpest expected rise in adoption compared with any other new technology in the survey over the next two years.

The use of autonomous guided vehicles (63%) and drones (87%) is also predicted to increase significantly to help automate and remotely operate repetitive or hazardous tasks in factory and distribution environments and beyond.

The intended rise in blockchain investments (76%) is also notable as manufacturers begin to harness this emerging technology to help protect their IP, enhance traceability and product provenance in the face of continued counterfeiting, and streamline international shipping, exporting, and importing procedures.

Together, the combination of new digital technologies such as these promises to revolutionize many aspects of supply chain and operational activities.


The potential benefits of digital supply chain transformation to the overall business are extensive. Survey respondents specifically identify the areas of planning and scheduling (35%), manufacturing and distribution (26%), and analytics and visibility (22%) as the supply chain functions most likely to improve through the process of digital transformation.

But digital technologies alone are not a catch-all solution. Only when the multiple functions of a supply chain organization are effectively integrated around a shared digital vision, and technology investments are supported by reengineered supply chain processes, can they deliver maximum value.

Over half the survey respondents (53%) already acknowledge this broader corporate opportunity and plan to redesign supply chain processes to support their digital transformation initiatives.

Companies that successfully adopt the right digital technologies, and rethink the design of their supply chain organizations to make best use of the data the new technologies provide, will be able to turn today’s disruption into digital opportunity for the future and gain competitive advantage in an increasingly digital world.

“The optimal recipe for digitally driven supply chain redesign requires four major inputs: identification of supply chain risks that must be mitigated in any new supply chain operating model, mathematical modelling of the manufacturing and distribution network, the inventory and service requirements, and possible tax scenarios,” Eaton said.

Which area of your supply chain do you think will benefit most from supply chain digitization and innovation?

Planning and scheduling


Manufacturing and distribution

Analytics and visibility

35%

17%

26%

22%

As you consider implementing new technologies to manage your supply chain, are you also contemplating or beginning a redesign of your supply chain process?2020+2727+5353+DYes53%

No27%

Don’t know20%

Digitally driven redesignRedesign supply chains for the digital economy of the future.

Finding 5


Future-proof supply chainsWhile transformational initiatives were already underway in many manufacturing supply chains before the COVID crisis, the lessons learned as a result of the pandemic experience have given those plans a new sense of urgency and a clearer focus for the future.

Risk factors and budget priorities now need to be rethought to better respond to the new normal. Investment timelines are becoming more ambitious than ever as manufacturing companies recognize the need to improve their level of digital maturity and more closely align their business and digital strategies to deliver the speed, agility, resiliency and operational performance they will need to succeed.

The digital opportunity is clear. New technologies and innovative digital strategies can help transform manufacturing industry supply chains to make them more efficient, more responsive, more agile and more competitive.

All it takes now is action.

Action guidelines• Reassess primary supply chain risk factors to

improve resilience

• Identify potential change areas of maximum benefit to the business

• Pilot key redesign and digitization projects to prove value opportunity

• Engage internal cross-functional teams to drive project development

• Engage external partners in the transformation process

• Scale pilots based on proven best practices and common value metrics

• Constantly review, measure and adapt digital supply chain transformation initiatives

Conducted in late August and early September 2020, this survey reflects the views and insights of more than 110 manufacturing and supply chain executives across multiple industry sectors.

GT.COM

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Contacts

Robert HershNational Managing Principal Manufacturing IndustryT +1 617 848 5060

Jonathan EatonPrincipalAdvisory ServicesNational Supply ChainSolution LeaderT +1 704 632 3523

David R. BrousellVice President andExecutive DirectorManufacturingLeadership CouncilNational Associationof ManufacturersT +1 508 359 6492

Paul TateCo-Founding Senior ContentDirector and Executive EditorManufacturingLeadership CouncilNational Associationof ManufacturersT +44 (0)7973 510 458

https://www.grantthornton.com/people/bios/h/hersh-robert.aspx

https://www.grantthornton.com/people/bios/e/eaton-jonathan.aspx

mailto:DBrousell%40nam.org?subject=David%20R.%20Brousell

mailto:mailto:PTate%40nam.org?subject=Paul%20Tate

2020 Digital supply chain survey

Documents

Transcript of 2020 Digital supply chain survey